BHP boss Chip Goodyear observed a couple of months ago that every new project you undertake in WA adds 10% to the cost of your other projects as you have to steal workers from them. When it comes to building a complex nickel operation though, you can add a lot more than 10%.

Veteran mining writer Tim Treadgold – someone who benefits from the experience of having seen it all before – raises some serious questions about BHP’s management as he documents in the latest Eureka Report the 100% cost blowout at BHP’s Ravensthorpe laterite nickel mess in WA.

Treadgold reports the mine is already running 65% over its $1.04 billion initial budget and still blowing out with the 100% figure looming:

Some nervous observers in Perth are starting to question whether Ravensthorpe is the start of another bad run for the company, which destroyed about $US9 billion in shareholder wealth in the 1990s with ill-fated investment decisions.

BHP Billiton itself is playing it cool, although the sudden retirement of the head of its stainless steel minerals division, Chris Pointon, and an ongoing budget review process points to more bad news ahead on Ravensthorpe.

A billion dollars would be enough to fund my retirement, but it’s still affordable for BHP with the way money is gushing into its coffers at present. But it’s only affordable if it’s not a sign of broader cost control problems in the booming resources industry.

WA laterite nickel projects have a history of claiming victims as it’s difficult ore to process. Treadgold makes the point that building the mine and processing plant is only half the battle – operating it is just as difficult.

The $9 billion run of bad projects at BHP under the pre-Paul Anderson management all started with one job going bad, but the series of them added up to recognition that the whole culture, management and board were flawed. There needs to be some serious detailing and explanation of what’s gone wrong at Ravensthorpe to make sure it’s a one-off.