The world’s biggest miner, BHP, is planning to deliver a total of $US1.6 billion ($2.2 billion) in productivity gains across its n mining operations over the next two years.
But while BHP expects to lower unit costs by 10 per cent over the medium term, it is also hoping to lift its n iron ore production “run rate” to 290 million tonnes a year by the end of fiscal 2019.
Speaking to analysts and investors on Tuesday, BHP Minerals president Mike Henry said he wanted the company to lift iron ore production to that run rate “as soon as possible”.
Mr Henry said BHP was working with government and local communities to increase its export licence.
“We’ve put in place the granular plans that get us to 290, and that’s going to be a big achievement in its own right,” he said.
Asked how BHP would reach the 290 million tonne run rate, he said: “This is just us getting better and better and better at productivity, at the way that we operate our current assets. There is a little bit of de-bottlenecking, and system optimisation, in particular in the inflow circuit and the outflow circuit at the port.”
Mr Henry said the returns on the iron ore production increase would be fantastic, and come without “significant licks of capital”.
BHP has forecast that total iron ore production from its West n iron ore operations (WAIO) would be in the range of 275 million to 280 million tonnes in fiscal 2018. It has forecast unit cash costs for fiscal 2018 at its WA iron ore operations of less than $US14 a tonne. Last year BHP produced 268 million tonnes of iron ore.
BHP also highlighted a number of “attractive options” it had for expansion, including the so-called brownfield expansion option at Olympic Dam in South
BHP had “a suite of attractive medium-term investment opportunities. While these remain subject to our strict group-level capital allocation framework tests, with average returns potentially exceeding 40 per cent, they are well placed to compete for capital,” Mr Henry said.
Mr Henry said BHP had substantially reduced unit costs at its n operations over recent years by replicating best practice across its global portfolio, and by sharing knowledge.
“But we have further to go. We can make ourselves safer and even more productive, and expect to lower our unit costs by a further 10 per cent over the medium-term,” he said.
In a bullish outlook, the company said prices for iron ore and metallurgical coal could rebound sharply before February as buyers look to replenish stocks.
“While steel production in China will fall in the short term due to the mandated winter cuts and this could impact short term demand for iron ore and met(allurgical) coal … record margins means competition for premium quality raw materials is high,” vice-president of marketing Vicky Binns said.