The Australian Mining Review - - FRONT PAGE - AMY BLOM

Olympic Dam had mixed re­sults in FY18 as a re­sult of smelter is­sues as well as a planned rolling shut­down. How­ever, BHP is back on track, push­ing ahead with ex­pan­sion projects and po­ten­tially game-chang­ing in­no­va­tions that could de­crease costs while dou­bling pro­duc­tion.

GROWTH plans for BHP’s Olympic Dam were back on track fol­low­ing a slower than planned ramp-up after its ma­jor smelter up­grade ear­lier this year and on­go­ing tech­ni­cal is­sues.

The ma­jor smelter main­te­nance up­grade was the largest planned shut­down ever un­der­taken in Olympic Dam’s 30 year his­tory, run­ning from Au­gust 2017 un­til Fe­bru­ary 2018.

Other ma­jor up­grade work was car­ried out on the re­fin­ery, con­cen­tra­tor and site tech­nol­ogy to en­sure the on­go­ing re­li­a­bil­ity and safety of the Olympic Dam op­er­a­tion.

The $350 mil­lion project in­volved a planned rolling shut­down with up to 1300 con­trac­tors work­ing around the clock to dis­man­tle, re­build and up­grade in­te­gral com­po­nents of the fa­cil­ity.

De­spite the smelter up­grade’s suc­cess­ful com­ple­tion in early 2018, BHP con­firmed in Au­gust 2018 that the fail­ure of sev­eral boiler tubes at the acid plant had caused tech­ni­cal is­sues.

In its full year earn­ings re­lease, BHP stated re­me­di­a­tion and mit­i­ga­tion ac­tiv­i­ties were un­der­way, and un­der­ground min­ing op­er­a­tions were con­tin­u­ing as nor­mal.

The is­sues were ex­pected to hin­der pro­duc­tion for about two months.

BHP chief ex­ec­u­tive An­drew Macken­zie said Olympic Dam was the one part of the busi­ness BHP wanted to get to pre­vi­ous lev­els of re­turn since sell­ing its US on­shore oil and shale gas busi­ness to en­ergy gi­ant BP and Merit En­ergy in July.

“I ac­cept that we have a lot to do to build con­fi­dence in Olympic Dam, but this is some­thing that we can re­ally con­cen­trate on now as an or­gan­i­sa­tion since we’ve cleared al­most every­thing else off our ta­ble other than just mak­ing the most of this tremen­dous port­fo­lio we’ve now got,” Mr Macken­zie said.

“We have seen a con­sid­er­able im­prove­ment in our de­vel­op­ment rates in the South­ern Mine Area and that has put our growth plans that we have for Olympic Dam back on track.

“It will ab­so­lutely have the fo­cus of the best and bright­est in BHP to make that hap­pen.”

Guid­ance for Olympic Dam was re­duced to about 135,000t from the pre­vi­ous 150,000t fol­low­ing the slower than planned ramp-up.

How­ever, in its an­nual re­port re­leased on 18 Septem­ber, BHP an­nounced Olympic Dam had slightly ex­ceeded the re­vised guid­ance for the full FY18 at 137,000t.

In its Septem­ber quar­ter op­er­a­tional re­port, re­leased on 17 Oc­to­ber, BHP an­nounced its cop­per guid­ance for FY19 would be re­duced by 3 per cent fol­low­ing the Olympic Dam out­age, as well as an elec­tro-win­ning plant out­age at its Spence op­er­a­tion in Chile.

It stated Olympic Dam cop­per pro­duc­tion had de­creased in by 21 per cent to 33,000t in the Septem­ber quar­ter as a re­sult of the out­age in Au­gust.

As a re­sult, pro­duc­tion guid­ance for FY19 was re­duced from be­tween 200,000 and 220,000t to be­tween 170,000 and 180,000t.

Fur­ther De­vel­op­ment

Pro­duc­tion was ex­pected to in­crease as de­vel­op­ment into the higher-grade South­ern Mine Area (SMA) con­tin­ued.

The move into the SMA would in­crease cop­per grade to 3 per cent by the 2023 fi­nan­cial year, which is when BHP an­tic­i­pated the cop­per mar­ket to en­ter a struc­tural deficit.

SMA was a key foun­da­tion for sus­tain­able fu­ture growth for BHP, ac­count­ing for about 70 per cent of the Olympic Dam fu­ture ore­body.

BHP be­gan de­vel­op­ment in the site in 2014 and pro­duced first ore late last year.

Plans to de­velop a low-cost heap leach­ing tech­nol­ogy in or­der to dou­ble mine out­put to 450,000 tonnes of cop­per per year by 2023 were also pro­gress­ing well.

While dou­bling out­put, the heap leach cop­per ex­trac­tion process was also ex­pected to be far more cost-ef­fec­tive, with cap­i­tal costs ex­pected to be about 20 per cent lower than tra­di­tional min­ing meth­ods.

Op­er­at­ing costs were also ex­pected to be lower.

The first cop­per cath­ode was pro­duced from the heap leach re­search and de­vel­op­ment tri­als in Septem­ber last year.

A se­ries of larger scale ex­per­i­ments and test­ing on the heap leach process were ex­pected to con­tinue over the next two years.

As one of the world’s most sig­nif­i­cant de­posits of cop­per, gold, sil­ver and ura­nium, BHP con­sid­ers Olympic Dam to be a multi-gen­er­a­tional re­source, and has a num­ber of plans to fully un­lock its po­ten­tial.

BHP was also pro­gress­ing plans on a $2.1 bil­lion ex­pan­sion of its Brown­fields cop­per de­posit, known as the BFX.

If ap­proved the BFX would in­crease out­put to be­tween 280,000t to 330,000t per year in the medium term and move Olympic Dam into the first quar­tile of the cost curve.

