BHP in pledge to ore buyers
BHP boss Andrew Mackenzie says it is too early to assess the financial impact of this week’s Pilbara train derailment.
However, the mining giant insisted on Thursday it intended to meet all contractual commitments to its customers and would not have to re-work contracts as a result.
“I know people will be listening to me and trying to figure out what the impacts of all this will be,” Mr Mackenzie told shareholders at the company’s annual meeting in Adelaide.
BHP’s crucial transport link between its mines and the port was severed on Monday morning after it had to derail a fully laden iron ore train about 120km south of Port Hedland.
The train, made up of four locomotives and 268 cars, had careered for 50 minutes at an average speed of 110km/h over 90km with no one at the controls after the driver got out to check a carriage and the train continued on its journey.
More than 130 workers with a fleet of heavy equipment are scrambling to clear wreckage from the crash site and repair 1.5km of damaged track.
BHP said it expected to have partial rail operations back up within a week, but it has revealed its port stockpiles will run out before rail services can be restored.
An industry source, who previously worked at a senior level connected to the Pilbara iron ore industry, told The West Australian this week the cost of the incident could run into the hundreds of millions, based on the company losing 800,000 tonnes worth about $80 mil- lion in revenue for every day its shipments were suspended.
The source said BHP could meet its long-term contract sales by selling less ore into the spot market to correct for any lost tonnes.
“Sales commitments are nor- mally three to four weeks ahead of the actual product lifting so they can correct their shipping arrivals over the next three weeks,” he said.
BHP has not yet updated its fullyear iron ore production estimate of 273Mt-283Mt, but the source said he expected the company would have to reduce guidance to 265Mt275Mt at some stage.
The company is also expected to incur demurrage while ships have to wait off the coast of Port Hedland for ore.
Andrew Mackenzie speaks to the media after BHP’s annual meeting in Adelaide on Thursday.