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Miners BHP Billiton and Anglo American advance new projects

Jon Yeomans
BHP Billiton needs to replace depleting production from its Yandi iron ore mine

Two of the world’s biggest mining companies have signalled they will push ahead with long-awaited expansion projects, tapping new supply of iron ore and copper.

BHP Billiton is to spend $2.9bn (£2.2bn) developing its South Flank asset in Western Australia, which will replace depleting production at its Yandi iron ore mine.

Meanwhile its FTSE 100 peer Anglo American has sold a 20pc stake in a Peruvian copper deposit to Japan’s Mitsubishi for $600m, paving the way for the development of a brand new mine.

BHP will spread out its investment in South Flank, in which it has an 86pc stake, over several years. It is expected to begin production in 2021 and will have a mine life of about 25 years.

The move should help strengthen BHP’s position in China, the biggest market for iron ore, which is used to make steel.

South Flank is expected to produce a slightly higher grade of iron ore than previously, at around 62pc pure. Higher-grade iron ore produces less pollution when smelted, and as such is in high demand in China, where steelmakers are under pressure to reduce contamination from their mills in order to clean up the air.

The Quellaveco mine site in Peru

Anglo American’s Quellaveco project in Peru, meanwhile, is expected to become a world-class copper mine, with around 7.5m tonnes of the metal below ground and a 30-year life.

Anglo has been looking for a partner to help shoulder the estimated $6bn cost of developing the project. Under the deal, Mitsubishi will raise its stake from 18.1pc to 40pc, with Anglo holding the rest.

Development could begin later this year, with first production due in 2022, pending approval from Anglo’s board.

Copper, used in electrical wiring, is highly sought after by the major miners but quality deposits are few and far between. It is likely to be in high demand for electrical cars.

Investment in mining projects around the world has been sparse in recent years as the big miners have focused on restoring their balance sheets following a two-year plunge in commodity prices. Chief executives are also wary of blowing shareholders’ cash after a flurry of ill-judged of acquisitions at the start of the decade.

Both BHP and Anglo have stressed they will be cautious about giving the green light to major expansion projects.