BHP OKs $822m for new Autralian iron ore mine

[] — BHP Billiton has approved $822m in capital spending to dig a new iron ore mine in Australia capable of yielding 17 million tonnes of ore a year starting in mid-2012.

Development of its Orebody 24 deposit would help maintain production rates at the company’s operations in Western Australia state’s Pilbara iron belt, BHP said on Wednesday.

BHP is Australia’s second largest iron ore company behind Rio Tinto. Both companies hold long-term supply contracts with steel mills across Asia, the bulk in China.

Orebody 24 is a small satellite mine to the massive Mt Whaleback operation – the biggest single-pit open-cut iron ore mine in the world at more than 5 km long and nearly 1.5 km wide.

“Orebody 24 is a sustaining mine to maintain iron ore production output from the Newman joint venture operations,” BHP Billiton said in a statement

Itochu Minerals & Energy and Mitsui-Itochu Iron and Mitsui Iron Ore hold minority stakes. BHP’s share of the cost is $698m.

Rio Tinto is accelerating a plan to lift output by 50% to 333 million tonnes a year by 2015. BHP is aiming for a 37% rise in production to 220 million tonnes by around the same time.

BHP closed down 0.6% at $36.65, roughly in line with slight losses in the wider market.