PLANS by BHP Billiton to expand its West Australian Iron Ore business (WAIO) by taking its Pilbara region production capacity to 350 million tonnes per annum by 2020 are progressing well, with the sixth stage of the company’s Rapid Growth Project set to deliver on long-term iron ore demand increases.
BHP’s Pilbara operations comprise a complex integrated system of seven inland mines (the 100 per cent-owned Jimblebar and the 85 per cent-owned Area C, Mt Whaleback, Ore Body 18, Ore Body 24, Yandi and Yarrie), more than 1000km of rail, stockyards and two separate port facilities in Port Hedland.
An early stage capital expenditure of US$1.93 billion was approved for Rapid Growth Project 6 (RPG6) in January 2010. RGP6 comprises an expansion of the Jimblebar mine and the inner Port Hedland harbour, development of the outer harbour and the duplication of rail tracks.
It is expected to increase installed capacity at the company’s Pilbara iron ore assets to 240mtpa during 2013.
RGP6 emphasises BHP’s core plan of investing in large, low-cost, expandable assets and is part of a long-term preparation that hinges on the company’s confidence in the future demand outlook for iron ore.
“This investment is the continuation of our long-term strategy of adding capacity in our high-quality iron ore business to support our confidence in the longer-term demand for iron ore globally. By the time RGP6 is completed, we will have more than tripled installed capacity at our Western Australia iron ore operations since we first invested in our accelerated growth program in 2002,” BHP president iron ore Ian Ashby said in a statement.
To reach the increased capacity of 350mtpa by 2020, the company will need to compound an annual growth rate of about 10 per cent per year, compared to the 8n per cent per year that has been achieved since 2000.
In line with this strategy, BHP’s December 2011 quarterly report recorded a 22 per cent increase in iron ore production for the quarter.
At 41.1 million tonnes (compared to 33.4mt for the same period in 2010), the quarter’s production rate was better than what had been expected by many analysts. However, the report stated that “scheduled maintenance, tie-in activities and the wet season in the Pilbara are
expected to affect production in the second half of the 2012 financial year; full year production is now forecast to marginally exceed prior guidance of 159 million tonnes per annum”.
Jimblebar BHP acquired the Jimblebar mine, 41km east of Newman, in 1992. Ore from the mine is transported to the company’s facilities at Port Hedland via the Mount Newman railway: a private line owned and operated by BHP.
Jimblebar was originally constructed with a two-stage crushing circuit to produce 14mtpa of iron ore; the expansion aims to increase production to 35mtpa, with an embedded option to later increase this to 55mtpa.
According to the report and recommendations of the Environmental Protection Authority for Jimblebar, prepared in October 2010, the expanded operations would have a mining and processing life to up to 2037, with an ore processing rate of up to 30mtpa, and total overburden production of no more than 1.225 billion tonnes.
Construction for the expansion is slated to cost US$3.4 billion and will include a new ore processing plant and associated stockyards as well
as power, rail and accommodation infrastructure. Procurement is being undertaken by FAST JV, a joint venture between Fluor and SKM
Consulting, and will involve mobile equipment workshops, dewatering infrastructure to process 60 megalitres per day, a 1200t ammonium nitrate storage facility and an administration centre, as well as the mine itself. Decmil Australia has been awarded a $71 million construction contract for the Warrawandu village, set to accommodate 2200 miners, while Thiess is providing bulk earthworks, drainage and civil infrastructure, roadworks and buried services under a $166 million contract. When announcing the contract in March 2011, Theiss stated that the work was expected to be completed by the end of July 2012.
In January this year, VDM Group was granted a $25.2 million contract to design and build the ammonium nitrate storage facility at Jimblebar.
The company stated at the time that it would begin works in February, with completion scheduled for December.
In March, BHP indicated that construction was on track to allow for first ore delivery from the expanded operations in the first quarter of the 2014 calendar year.
Port Hedland BHP has processing, stockpiling and shiploading facilities at Nelson Point and Finucane Island in Port Hedland that are referred to as the Inner Harbour operations. The company is seeking approval under the WA Environmental Protection Act 1986, the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 and the Commonwealth Environment Protection (Sea Dumping) Act 1981to develop an iron ore export facility in the Outer Harbour, adjacent to its existing Inner Harbour operations.
In February 2012, US$917 million of pre-commitment funding was announced for the first phase of the WAIO Outer Harbour development
(BHP’s share being US$779 million) to support 350mtpa of iron ore capacity by 2020. The funding will enable the progression of feasibility studies, the procurement of long lead time items and the start of dredging.
The first stage of the proposed Outer Harbour development, targeting 100mtpa of capacity, will comprise the construction of a 4km jetty, a
four-berth wharf, two ship loaders and a 32km dredged departure channel.
On the land side, the company will develop the Boodarie stockyards, the western spur rail loop and associated facilities.
The project, expected to be reviewed for full approval in late 2012, has an embedded option to expand production by a further 100mtpa. The supporting infrastructure will allow for modular expansion increments of about 50mt, with the investment decision for subsequent stages to be made based on internal and external factors (such as the demand for iron ore) at the time.
“This investment is an important first step in providing the infrastructure to allow us to fully develop our world-class resource base in the Pilbara. The development of the outer harbour is pivotal for our longer-term growth objectives and this initial funding is rapidly turning those plans into a reality,” Mr Ashby said in a statement.
The company’s commitment to expansion indicates its confidence in the long-term demand for iron ore, underpinned by China’s urbanisation and industrialisation. By increasing production at Jimblebar, fully utilising the inner harbour and scaling use of the outer harbour, BHP’s massive scale, resource quality and geographic nature will place it in a good position to meet long-term iron ore demand from Asia.
By Rachel Dally-Watkins