Melbourne - BHP Billiton, the world's largest miner, has approved an $845-million investment to keep up production at its Illawarra coal operations in Australia's New South Wales state, a move that analysts said was unexpected.

BHP said on Friday it was going to dig a new area at its Appin Mine which would have production capacity of 3.5 million tons per year of coal used in steel mills from 2016, replacing production at the West Cliff Mine.

That would sustain total production from its Illawarra, north of Sydney, operations at nine million tons a year.

BHP approved the spending at a time when major miners have been under pressure from shareholders, jittery about slowing global growth, falling commodity prices and rising costs, to hand back capital rather than splashing out on projects.

An analyst said he had not anticipated the Illawarra spending over the next two to three years, but said it was small relative to the mega projects that BHP has signalled it may delay, including the Outer Harbour iron ore expansion and the Olympic Dam copper and uranium expansion.

“Eight hundred million dollars is not what we have in our numbers to be spent... But when spaced over two to three years, it's very different by an order of magnitude from the $2-3 billion-plus a year they would need to spend on those projects,” said UBS analyst Glyn Lawcock.

BHP has indicated over the past month it is unlikely to approve any major new capital spending in its $80-billion pipeline over the next 12 to 18 months, as it has been caught in a squeeze between falling prices and rising costs.

BHP opened on the Australian Securities Exchange at A$31.48 from its close at A$32.20 on Thursday. - Reuters