BHP was work­ing to­wards board ap­proval of the BFX at Olympic Dam in mid-2020.

First in­cre­men­tal pro­duc­tion was tar­geted in late 2021 and project ramp up and com­ple­tion was tar­geted for the fol­low­ing year.

Light Elec­tronic Ve­hi­cles De­ployed

In fur­ther devel­op­ments at Olympic Dam, BHP un­veiled its first light elec­tric ve­hi­cle in June (LEV) as part of a trial, which could lead to the re­place­ment of its ex­ist­ing un­der­ground fleet of 240 diesel-pow­ered light ve­hi­cles.

A se­cond LEV was ex­pected to fol­low later in the cal­en­dar year.

As part of its day-to-day op­er­a­tions, Olympic Dam re­lies on a team of about 800 un­der­ground em­ploy­ees and uses diesel equip­ment for de­vel­op­ment, pro­duc­tion, ore han­dling and mine ser­vices.

Al­though LEVs look sim­i­lar to a tra­di­tional Land Cruiser or ute, BHP be­lieved the ve­hi­cles were at the heart of the com­pany’s work on low emis­sions tech­nol­ogy.

As LEVs are bat­tery-pow­ered, mine work­ers at Olympic Dam could ex­pect their ex­po­sure to the diesel par­tic­u­late mat­ter gen­er­ated by tra­di­tional diesel en­gines to be sig­nif­i­cantly re­duced.

In an an­nounce­ment on 27 June, BHP said the trial was part of a broader ini­tia­tive aimed at achiev­ing a 50 per cent re­duc­tion in the num­ber of em­ploy­ees with po­ten­tial ex­po­sure to par­tic­u­late mat­ter.

BHP said Olympic Dam’s switch to LEVs in its op­er­a­tions would re­duce emis­sions, ex­po­sure and costs, as well as in­flu­enc­ing the roll­out of sim­i­lar ini­tia­tives in its other lo­ca­tions.

Dur­ing the trial, BHP will col­lect data on the ve­hi­cles’ per­for­mance, power sup­ply, main­te­nance re­quire­ments, charg­ing time and cor­ro­sion re­sis­tance un­der­ground.

A wider de­ploy­ment at Olympic Dam was ex­pected to be made dur­ing FY19.

Olympic Dam is 560km north of Ade­laide and is made up of un­der­ground and sur­face op­er­a­tions, as well as a fully in­te­grated pro­cess­ing fa­cil­ity from ore to metal.

The mine is made up of more than 450km of un­der­ground roads and tun­nels.


BHP’s ex­pan­sion and im­prove­ment projects have come as cop­per has taken a bear­ish turn in re­cent months, plung­ing by 20 per cent to a 14 month low of about $US6000 per tonne in early Au­gust.

Ac­cord­ing to BHP’s full year earn­ings re­lease, cop­per prices rose over the 2018 fi­nan­cial year, with gains in the first half sus­tained for most of the se­cond half.

The av­er­age re­alised price for BHP’s cop­per in FY18 was $US3.12 per pound.

Broad-based de­mand strength and the threat of sup­ply dis­rup­tion both con­trib­uted to the im­prove­ment in prices.

How­ever, the rise in trade ten­sions pushed cop­per prices down early in FY19.

Grade de­cline, in­creased in­put costs, wa­ter con­straints and a scarcity of high-qual­ity fu­ture de­vel­op­ment op­por­tu­ni­ties would re­quire at­trac­tive prices to se­cure suf­fi­cient in­vest­ment to bal­ance the mar­ket, with new mine sup­ply re­quired in the early part of the next decade.

Cop­per pro­duc­tion for the 2018 fi­nan­cial year in­creased by 32 per cent to 1.7mt largely due to a full year of pro­duc­tion at Es­con­dida, sup­ported by the ramp-up of the Los Colorados Ex­ten­sion project and record pro­duc­tion at Spence, in Chile.

This more than off­set re­duced vol­umes at Olympic Dam as a re­sult of the planned smelter main­te­nance project.

Ac­cord­ing to the De­part­ment of In­dus­try, In­no­va­tion and Science’s Septem­ber Re­sources and En­ergy Quar­terly, US-China trade ten­sions played a sig­nif­i­cant role in the re­cent de­cline.

In­sta­bil­ity in cop­per prices had been fur­ther ex­ac­er­bated by events in Turkey, where high cur­rent deficits and a gov­ern­ment freeze on in­ter­est rates have led to a cur­rency cri­sis.

De­spite the re­cent de­cline, ris­ing de­mand was ex­pected to grad­u­ally re­verse this fall, with prices ex­pected to rise from $US6726 a tonne in 2018 to $US7734 by 2020.

Global cop­per con­sump­tion was pro­jected to rise from 24.5 mil­lion tonnes in 2018 to 25.7 mil­lion tonnes by 2020.

The fore­cast higher cop­per con­sump­tion re­flected solid growth in global in­dus­trial pro­duc­tion and a ramp-up in the de­vel­op­ment of cop­per-in­ten­sive tech­nolo­gies.

Ac­cord­ing to the de­part­ment higher pro­duc­tion and mod­est growth were ex­pected to in­crease Aus­tralia’s cop­per ex­port earn­ings from $8.5 bil­lion in 2017-18 to $10.5 bil­lion in 2018-19.

Fur­ther price growth was then fore­cast to push earn­ings up to $11.3 bil­lion by 2019-20.

The de­part­ment be­lieved the long-term prospects for Olympic Dam re­mained strong, de­spite the mixed re­sults caused by the smelter is­sues.

Olympic Dam has ramped up to nor­mal pro­duc­tion lev­els fol­low­ing a smelter up­grade ear­lier in the year.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.