The DMO project includes utilising reserves across the Douglas and Middelburg Mine Services (MMS) collieries and development of new mining areas with low strip ratio coal.

The product will be fed into a new 14 million tonne per annum coal processing plant. The new coal processing plant will replace the existing, less efficient washing plant at Douglas, BHP said.

The project will enable BHP to maintain energy coal exports from the combined Douglas Colliery and MMS at around current levels (approximately 9.5Mtpa BHP share) whilst also fulfilling domestic contractual commitments.

First coal from the new mining areas is expected in mid-2008 and the new plant is expected to receive coal mid-2010.

The Douglas and MMS collieries are currently owned through the Douglas Tavistock Joint Venture (DTJV), in which BHP has an 84% share and Xstrata has a 16% share.

To facilitate the DMO project, which is to be developed and owned solely by BHP, the DTJV will be restructured with each of the joint venture partners being allocated coal resources according to their ownership share.

“This project allows us to realise maximum value from these assets by optimising the existing reserves at Douglas and MMS and enabling us to maintain exports through to 2034," said BHP Billiton Coal president Dave Murray.

“With the recent approval of the $US450 million investment in the Klipspruit Project, our South African coal operations will now comprise of three world-class assets, namely Middelburg Mine Services (which now incorporates the resources of Douglas Colliery), Khutala Colliery and Klipspruit Colliery."