Underlying earnings before interest, taxes, depreciation and amortisation was up 74% year-on-year to $14.83 billion on the back of strong margins as revenue increased 39% to $34.17 billion.

One of the key milestones for the recent half was first production from the MAC20 project, an expansion of the Mt Arthur open cut operation near Muswellbrook which was finally approved by the New South Wales government in September.

Underlying EBIT from the metallurgical coal division increased 88% year-on-year to $1.45 billion.

BHP noted that its realised hard coking coal prices had increased 50%, weak coking coal was up 57% and its thermal coal prices were up 43% from the last half of 2009.

Unseasonal rain hit Central Queensland in the months leading up to a devastating wet season in the state.

While March quarter results will reveal much of the production fallout for Queensland’s coal mines, BHP noted it had a “healthy” level of inventory across its supply chain back in July, at the start of its recent half-year period.

“However, weather-related disruption and higher labour and contractor rates contributed to an increase in costs for the period,” BHP said.

“Furthermore, the combined impact of a weaker US dollar and inflation reduced underlying EBIT by $291 million.”

On the current situation facing its mines in the state, BHP did not reveal much more from what was previously announced, but does expect production impacts to continue for months.

“BHP Billiton continues to assess the impact of the extreme weather events and confirms that force majeure has been declared for the majority of our Bowen Basin products, including Goonyella Riverside, Peak Downs, Norwich Park, Gregory Crinum, South Walker, Blackwater and Saraji.

“The decision to double pumping capacity following severe wet weather in the March 2008 quarter has minimised in-pit water accumulation, although heavy rainfall that persisted for much of the December 2010 half year has significantly restricted overburden removal.

“When combined with disruptions to external infrastructure, we expect an ongoing impact on production, sales and unit costs for the remainder of the 2011 financial year.”

Underlying EBIT from the energy coal division increased just $2 million year-on-year to $334 million.

Despite record Hunter Valley thermal exports in the recent half year, BHP noted the gains were offset by costs associated with the ramp up of growth projects in Australia and South Africa.

Future growth projects

In a presentation on the half-yearly results, BHP revealed a multitude of growth options covering various commodities in a single slide.

The Mt Arthur Underground project was in the “future options” category.

The Mt Arthur Coal Consolidation project approval last year already modified the scope of this long-slated longwall project.

Previously approved to produce up to 8 million tonnes per annum run-of-mine, the permitted production was reduced to 4Mtpa as BHP successfully made modifications to increase open cut production for an expanded Mt Arthur mining complex.

Other future coal options in the thermal coal sphere included the Caroona longwall project, which has suffered considerable opposition from environmental and community groups, plus a third expansion of its part-owned Newcastle Coal Infrastructure Group export terminal.

For metallurgical coal, BHP is considering a possible expansion of the Peak Downs, Blackwater, Saraji and Goonyella mines in Queensland.

The Caval Ridge open cut project in the state is in the feasibility stage, but BHP is already considering a possible expansion.

The company’s 7 million tonnes per annum Wards Well coking coal project in the state is also under consideration.

In New South Wales, the broad expansion of BHP subsidiary Illawarra Coal’s underground operations is also listed as a future option.

Illawarra Coal sliced 32% of its mineable coal reserves off the Bulli Seam Operations project to continue the Appin and West Cliff longwall mines back in October.

But the expansion plans could face more hurdles if the Coalition should win next month’s state election, with 24 state Labor MPs already announcing their retirement.

Opposition leader Barry O’Farrell has promised that no underground mining will take place under the nearby Dharawal State Conservation Area, which he wants to turn into a national park.

Indonesia is increasingly becoming a coal investment hotspot, with BHP ranking its IndoMet (Maruwai) coal project in Central and East Kalimantan as another future option.

BHP was widely tipped to post a strong half-year result, and its shares were down 58c to $46.78 this morning.