BHP has approved initial funding for its $3 billion-plus South Flank iron ore project in the Pilbara, and the company's top Australian executive said he wanted to hear from local suppliers who could add value to the development.
BHP has approved initial funding for its $3 billion-plus South Flank iron ore project in the Pilbara, and the company's top Australian executive said he wanted to hear from local suppliers who could add value to the development.
The company has agreed to spend $US184 million ($A244 million) preparing for its South Flank project.
South Flank is part of BHP's Mining Area C hub, and is the company's preferred option to replace production from the 80 million tonnes per annum Yandi mine when it reaches the end of its economic life in the early to mid 2020s.
The project is expected to be submitted for board approval in the middle of the 2018 calendar year, with first ore targeted in the 2021 calendar year and ramp-up timed to coincide with the ramp-down of Yandi.
BHP’s funding commitment comes one month after Rio Tinto approved an investment of $30.9 million to complete the feasibility study for development of its 40mtpa Koodaideri iron ore mine, which is estimated to cost $US2.2 billion ($A2.9 billion).
Like South Flank, this project is designed to sustain current production volumes rather than expand.
BHP president operations minerals Australia, Mike Henry, said the funding would generate several hundred construction jobs, while full development of South Flank would generate several thousand jobs during construction.
By comparison, Rio has stated that Koodaideri will require an expected 1,600 construction jobs and a further 600 operational staff if approved.
Mr Henry said the South Flank project was a compelling option to replace Yandi production and offered attractive returns.
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,” Mr Henry said.
“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.”
The capital cost for South Flank is expected to be in the range of $US30 to $US40 per tonne.
With output of 80mtpa, that equates to a range $US2.4 billion to $US3.2 billion.
The mid-point is $US2.8 billion, or $A3.7 billion.
“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.
Speaking to journalists after a business lunch in Perth today, Mr Henry said there would be opportunities for local suppliers, particularly those who could value add rather than seeking work just because they are based in WA.
“You want companies to come to us with true value add,” he said.
“It will be them coming to understand our needs and how they can meet our needs with what they already have or developing something new.
“And the onus is on us to understand them, their business, and what the opportunity is to help them meet our needs.”
Mr Henry said one example BHP was already pursuing was testing locally developed technology on-site, in a way that could not be done in a lab setting.
He noted that 90 per cent of spending on BHP’s iron ore operations was already undertaken in WA.
Mr Henry's comments built on the main theme of his speech, which was around building trust between big companies like BHP and the communities in whch it operates.
He said increased use of automation was one area where BHP needed to be attuned to the local impacts of changes in its business.
:I know that sometimes we get pretty excited by the new world of driverless trucks, driverless drills, and driverless trains," he said in his speech.
"And this is actually really exciting stuff!
"But let’s face it, that excitement probably isn’t shared by all.
"Some will be worried about the impact on their jobs, others about the impact on local communities and local business. It’s imperative that we listen to those voices."
Mr Henry said BHP needed to be transparent, to help people understand why it was making changes, and the opportunities that will flow, such as for upskilling and for new business.
"And of course we need to be looking at how we can ensure that affected employees and communities are supported through things like retraining or through deliberate fostering of new local opportunities, including supporting local business partners to move up the technology curve or to expand their markets."
Mr Henry also outlined early work on a community development plan at Port Hedland, after a meeting this month between community leaders, government and industry representatives from BHP, Fortescue Metals Group, Gina Rinehart's Roy Hill Holdings, WesTrac and the Chamber of Minerals & Energy of Western Australia.
"The concept that is being developed is one that unites stakeholders around a long-term vision and plan for the community in question," he said.
"It involves the creation of a long-term community development plan, informed by world class planning expertise, with input from community, government and industry.
"This long-term plan, owned by the community and local government, then provides a more integrated backdrop against which investment in infrastructure and programmes can occur over time in a way that builds towards something greater.
"It moves away from a more piecemeal approach where effort and investment are made less effective through simple lack of vision and integration."
The meeting comes after a contentious and long-runnng debate at Port Hedland about the environmental and health impacts of dust from BHP's iron ore stockpiles.
