BHP Billiton gives MAC the nod (April 08, 2002)

BHP Billiton (BHP-N) has approved a US$564-million plan to develop an iron ore mine at its 85%-owned Mining Area C and expand its Port Hedland port-rail facilities. Both sites are in Western Australia’s Pilbara region.

BHP Billiton’s share of the US$213-million cost of developing the mine is US$181 million. Commercial production is scheduled to start early next year, and the mine has the potential to increase iron ore production by up to 15 million tonnes annually by 2011.

Plans call for a 15-million-tonne-per-year mine and processing facility to produce lump iron ore and fines. A 38-km-long rail will link Mining Area C and the Yandi lump iron-ore project. Power and water facilities will also be built, along with an airstrip, access roads, and housing for 500 construction workers and a permanent staff of 150.

In addition, BHP Billiton will contribute USUS$299 million to the US$351-million cost of expanding the port and rail facilities. The expansion is expected to increase the major’s export capacity to 81 million tonnes per year from the current 67 million tonnes. A further expansion would raise that to 90 million tonnes, an increase of more than 40%.

The port expansion will consist of the following:

– a western stockyard;

– installation of more modern and efficient dust-suppression systems;

– an upgraded under-harbour tunnel conveyor (increasing to 10,000 tonnes per hour from 4,500 tonnes);

– a lump re-screening facility; and

– an extension of existing shipping berths.

Situated 39 km from BHP Billiton’s Yandi operation, Mining Area C is estimated to contain 890 million tonnes of Marra Mamba iron ore in seven separate deposits: A, B, C, D, E, F and R. Deposit C, on the northern flank of Mining Area C, contains a proven reserve of 161 million tonnes and a probable reserve of 29 million tonnes.

Marra Mamba ore is a mixture of hematite and goethite and is low in impurities such as silica and alumina. The mineralized material is in the Marra Mamba formation of the Hamersley succession in Western Australia.

All approvals for mine construction are in-hand. Also, native title agreements have been reached for land covering the powerline corridor to the mine. The port and rail expansion project will begin following regulatory approval.

As part of the development plan, BHP Billiton has entered into a joint-venture agreement with South Korean steel maker Posco under which Posco will acquire a 20% stake in deposit C for an undisclosed sum. In return, Posco has committed to buy at least 3 million tons of iron ore from the mine each year. Posco has also agreed to a long-term arrangement with BHP Billiton for supply of other iron ore products.

The remaining stakeholders in the project are CI Minerals Australia, with 8%, and Japan’s Mitsui & Co., with 7%.