BHP Billiton Ltd's plans of spending billions on expansion of its mining operations in Western Australia's Pilbara region may come unstuck as iron ore prices continue to slide downhill. In a staff memo, Jimmy Wilson, the recently appointed president of the Anglo-Australian company's iron-ore division, said rising costs and falling prices had prompted a review of "the sequence and pace" of growth projects.

Though mining companies have been feeling price pressures from copper and thermal coal, iron ore had been expected to be resilient enough to let  BHP and others go ahead with plans to boost capacity of what is their prime driver of earnings.

Wilson's note, dwelt on challenges while it affirmed the company's belief in the long-term attractiveness of iron ore and the company's commitment to projects under way.

The Wall Street Journal cited a BHP spokeswoman, as saying the note made no reference to approval for an outer harbour to boost export capacity at Port Hedland which already counts as the world's second-largest iron-ore port, after the terminals at São Luís in Brazil. The spokeswoman added, no decision had been made on the project, which according to analysts' estimate could cost nearly $20 billion to complete.

The harbour project was among three likely to cost at least $10 billion about which BHP's board was to decide towards the end of the year. However, speculation has been rising that at least one big project would be deferred after executives started reconsidering ambitious spending plans and the company increased its focus on cutting costs.

The benchmark spot price for iron ore has fallen a third over the past year to a nearly two-and-a-half-year low of $115.20 a metric ton, and the price which remains strong historically still offers a healthy margin for the world's biggest miners, including BHP and Rio Tinto, which had been able to keep costs in check.

However, lower price expectations and increased operating costs meant the return on investment in new capacity had fallen to levels where companies might need to reconsider some projects, according to analysts.

The Wall Street Journal quoted Richard Knights, an analyst at Liberum Capital in London, as saying it would not be surprising if a decision on the outer harbour did not come until mid-to-late next year, given the pullback by mining companies from new capital investments and the fall in iron-ore prices. He added the project was only likely to offer a strong return on investment in later phases on its expansion.

According to BHP chief executive Marius Kloppers there was a window of opportunity for mining companies to expand in iron ore to capture strong prices before demand from primary consumer China peaked around 2025 and increased amounts of scrap material entered the world market.

The iron ore output at BHP' s mines, in the year through June stood at 159.5 MT of iron and the company aims to rais that to 220 MT by 2014 and 350 MT by 2020.

Meanwhile, the company said today, it would take a $2.84-billion writedown on its US shale gas business and additionally a $450 million writedown on Australian nickel operations after a plunge in commodities prices.

Following the ill-timed gas investment, the company said Kloppers and energy division head Mike Yeager would forfeit bonuses for the 2012 fiscal year.

Under the two executives, BHP bought its Fayetteville and Petrohawk shale gas businesses for $17 billion after which shale gas prices had roughly halved. The company said, the Petrohawk division had not been affected by the writedown.

The move had been anticipated by analysts who had forecast a writedown of between $2 billion and $3 billion for BHP's natural gas assets, even before taking the plight of the nickel division into account.

According to the company, both impairments would be recognised as exceptional items.

Chairman Jacques Nasser described the shale writedown as "very disappointing" after low gas prices had cut the value of the Fayetteville business in a statement.

"The board remains of the view that the investment in the U.S. shale assets is the right decision for BHP Billiton shareholders," Nasser said.