ORE-SOME START

Min­ing gi­ant BHP is on time and on bud­get to de­liver its multi­bil­lion dol­lar South Flank project, hav­ing taken off with a fly­ing start in July.

The Australian Mining Review - - FRONT PAGE - AMY BLOM

SOUTH Flank has made a rapid start in its first three months of con­struc­tion, ac­cord­ing to project direc­tor Si­mon Thomas.

Speak­ing at a WA Min­ing Club lunch in Perth on 25 Oc­to­ber, Mr Thomas said BHP al­ready had more than 600 peo­ple work­ing on the project, with lo­cal con­trac­tors such as NRW, Clough, CPB and Decmil mo­bilised to site.

He said Septem­ber quar­ter high­lights in­cluded an ex­pan­sion of the Mulla Mulla vil­lage fa­cil­i­ties com­pris­ing 756 op­er­a­tional rooms and cen­tral fa­cil­i­ties, new min­ing fa­cil­i­ties, ex­panded in­fra­struc­ture at Min­ing Area C process fa­cil­i­ties, and the re­lo­ca­tion of more than 20 mil­lion tonnes of waste from the foot­print of the ex­panded rail loop.

The com­pany has also awarded two large civil and earth­works con­tracts, and a stock­yard ma­chines con­tract.

BHP con­ducted the first blast at its South Flank project in Septem­ber and was ad­vanc­ing con­struc­tion with the aim of de­liv­er­ing first ore in 2021, fol­lowed by a three-year ramp up.

The project, in WA’s Pilbara re­gion, had an ex­pected 25-year mine life and would re­place the age­ing 80 mil­lion tonne per an­num (mtpa) Yandi mine.

South Flank In De­tail

Mr Thomas said the $US3.6 bil­lion project would be the sin­gle largest an­nual pro­duc­tion iron ore mine BHP had ever de­vel­oped, and the largest iron ore min­ing and pro­cess­ing fa­cil­ity built in more than 50 years of iron ore min­ing in the Pilbara.

“The South Flank de­posit it­self is huge, it’s 26km long, 2km wide and re­quires sig­nif­i­cant min­ing in­fra­struc­ture and oper­a­tions,” Mr Thomas said.

“For ex­am­ple, it in­cludes two main min­ing ar­eas, each sup­ported by a 40mtpa pri­mary crusher.”

There was also about 23km of over­land con­vey­ors, in ad­di­tion to usual con­vey­ors, coarse ore stock­pile, prod­uct screen­ing build­ings, and a new train load-out fa­cil­ity and rail loop du­pli­ca­tion.

The MAC stock­yard was set to be ex­panded, and ac­cord­ing to Mr Thomas, the new stock­yard ma­chines would be among the largest in the world.

Mr Thomas said the mine was spread over a large geo­graph­i­cal dis­tance with mul­ti­ple work fronts, how­ever the prox­im­ity of the South Flank de­posit to the Min­ing Area C hub would en­able BHP to fur­ther max­imise the ex­ist­ing in­fra­struc­ture and achieve economies of scale by pro­cess­ing ore through a larger cen­tral hub.

“It will cre­ate a min­ing in­fra­struc­ture hub within reach of sev­eral bil­lion tonnes of high-grade iron ore over its 25-year pro­duc­tion life,” Mr Thomas said.

“This means what we’re build­ing for South Flank will be in­te­grated into the ex­ist­ing Min­ing Area C brown­fields op­er­at­ing en­vi­ron­ment.

“This is where the in­te­grated project team will ex­e­cute both con­struc­tion and op­er­a­tional readi­ness ac­tiv­i­ties and our sin­gle team ap­proach will en­sure a safe, stream­lined in­te­gra­tion and han­dover with re­duced risk to sched­ule.”

Ac­cord­ing to Mr Thomas the 80mtpa project would not just sus­tain the cur­rent level of iron ore pro­duc­tion from BHP’s Pilbara mines, it would also al­low the min­ing gi­ant to in­crease the qual­ity of its prod­ucts by in­creas­ing the amount of lump.

