In its corporate old age BHP Billiton is getting a bit forgetful. Over the last nine months the company has failed to mention to investors in its quarterly exploration and development reports that it is spending $80 million on a new coal mine in Central Kalimantan in Indonesia.
Last month the company took investment analysts on a tour of a few of its half-completed metallurgical coal mines in Queensland. In the opening presentation by BHP Billiton’s newly installed coal head, Dean Dalla Valle, proclaimed that capital expenditure would soon peak; the company has “no new major projects planned”. For anti-coal activists and investors wary of big budget projects it seemed like good news and was widely reported.
In her presentation to the analysts, Vice President of Marketing Coal, Vicky Binns, flagged that the development of metallurgical coal projects in Mongolia and Mozambique had “proven challenging” given their “risk and capital intensity”. It was a veiled swipe at companies such as Rio Tinto and Vale, which have had their fair share of troubles with new projects in Mozambique, while others have struggled with projects in Mongolia. It was also a way of underscoring that BHP Billiton’s emphasis was heavily on projects in Australia.
As always, the devil is in the detail. While a map in one of the presentations of BHP Billiton’s far flung global coal projects listed the IndoMet Coal Project in Indonesia, precious little else was disclosed. A table on the company’s coal resources listed the project as having 83 million tonnes of measured resources and another 690 million tonnes of indicated and inferred resources making the project potentially a big one. But oddly there was no substantive mention of the project at all in Dalla Valle’s presentation notes.
Nor does the project rate a mention in any of BHP Billiton’s three most recent quarterly exploration and production reports (see here, here, and here). BHP's 2012 annual report indicates the company has a 75 per cent stake in the project but was still rather cryptic. After a little background information on the project, the company states on page 37 that “study work is underway to identify development options across our CCoWs [Coal Contracts of Work] and early work on infrastructure development has commenced”.
However, BHP Billiton’s 25 per cent Indonesian partner in the IndoMet project, Adaro Energy, has been much more forthcoming. In its most recent investor update the company states that it is “on track to begin mining from the Haju mine in the third quarter of 2013”. The Haju mine is just one of a number of coal deposits within the company’s licence areas.
So why is it that a mine which is being commissioned later this year is not even mentioned by the largest of the joint venture partners to a captive audience of investment analysts? After all, back in late 2001 it was reported in The Australian that the IndoMet Coal Project would cost $US1.34 billion and “could be producing five million metric tonnes of coking coal annually by 2017”. Taking the news report at face value, it seems that the total project could well be what anyone would consider a “major project”.
In response to an email inquiry BHP Billiton told me that the Haju mine project would cost the company $80 million and would produce one million tonnes of coal a year from early 2014. However, the company did explain why an $80 million project was not even mentioned in the company’s three most recent quarterly exploration and development reports.
Nor is it clear exactly what coal will be produced from the mine. In its 2012 annual report (page 74) BHP Billiton indicates that the Haju mine has measured resources of 11 million tonnes of metallurgical and thermal coal, though it provides no detail on what the split between them is. The 83 million tonnes figure listed in Dalla Valle’s presentation notes seems to comprise the 72 million tonnes of thermal and metallurgical coal from the nearby Lampunut deposit as well the smaller Haju mine.
BHP Billiton did not respond when asked whether an environmental impact assessment had been undertaken or whether a copy in English was available. Nor does the project rate a mention in the company’s 2012 Sustainability Report.
In its Charter, BHP Billiton proclaims one of the values it embraces is “respect” and that achieving this requires “embracing openness”. Disclosing more about just what the company is doing in the forests of Central Kalimantan would be a good place to start embracing “openness”.
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