BHP reports its 2016-17 production and sales data in less than two weeks and the full year financial results a month later, but one thing you will hear more of is the looming decision on a new multi-billion dollar iron ore mine in the WA Pilbara region that replace its veteran Yandi operation in around 8 years time.
BHP last week took the first step in the life of the new South Flank mine by approving the spending of $US184 million ($A244 million) (BHP’s share) in initial funding for the South Flank project.
The mine could cost more than $A3 billion by the time it is due to start producing in 2021.
The new mine, if approved in the central Pilbara of BHP”s West Australian Iron Ore Operations (WAIO). BHP’s board is expected to make a final decision on the multi-billion dollar project in mid 2018.
The initial funding would generate several hundred construction jobs in the region as the company starts work on preliminary facilities.
The South Flank project, which will leverage and expand the existing Mining Area C hub, is BHP’s preferred option to replace production from the 80 million tonnes a year (100% basis) Yandi mine when it reaches the end of its economic life in the early-to-mid 2020s.
If approved by the bHP board, the company expects the ore production to start in the 2021 calendar year and ramp-up timed to coincide with the ramp-down of Yandi.
BHP says full development of South Flank will generate several thousand jobs during construction.
BHP’s iron ore boss, Mike Henry saays the capital efficient South Flank project "was a compelling option to replace Yandi production and offered attractive returns. Its high-grade lump and fines ore and a strip ratio in line with the WAIO average would establish it as a highly-competitive operation”.
The initial funding will be used primarily for the expansion of accommodation facilities to support current and future workforce requirements.
“As well as supporting our current operational requirements, this work will advance potential first ore from South Flank, while we further optimise the full development and progress external and internal approvals.
"As we have said previously, a continuing stable investment environment in Western Australia is required to underpin ongoing investment in the business, including this project,” Mr Henry said.
The capital cost for South Flank is expected to be in the range of US$30 to US$40 per tonne, with expenditure fitting within WAIO’s previously indicated average sustaining capital expenditure of US$4 a tonne over the next five years. In other words, the South Flank project will absorb a lot of the investment BHP has planned for the Pilbara iron ore operations, its most important business.
“The capital efficiency of South Flank is underpinned by the planned use of existing infrastructure at the Mining Area C operation, which would, if approved, become one of the largest standalone iron ore processing centers in the world, within reach of several billion tonnes of high-grade ore,” Mr Henry said. BHP shares rose 0.6% yesterday to $24.30.
