BMA’s expansion planning
Wednesday 25 January 2017
BHP says it will make a decision this year whether to build an 11-kilometre coal conveyor system linking their Peak Downs mine with the Coal Handling and Preparation Plant (CHHP) at the Caval Ridge mine to the north.
Known as the Southern Circuit Project - the proposal could see BMA increase its coking coal exports by 4 million tonnes a year by expanding coal mining at Peak Downs and utilising current spare capacity at the newly built ultra modern CHPP at Caval Ridge to process it for export.
According to BHP’s Asset President Ragg Udd, he expects the Southern Circuit Project to present a compelling consideration for the BHP investment committee when they look at it sometime this year.
“We will provide an option for the organisation for whether they would like to see it move forward or not, but I think it’s fair to say it’s a pretty darn compelling option,” he said.
The proposal is just one of a number of options BHP have for expanding output in Central Queensland - including buying mines that are on the market.
However, expansion has been a dirty word in coal for the last five years because of the prevailing low prices driven by an oversupply created during Australia’s biggest ever mining construction boom between 2007 and 2014.
But that balance might be shifting back, with year after year of record coal exports from existing mines, not being offset by any new greenfield or brownfield expansions.
For this reason, there is a growing consensus that future contract and spot coal prices will be at profit-sustaining levels.
Like most in the industry, Mr Udd says he was shocked by the major recovery in coal prices late in 2016
“If you had told me midway through July we were going to see prices north of $US100 per tonne, or even north of $US200 per tonne; you could have blown me down with a feather,” he said.
“We have invested really well in terms of getting premier tier one assets that we can operate at low costs.
“We have 200 kilometres of strike length of open pit that we can mine pretty well for decades to come without much concern.
“Don’t get me wrong, if there is a good asset that comes along, that is worthwhile taking a look at, absolutely we will take a look at it, but it’s at the right price.
“We just don’t need to overpay for assets, because we have enough good ones.”
In the meantime, Mr udd says the company will continue to focus on the one thing it has complete control over - costs.
“I want to create an evergreen strategy for this organisation," he said.
"We really want to be in a spot where it doesn't matter what the price of coal is, we are profitable, and if we are profitable that is great for jobs, that is great for security, that is great for shareholders,” he said.
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