BHP chases lower costs for more iron ore in Western Australia

BHP Billiton has announced plans to cut costs and increase supply of iron ore as it chases its goal of becoming the lowest-cost producer in the Pilbara.

The miner said it expects unit cash costs of less than $US20per tonne in the medium term at Western Australia Iron Ore (WAIO), a cut of more than 25 per cent.

It is also looking to add 65 million tonnes of capacity at WAIO by working its four mining hubs and associated integrated rail and port infrastructure harder.

This would increase annual output to 275 million tonnes per annum by the 2017.

BHP Billiton iron ore boss Jimmy Wilson said the company had the “strongest position in Western Australia” adding that quality ore bodies would help to sustain strong margins.

“Our reserves are concentrated around our four major mining hubs which will support a lower level of sustaining capital expenditure than required by our peers,” Wilson said.

“With annual sustaining capex of approximately US$5 per tonne over the next five years, we aim to be the lowest cost supplier to China on an all-in cash basis.”

Despite a crash in the price of iron ore this year, which is hovering at five-year lows of $US80 a tonne, Wilson was optimistic about “healthy demand growth for iron ore in the medium term”.

He said Chinese steel production would increase by 25 per cent at the same time as other emerging economies started their own urbanisation and industrialisation journeys.

Wilson said there was the potential to make further increases to its production levels, labelling the prospect as “compelling”.

“We completed our major supply chain investments some time ago and have since focussed on using BHP Billiton’s benchmarking systems to improve the performance of our equipment by systematically tackling the bottlenecks,” he said.

Technology also highlighted as a key driver in achieving higher production targets.

BHP said its fully functioning Integrated Remote Operations Centre was unlocking capacity and synergies across the supply chain while autonomous haulage and drill rig trials were well advanced.

The company is also actively studying ‘best in class’ autonomous above rail capability.

“With an undeniable sustainable capital expenditure advantage and a lower strip ratio, we have no excuses and should be the lowest all-in cost supplier of high-quality iron or eto China, and that is our unrelenting goal,” Wilson said.

BHP rival, Rio Tinto is already producing about 290 million tonnes of iron ore a year and has plans to increase this to 330 mtpa by 2015.

The other major miner in the region, Fortescue Metals Group currently produces 155 mtpa.

The companies have been blamed for oversupplying the market with iron ore which has led to lower prices.

News of even more ore at such low costs is bad news for higher cost produces, two of which have recently had to close their operations.





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