Iron ore is crushed and split into lump and fines com­po­nents, with lump prod­uct gen­er­ally be­ing richer in iron and lower in other min­er­als.

As an out­come of South Flank, BHP would in­crease the lump in its prod­uct suite from 25 per cent to 35 per cent.

“This will sat­isfy ris­ing de­mand of high-grade fines and lump with the struc­tural im­prove­ment of steel mar­gins and more strin­gent en­vi­ron­men­tal stan­dards,” Mr Thomas said.

“The shift to­wards in­creased de­mand for higher qual­ity ma­te­ri­als driven by suc­cess­ful China steel side re­form, po­si­tions the South Flank prod­uct to be in high de­mand by our cus­tomers.”

South Flank was ex­pected to cre­ate 2500 jobs dur­ing con­struc­tion and about 600 on­go­ing op­er­a­tional roles, with more than 9000 peo­ple ex­pected to be in­volved over the life of the project.

The project would also have a strong fo­cus on lo­cal con­trac­tors, with BHP ex­pect­ing to award about 85 per cent of the South Flank spend to Aus­tralian com­pa­nies, 90 per cent of which would likely be com­pleted in WA.

BHP has al­ready awarded 177 con­tracts worth more than $1.5 bil­lion with $1.2 bil­lion go­ing to WA-based com­pa­nies.

BHP re­ported that as at 30 Septem­ber South Flank was 15 per cent com­plete, on sched­ule and on bud­get.

South Flank would even­tu­ally ac­count for about 28 per cent of BHP’s fu­ture WA iron ore pro­duc­tion and about 8 per cent of its over­all EBITDA.

The de­posit is about 130km north-west of New­man and about 8km south of BHP’s ex­ist­ing Min­ing Area C op­er­a­tion.

Adapt­ing To Change

Be­yond the pro­duc­tion and out­put, Mr Thomas hoped South Flank would set the stan­dard for how BHP de­vel­ops ma­jor projects in the fu­ture, as it con­tin­ued to adapt to the chang­ing min­ing land­scape.

Changes in­cluded a sim­pli­fied port­fo­lio with a fo­cus on own­ing and op­er­at­ing large, long-life, low cost, ex­pand­able up­stream as­sets diver­si­fied by com­mod­ity, ge­og­ra­phy and mar­ket.

As part of the move to sim­plify its in­vest­ments, BHP an­nounced the $US10.8 bil­lion sale of its shale as­sets in July.

Mr Thomas said South Flank was a sus­tain­ing op­por­tu­nity for BHP that ticked all the boxes.

“With BHP op­er­at­ing dif­fer­ent, and op­er­at­ing in dif­fer­ent mar­kets, the way we ap­proach ma­jor project in­vest­ment must also be dif­fer­ent,” Mr Thomas said.

“We’ve changed our model at BHP for Western Aus­tralian iron ore ma­jor projects.

“What we’re do­ing with South Flank is all about bring­ing that op­er­at­ing model to life and set­ting us up for the fu­ture of projects.”

Mr Thomas said at the heart of the op­er­at­ing model was a col­lab­o­ra­tive en­vi­ron­ment with its con­tract­ing part­ners, free of the tra­di­tional lay­ers of man­age­ment that had pre­vi­ously ex­isted on past projects.

The ap­proach to re­cruit­ment and em­ploy­ment at South Flank would also stand as a point of dif­fer­ence, with a greater fo­cus on a more rep­re­sen­ta­tive and di­verse work­force by of­fer­ing greater flex­i­bil­ity and re­design­ing work to al­low for more en­try level path­ways.

On 25 Oc­to­ber, BHP an­nounced it had al­ready achieved a 35 per cent fe­male work­force on the front line of the projects.

Ac­cord­ing to Mr Thomas there had also been a greater fo­cus on tech­nol­ogy and the move to au­to­ma­tion.

