BHP expansions back on table
3 brownfield and a billion tonne greenfield expansion an “option” for BHP.
Wednesday 13 December 2017
BHP has confirmed this week that the prospect of significant new mining projects at the Blackwater, Goonyella and Caval Ridge mines was raised at a recent meeting with mining investors.
BHP also raised the prospect of developing the 1 billion tonne high-quality hard coking coal Wards Well underground longwall project. It's located north of the current Goonyella operations and has a predicted mine life of more than 50 years.
While a spokesperson for the company was quick to point out that the company is not in anyway committed to developing the projects, he did confirm that BHP’s head of Minerals Mike Henry said expansions were an option.
During the discussion with various mining analysts, Mr Henry said their current production of 48 million tonnes of coking coal a year was at the “light” end of the spectrum, and that subject to market conditions they were exploring options to increase production by around 20 million tonnes a year.
“Things that we would bring forward specifically would be the Blackwater expansion ... and the rest is really going to be creep through wash-plant capacity,” Mr Henry said.
“Our strategy is simply focusing on productivity and debottlenecking the business for iron ore and coal.
“We haven’t changed our view on not wanting to invest major licks of capital in those two businesses, but the Blackwater expansion would involve mining high-quality coal that does not need to go through wash plants.”
Coking coal prices have continued their astonishing recovery in the last two months rising more than a third to $US 236 a tonne for benchmark grades on the spot market.
However, despite the improvement, Mr Henry told analysts BHP did not expect prices to remain above $US 200 a tonne in the long term.
Nonetheless, the company predicts its costs per tonne will be below $US60 a tonne in 2018 - down from the astonishing high of $148/t in 2012, meaning there is a compelling case for expansion, even if their price predictions are accurate.
After first flagging the possibility late last year, BHP Billiton has started building an 11-kilometre overland conveyor system which will transport coal from Peak Downs mine to the Coal Handling Preparation Plant (CHPP) at the nearby Caval Ridge Mine.
Known as the Southern Circuit Project the new facility will allow BMA to increase its coking coal exports by 4 million tonnes a year.