BHP gives go-ahead to $4.5b Pilbara mine
BHP will spend $3.9 billion to develop its majority-owned South Flank iron ore mine in the central Pilbara, creating more than 600 permanent jobs.
The dual-listed mining giant said the project, which would also generate about 2500 construction jobs in Western Australia, would fully replace production from its Yandi mine. The 80 million-tonne-a-year Yandi is reaching the end of its economic life.
BHP's local minerals president, Mike Henry, said the South Flank project would prove capital efficient and offer attractive returns.
"The project will create around 2500 construction jobs, more than 600 ongoing operational roles and generate many opportunities for Western Australian suppliers," Mr Henry said in a statement. "It will enhance the average quality of BHP's Western Australia iron ore production and will allow us to benefit from price premiums for higher-quality lump and fines products."
BHP has an 85 per cent stake in South Flank, with the remaining 15 per cent held by local subsidiaries of Japanese corporations Itochu and Mitsui. Itochu and Mitsui will also contribute, bringing the total cost of the project to $4.55 billion.
South Flank iron ore will help increase BHP's average iron grade in WA from 61 to 62 per cent, and the overall proportion of lump from 25 per cent to about 35 per cent.
Production is expected to start in the 2021 calendar year and run for more than 25 years.
RBC Capital Markets analyst Paul Hissey, who expects Yandi to cease production by the end of 2022, welcomed the South Flank announcement.
"This is timely given the current dynamics in the iron ore market, with higher-quality products attracting premiums to benchmark prices," Mr Hissey said. "To this end, the project should help support margins from BHP's Pilbara operations."
Engineering group CIMIC on Friday said it would start work on South Flank in July after winning a $260 million contract for the construction of bulk earthworks, concrete and underground services. Construction was scheduled to run until September 2020, CIMIC said in a statement.
AAP