“We see South Flank as an op­por­tu­nity to build on our strate­gic in­vest­ment in tech­nol­ogy to drive fur­ther im­prove­ments across our min­ing value chain,” Mr Thomas said.

”And as we move to highly au­to­mated oper­a­tions across the Pilbara, we have an op­por­tu­nity to more fully in­te­grate our sup­ply chain from re­source to mar­ket.

“We want to build on our suc­cess and drive au­to­ma­tion fur­ther back, into our drill and blast, and load and haul oper­a­tions, bring­ing the safety and pro­duc­tiv­ity ben­e­fits we’ve seen across our fixed plant.

“We see South Flank as an op­por­tu­nity to ad­vance our ef­forts to be­come a fully in­te­grated and highly au­to­mated busi­ness by 2025.”

The Big­ger Pic­ture

When com­pleted, South Flank will join BHP’s East­ern Ridge, Whale­back, Min­ing Area C and Jim­ble­bar mines, which form its Western Aus­tralian Iron Ore (WAIO) sys­tem, along with Yandi.

Yandi was ex­pected to ramp down in the mid-2020s, in line with South Flank’s ramp up.

WAIO also con­sisted of four pro­cess­ing hubs, New­man, Yandi, Min­ing Area C and Jim­ble­bar.

BHP re­ported strong num­bers in its Septem­ber quar­ter op­er­a­tional re­view, with to­tal iron ore pro­duc­tion in­creas­ing by 10 per cent to 61 mil­lion tonnes (mt) or 69mt on a 100 per cent ba­sis.

Guid­ance for FY19 re­mained un­changed, stand­ing be­tween 241mt and 250mt, or be­tween 273mt and 283mt on a 100 per cent ba­sis.

At WAIO, in­creased vol­umes were sup­ported by record pro­duc­tion at Jim­ble­bar and im­proved re­li­a­bil­ity across BHP’s rail net­work and port oper­a­tions.

At its AGM in Lon­don on 17 Oc­to­ber, BHP chair­man Ken MacKen­zie sig­nalled the com­pany would re­main cau­tious in the face of mar­ket volatil­ity and pre­dicted price de­clines, though he con­firmed the com­pany had so far been un­scathed by global un­cer­tain­ties.

“We all know suc­cess is never as­sured; we work in an un­cer­tain world and that’s why it’s im­por­tant BHP is well-po­si­tioned to weather any chal­lenge,” Mr MacKen­zie said.

“We closely mon­i­tor the ex­ter­nal en­vi­ron­ment, in par­tic­u­lar, the mar­ket volatil­ity trig­gered by cur­rent global trade ten­sions.

“While we haven’t seen a ma­te­rial im­pact on our busi­ness, we re­main cau­tious in the near term.”

Ac­cord­ing to the De­part­ment of In­dus­try, In­no­va­tion and Sci­ence, the iron ore price was fore­cast to de­cline to $US51 a tonne in 2020 as a re­sult of an ex­pected de­cline in steel pro­duc­tion in China and a well-sup­plied seaborne iron ore mar­ket.

Mean­while, Mr Thomas poured wa­ter on lo­cal fears of a loom­ing skills short­age that could hurt new projects such as South Flank, say­ing BHP had al­ready taken the po­ten­tial chal­lenge into ac­count and that it had not sur­faced as much as the com­pany may have feared ini­tially.

Image: WA Min­ing Club.

South Flank project direc­tor Si­mon Thomas pro­vided an up­date to the WA Min­ing Club in Oc­to­ber.

Image:BHP.

“The shift to­wards in­creased de­mand for higher qual­ity ma­te­ri­als driven by suc­cess­ful China steel side re­form, po­si­tions the South Flank prod­uct to be in high de­mand by our cus­tomers.”South Flank min­ing op­er­a­tion.

Image:BHP.

BHP con­ducted the first blast at its South Flank project in Septem­ber.

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