September 7, 2008

BHP Halts Operations After Worker Dies at Mine

By From news reports

BHP Billiton, the world's largest mining company, suspended its West Australian iron ore operations after its second fatal accident in two weeks, halting output from mines that supply about 14 percent of annual global exports.

"All our iron ore operations in Western Australia are suspended except for essential services," Samantha Evans, a spokeswoman for BHP, said Friday. Mining stopped Thursday night, and it is too early to say whether BHP will declare force majeure, Evans said. Force majeure is a legal clause that allows a company to miss deliveries because of circumstances beyond its control.

Iron ore supply from Australia, the world's biggest exporter, had already been disrupted this week after Rio Tinto Group declared force majeure after damage to a loader at its Cape Lambert port. Cash prices are trading around double the annual contract prices because of demand from Chinese steel mills.

In past cases where fatalities have resulted in the closing of individual mines, including one less than two weeks ago, operations have resumed within a day or two after police and special emergency mine investigations.

But analysts said they are were worried that a long loss of BHP's output could tighten spot markets.

"If it's a day or two, that won't cause much of a ripple, but if the mines remained closed for longer periods, say a week or more, then that could cause some issues," said James Wilson, an analyst at DJ Carmichael & Co.

The traded market for iron ore is sensitive to any disruptions to supply amid a global shortage brought on by growing orders from Asian steel makers.

But China, which is more dependent on the spot market than most nations, is in a better position to weather disruptions than it was earlier this year, with some 60 million tons of ore, roughly one month's consumption, stockpiled in ports.

BHP fell 0.3 percent on the Australian stock exchange Friday, to 37 Australian dollars, or $30. Rio Tinto dropped 1.4 percent, to 110.80 dollars.

The fatality occurred Thursday at BHP's Yandi mine, 500 kilometers, or 310 miles, east of the west coast in the Pilbara district.

The worker, an employee of HWE Mining, the Leighton Holdings unit that BHP employs to operate the Yandi mine, died after a collision between a light vehicle and a truck, BHP said in a statement on its Web site. A worker also died in an industrial accident in a workshop at the same mine on Aug. 26. That incident also resulted in the temporary suspension of operations.

Originally published by Bloomberg, Reuters.

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