BHP shelves coking coal operations

Recognising the persistent weakness in global coal markets, mining heavyweight BHP Billiton (ASX: BHP) has formally given up its right to build a new coal terminal at the port of Abbot Point on the north Queensland coast.

As reported by The Australian Financial Review, the miner will cease work on all growth projects in its Queensland coking coal business, with the exception of those already in execution. This includes the planned development of terminal two (T2) at Abbott Point, which the company relinquished the right to build around a fortnight ago.

The terminal was to link Goonyella in the Bowin Basin via a 250km rail line and would have been capable of carrying 60 million tonnes of coal each year. The rail would have also heavily reduced the miner’s reliance on rail freight operator Aurizon (ASX: AZJ) to transport the commodity.

BHP has also shelved developments for the Red Hill and Saraji East sites – the latter of which the company purchased for $2.45 billion in 2008 from New Hope Corporation (ASX: NHC).

Foolish takeaway

The miner’s decision to shelve less promising projects is a good sign for the future of the company as it aims to cut capital spending and focus on shareholder returns. However, investors would be wise to wait for a much more attractive entry point before buying into their shares.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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