Investing in high-quality iron ore resources

0 Comment
 27 Nov 2012   Posted by admin


BOASTING large-scale operations in Australia and Brazil, BHP Billiton remains one of the world’s leading iron ore producers.
The company’s principal Australian operations are based in the Pilbara region of northern WA and comprise a complex integrated system of` seven inland mining operations (Jimblebar, Area C, Mt Whaleback, Ore Body 18, Ore Body 24, Yandi, and Yarrie, all 85 per cent owned by BHP). More than 1000km of rail connects these operations to stockyards and two separate port facilities at Port Hedland.
BHP Billiton had a strong half year ending December 2011 and it reported record iron ore production in WA as one of the major catalysts for the increase. The commodity earned the company US$12.149 billion for the 2011 half-year, in comparison to US$9.382 billion for the corresponding period of the previous year.
In its 2012 Annual Report Summary Review the company reported that it had continued this momentum, with its WA Iron Ore business (WAIO) – which employs 13,000 people and maintains close links with the town of Newman – achieving a twelfth consecutive annual production record.
“WAIO shipments rose to a record annualised rate of 179 million tonnes in the June 2012 quarter (100 per cent basis),” the company stated.
“Underlying EBIT [earnings before interest and tax] for financial year 2012 increased by US$873 million to a record US$14.2 billion.
“Outstanding financial performance was underpinned by record production at WAIO, which increased underlying EBIT by US$2.4 billion. This was partially offset by a seven per cent and five per cent decline in fines and lump prices, respectively, which reduced underlying EBIT by US$1.3 billion, net of price linked costs,” it stated. “WAIO production is forecast to increase by approximately five per cent in financial year 2013.”
Measuring about 5km long and 1.5km wide, BHP’s Mt Whaleback mine, established in 1968, is the biggest single-pit, open-cut iron ore mine in the world. Adjacent to Mt Whaleback are Orebodies 29, 30 and 35. Smaller satellite mines – Wheelarra and Orebodies 18, 23, 23 and 25 – are outside Newman; the Yandi and Area C mines are 100km northwest of Newman and the Yarrie mine 200km east of
Port Hedland.
Ore from the mines is transported by rail to Port Hedland by two independent railways.
The Mount Newman railway carries ore from Mt Whaleback, Orebodies 18, 23 and 25, Yandi and Area C, with the Yarrie mine serviced by the separate, shorter Goldsworthy railway. BHP has processing, stockpiling and shiploading facilities at Nelson Point and Finucane Island at Port Hedland, referred to as the Inner Harbour operations. The company is in the process of developing an iron ore export
facility adjacent to its existing operations in Port Hedland, known as the Outer Harbour. In September 2011, BHP finalised the purchase of the HWE mining services business from Leighton Holdings – comprising three entities and other property, plant and equipment – which provided contract mining services to WAIO’s joint ventures. The purchase of the acquired entities’ issued share capital was funded by the group’s available cash.
The acquisition of the mining equipment and related assets that service the Area C, Yandi, and Orebody 23 and 25 operations was consistent with BHP’s intention to move the WAIO business from contract mining to owner-operator mining.
During the December quarter of 2011, the group approved the development of the WAIO Orebody 24 mine, 10km northeast of Newman, for which its share of costs was US$698 million. Orebody 24 will maintain iron ore production output from the Newman joint venture operations.
BHP reported in a statement that the new Orebody 24 mine would have a capacity of 17mtpa (on a 100 per cent basis) and would include the construction of an ore crushing plant, train loadout facility, rail spur and other associated support facilities.
“The Orebody 24 development is consistent with our strategy to invest in high-quality, expandable resource basins and highlights the benefits of our ability to leverage existing infrastructure to sustain current production,” former BHP Billiton president iron ore Ian Ashby said.
Dual harbour strategy In February 2012, BHP announced the approval of US$779 million (BHP’s share) in pre-commitment funding for the first phase of the WAIO Outer Harbour Development.
The first stage of the proposed development included construction of a 4km jetty, a four-berth wharf, a 32km dredged departure channel and landside infrastructure, including stockyards and a rail spur. Start-up was scheduled for the first half of 2016 and the project included an embedded option to expand production by a further 100mtpa.
In late August, BHP announced that it had re-evaluated the most efficient means of expanding production from WAIO beyond its 240mtpa Inner Harbour allocation in Port Hedland.
“Preliminary studies have shown the potential for WAIO to ship substantially more than 240mtpa from the Inner Harbour.
As a result, work on the Outer Harbour has been slowed while WAIO’s focus has shifted to maximising its potential capacity from the Inner Harbour,” the company stated.
“WAIO has been granted the right, subjectto the State approvals processes, to develop two additional berths in the Inner Harbour.
“These berths do not come with guaranteed shipping capacity beyond BHP Billiton’s current 240mtpa throughput allocation,” it reported.
“WAIO believes there is substantially more opportunity to optimise its Inner Harbour throughput, given there is significant underutilised Inner Harbour port capacity. Port users may ship beyond their shipping allocation if unused capacity is available.”
Current BHP Billiton president iron ore Jimmy Wilson said that it had become apparent that existing facilities – including the Inner Harbour – had the potential to deliver significantly more capacity than originally assumed.
“Development of the Outer Harbour remains attractive. Its initial development would require dredging a shipping channel and turning basin, as well as constructing a four kilometre jetty with associated
stockyards and car dumpers at Boodarie. Additional expansion in the Inner Harbour would delay the requirement for many of these investments,” Mr Wilson said.
“The right to develop these berths and prudent debottlenecking in the Inner Harbour provide for a lower cost port capacity to match easily accessible growth options in our mines and rail.
“The Outer Harbour continues to be an important part of our long-term strategy. Despite the substantial establishment costs associated with this greenfield facility, our analysis concluded that development of the first 50mtpa phase of the Outer Harbour Project would deliver a value-adding investment return as a standalone project.” “The Outer Harbour therefore remains a critical part of our future growth plans, but is not our best option right now.”


Leave a Reply

Your email address will not be published.