LEADING WA iron ore producer BHP Billiton Iron Ore experienced a 22 per cent production increase for the three months ended December 2011, achieving record levels as a result of mine, rail and port expansions.
Iron ore output for the period was 41.1 million tonnes, as compared with 33.7mt for the same period in 2010. The company’s principal 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, stockyards and two separate port facilities in Port Hedland.
In Brazil, BHP is part of a 50:50 joint venture with Vale for the Samarco mining operations. The BHP group had a strong half year ending December 2011, with underlying earnings before interest, tax, depreciation and amortisation increasing by 8 per cent to US$18.7 billion. It reported record iron ore production in WA as one of the major catalysts for the increase: this commodity having earned the company US$12.149 billion for the 2011 half-year in comparison to the 2010 half-year result of US$9.382 billion.
WA operations
BHP’s WA Iron Ore (WAIO) assets produced a record annualised rate of 178mtpa (100 per cent basis) during the December 2011 quarter, reflecting the ramp up of ore-handling plant 3 at Yandi, dual tracking of the company’s rail infrastructure and additional ship-loading capacity at Port Hedland.
WAIO employs 13,000 people and is supported by the town of Newman, with port and rail facilities in Port Hedland. 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 through two independent railways. The Mount Newman railway carries ore from Mt Whaleback, Orebodies 18, 23 and 25, Yandi and Area C. The Yarrie mine is serviced by the separate, shorter Goldsworthy railway.
BHP has processing, stockpiling and shiploading facilities at Nelson Point and Finucane Island, Port Hedland. These facilities are referred to as the Inner Harbour operations. BHP 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 1981, to develop an iron ore export facility adjacent to its existing operations in Port Hedland, known as the Outer Harbour.
On a 100 per cent basis, the WAIO mines produced 44.927mt of iron ore for the December 2011 quarter and 87.985mt of iron ore for the 2011 half year. BHP’s share of this was 38.188mt and 74.787mt of iron ore respectively.
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 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 is consistent with BHP’s intention to move the WAIO business from contract mining to owner-operator mining. During the December quarter, 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,” BHP Billiton president iron ore Ian Ashby said.
In February 2012, BHP also 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 propose development includes 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 will be in the first half of calendar year 2016.
The project, which is expected to be reviewed for full approval in the fourth quarter of calendar year 2012, has an embedded option to expand production by a
further 100mtpa. BHP’s funding will enable the progression of feasibility studies and procurement of long lead time items. It will also allow for dredging to begin, subject to the necessary regulatory approvals. In tandem with this, engineering studies are under way to match mine and rail expansions to the expanded port capacity.
“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.
This investment takes the cumulative commitment to iron ore growth projects in execution to more than US$11 billion. BHP stated in its half-year production
report that while scheduled maintenance, tie-in activities and the wet season in the Pilbara were expected to affect WAIO  production in the second half of the 2012 financial year, full-year production was forecast to marginally exceed prior guidance of 159mtpa (on a 100 per cent basis). Brazilian operations BHP’s Samarco operations in Brazil comprise open-pit mines, a concentration plant, two pellet plants, port facilities, and a 396km concentrate slurry pipeline between the mine and the pellet plants.
The operations are centred on two large industrial footprints in the states of Minas Gerais and Espirito Santo. The Samarco operations are run as an independent business unit with its own management team, granted mining concessions by the Brazilian Government, provided that it mines the contained Alegria Complex according to an agreed plan. Production began at the Germano mine in 1977 at a low rate of 2.7mtpa and at the Alegria Complex in 1992. The latter has now replaced the depleted Germano mine. Samarco has an annual production capacity of more than 21mt of iron ore pellets and 1mt of concentrates.
Samarco is important to BHP’s portfolio due to its distinctive ore transportation methods that require only a small number of trucks. About 70 per cent of ore movement is via a direct loaded conveyor, resulting in significantly lower fuel consumption. Production of 2.884mt or iron ore during the December 2011 quarter was in line with comparable periods, with all three pellet plants continuing to run at full capacity. For the half year to December, the mine
produced 5.857mt of iron ore.
In May 2011, BHP confirmed a US$3.5 billion expansion plan for Samarco, in which a fourth pellet plant would be added to increase output from the second half of calendar 2014. Known as P4P, the expansion project would increase output by 8.3mtpa of dry pellets and pellet feed.
Environmental licences have been received for the expansion, which will also include the construction of a third concentrator at the Germano site with a production capacity of 9.5mtpa of dry iron ore concentrate.
A third ore pipeline to Ubu will be installed, running parallel to the two already in operation. The new pipe will carry 20mtpa of dry iron ore concentrate equivalent. The combined upgrades will increase the overall pellet production capacity of the operation by 37 per cent to 30.5mtpa. Start-up is expected in the first half of 2014.


By Rachel Seeley