BHP Billiton in talks on Indian steel plant

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BHP Billiton is in talks about developing what would be India's largest steel plant in the eastern state of Orissa.

According to Indian government officials, the global mining giant and the South Korean steel maker Posco are looking at building a 10-million ton steel factory costing up to 390bn rupees (£4.63bn) in the state.

BHP Billiton stressed yesterday that talks between itself, Posco and the state government were still at a very early stage. But it confirmed they were considering constructing a steel plant and port facility on India's east coast as well as developing an iron ore mill. BHP Billiton also said its involvement would be "limited to the supply of steel-making raw materials" and associated infrastructure.

The project represents a potentially lucrative new market for BHP Billiton, the world's biggest miner, which earlier this week posted a 78 per cent leap in annual profit to US$3.38bn on the back of booming commodity prices. It is already a major supplier to Asian steel mills - mainly in Japan and Korea - via its Australian iron ore and coking coal mines.

Analysts welcomed the potential move as a positive step yesterday. Morgan Stanley said it demonstrated BHP had more growth options but noted that legislative change could be needed regarding ownership of mineral rights before Orissa's iron ore potential is developed.

BHP Billiton shares rose 0.5p to 530.75p.