Australia's two biggest iron ore miners, BHP Billiton and Rio Tinto, have either just spent or have in the pipeline more than $10 billion worth of short-term Pilbara expansion plans to cash in on the booming China-fed steel market.
Australia's two biggest iron ore miners, BHP Billiton and Rio Tinto, have either just spent or have in the pipeline more than $10 billion worth of short-term Pilbara expansion plans to cash in on the booming China-fed steel market.
These two heavyweights, along with giant Brazilian CVRD, carry 80 per cent of the world’s seaboard iron ore trade.
The ongoing expansion in the Pilbara is expected to lift Rio Tinto’s production at its Hamersley Iron and Robe River mines to 200 million tonnes a year in 2007. BHP Billiton’s Pilbara production level is tipped to hit 130mt/year in the same period.
And there is bound to be more, which just adds to the market pressure on the junior producers and those struggling to fast-track production.
“We completely underestimated the increase in iron ore demand and we are running as fast as we can to catch up,” BHP Billiton president, iron ore carbon steel materials, Graeme Hunt said.
Since the unprecedented and unpredictable surge in iron ore demand began in 2002, BHP Billiton has increased production by 45 per cent in just three years.
To achieve this, the company has carried out $3 billion worth of accelerated expansion programs, including three rapid growth projects, the third of which is expected to come on stream at the end of 2007.
“That’s probably less than half the investment we see as necessary to support growth and demand going forward. We just keep adding things to the bottom of this list,” Mr Hunt said.
BHPB’s $1.9 billion Rapid Growth Project-4 will push iron ore production up to 152mt/year by 2010, and a fifth such project is under consideration.
“BHP Billiton has vast resources close to existing and expanding infrastructure that will enable further expansions well beyond 152 million tonnes a year,” Mr Hunt said.
Rio Tinto’s completed and committed expansion program currently runs to about $4 billion, without the inclusion of the $1 billion Hope Downs project with Gina Rinehart’s Hancock Prospecting, a 50/50 joint venture that brings a further 450mt of reserves into play.
Hancock Prospecting chair Gina Rinehart told WA Business News construction of the 30mt/year Hope Downs-1 mine would begin early next year with the first shipment expected early 2008.
The plan is to transport the ore along a 70 kilometre spur line – the Lang Hancock Railway – to be constructed to the West Angelas mine for transport north to either Dampier or Cape Lambert. Hope Downs-1 has a 20-year mine life.
West Angelas production was recently boosted from 20mt to 25mt/year.
Rio Tinto also recently committed $1.8 billion to the further expansion of Hamersley Iron’s Yandicoogina mine and the Dampier port facilities.
Yandicoogina’s expansion from an annual 36mt to 52mt makes it the largest iron ore mine in the Pilbara.
The $932 million expansion of the Dampier port facilities will increase annual shipping capacity there from 116mt to 140mt.
Construction of the Yandicoogina mine expansion will begin this month and construction of the Dampier port expansion in the first quarter of 2006. Both are scheduled to be commissioned at the end of 2007, with progressive ramp up during 2008.
Rio Tinto is also considering expanding capacity of its Cape Lambert port facilities, east of Karratha, to 69mt/year.
On the corporate front, the company has just signed a deal with Perth-based junior explorer Ausquest on its Nameless iron ore prospect near Tom Price in the Pilbara.
Ausquest says the iron ore mineralisation covers a strike length of about 15km and varies in width from 200-600 metres, assaying a healthy 55 to 58 per cent.
Rio Tinto will take $1 million worth of shares at 20 cents per share to fund an initial $250,000 work budget, with a second $500,000 placement if Rio Tinto decides to proceed.
Rio Tinto must fund and complete an order of magnitude study within two years and make a cash payment of $7.5 million within three years of completing the study at a minimum $2 million a year.
Rio Tinto has also earmarked $257 million for drilling and evaluation of its Pilbara tenements over the next five years.
BHPB’s recent expansion has centred on its rapid growth projects two, three and four, worth $4.3 billion and designed to lift production from its Pilbara operations to 118mt/year in the second half of next year, to 129mt/year by 2008-2009 and 152mt/year by 2010.
The company recently bought a further 10 giant ore hauling loco-motives, collectively worth $70 million.
Elsewhere in the Pilbara, the first project based on the Fortescue magnetite deposit is expected to be a 7mt/year pellet plant for export through new port facilities at Cape Preston.
Mineralogy Pty Ltd has entered into a number of memorandums of understanding with Chinese companies, which could lead to the development of a number of projects producing concentrate and pellets. While no start-up times have been set, environmental approval for the estimated $1.4 billion project has been granted.
Iron Ore Holdings is working on developing its Yandicoogina Creek, Lamb Creek and North Marillana projects, about 275km south of Port Hedland.
A scoping study, based on the road transport of 2mt/year of ore for shipping from Port Hedland, was completed earlier this year. Resource drilling is continuing.
In the Kimberley, Aztec Resources has completed a bankable feasibility study on mining the ex-BHP Koolan Island iron ore deposits in Yampi Sound, 130km north of Derby.
Aztec CEO Ian Burston said the company aimed to produce premium grade iron ore at an initial 2mt/year, rising to 4 mt/year over 10 years from a resource of 53.4mt, with the potential for more.
He expects construction of the $108 million project to begin early next year to enable first ore shipment in the second half of 2006, with the project providing life of mine revenue of $1.4 billion.
