BUSINESS BHP’s $ 3.9b Pilbara play

BHP has committed to what looks like being its biggest iron ore investment of the next 10 years, ploughing $ 3.9 billion into development of its majority- owned South Flank mine in the central Pilbara.

The dual- listed mining giant said the Western Australian project would fully replace production from its 80 million tonnes a year Yandi mine, which is reaching the end of its economic life.

BHP Minerals Australia president Mike Henry ( pictured) said South Flank would prove capital efficient and offer South Flank investment sets up iron ore for decade attractive returns. “I wouldn’t “It will enhance the average $ 4.55 billion. South Flank will want to comment on our comquality of BHP’s Western Ausgenerate about 2500 conpetitors but, for us, this is the tralia iron ore production and struction jobs but increased only investment of this size will allow us to benefit from automation means it will that we’ll have over the course price premiums for highereventually employ about 600 of next decade,” Mr Henry said quality lump and fines prodpeople, compared to Yandi’s yesterday. “This sets us up reucts,” Mr Henry said. workforce of 740. ally well.” BHP has an 85 per cent Engineering group CIMIC

South Flank iron ore will stake in South Flank, with the yesterday said it would start help increase BHP’s average remaining 15 per cent held by work on South Flank in July iron grade in WA from 61 per local subsidiaries of Itochu and after winning a $ 260 million cent to 62 per cent, and the Mitsui. contract for the construction overall proportion of lump ore The Japanese corporations of bulk earthworks, concrete – which allows for more efwill also contribute, bringing and underground services at ficient steelmaking than small- the total cost of the project to the site. er fine ore – from 25 per cent to approximately 35 per cent.

Production is expected to start in 2021 and run for more than 25 years.

Construction is scheduled to run until September 2020, CIMIC said in a statement to the ASX.

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.”