BHP Billiton (BHP) says it won’t be changing its current export first policy for maximising returns on installed capacity at its Western Australia Iron Ore business (WAIO).
Speaking in Perth at the annual Global Iron Ore and Steel Forecast Conference yesterday, the boss of BHP’s iron ore business, Jimmy Wilson, highlighted the exceptional returns from the company’s productivity agenda.
“The effectiveness of our approach is validated by our robust financial and operating results despite the challenging market conditions,” he said.
“For the first half of this financial year the team has delivered a solid underlying EBIT margin of 49 per cent and a return on assets of 34 per cent.”
It was a bit of a cheer leading speech on a day when the markets digested another fall in the global iron ore price to $US58.58, yet another all time low for the current index – based pricing system which started in 2009. This price has lost around 7% since last Thursday.
Reacting more to that fall, BHP shares lost 0.75% yesterday to $A31.91.
BHP 5Y – BHP talks up iron ore productivity gains
Mr Wilson said the WAIO business is on track to achieve unit cash costs of less than US$20 a tonne this year.
“Not only is our concentrated resource position a competitive advantage, but the quality and high-grade characteristics of our orebodies translates into premium products in the market,” Mr Wilson told the conference.
“The majority are high Fe (iron oxide) Brockman and Marra Mamba ores, with low impurities and a high proportion of lump, around which we optimise our mine plans to maximise our profit margin.
“We can deliver high-quality product that our customers value, through existing hub infrastructure, at a low operating cost. Our footprint also means that we won’t need to invest in new mining hubs to sustain current operations for decades.”
He said BHP also anticipated the increasing supply of seaborne iron ore (from Australia and Brazil, for instance), approving the last of its major capital investments in its Pilbara infrastructure in 2011.
“Over the past decade, BHP Billiton made a US$25 billion capital investment in infrastructure and equipment in our WAIO operations. Through our disciplined program of investment, we were able to deliver valuable tonnes to market and maintain our share of supply,” Mr Wilson said.
“We have no major projects in execution and our growth pathway will be achieved by continuing to make our existing infrastructure more productive.
“With this strategy we are maintaining Australia’s competitive position in the global market and providing the revenue, royalties, employment and innovation that is so important for this country’s future.”
WAIO achieved record production of 124 million tonnes in the first half and is on track to deliver 245 million tonnes in the 2015 financial year (100% basis), according to BHP.
