Caval Ridge approval "close"
Wednesday 22 February 2017
BHP has flagged a possible overhaul of its existing longwall coal operations and again put expansion plans at Caval Ridge on the table in its latest half-yearly results.
As anticipated following the big recovery in coking coal (+118%), iron ore (+ 28%) and other commodity prices, BHP has delivered a strong half-yearly profit of $US3.244 billion, which is around eight times better than last year.
However, the result was not just about better prices.
BHP has been able to slash another $1.2 billion from its global costs, and locally, it reported costs per tonne for coking coal were down 8% to $56.
With coal prices stabilising at very viable levels, BHP CEO Andrew Mackenzie says further investment in coal production and productivity is definitely on the radar.
In particular, he says approval is close for the construction of an 11-kilometre coal conveyor linking Peak Downs mine with the Coal Handling and Preparation Plant (CHHP) at Caval Ridge.
In the second half of last year, BHP successfully trucked coal along that route, but using a conveyor would significantly reduce costs and increase production by around 4 million tonnes a year.
“I do not think it is off the radar; I don’t think it ever has been for us,” Mr Mackenzie said.
“This [coal] is one of our pillars, and Caval Ridge [Southern Circuit] is certainly close to being approved.
“We have got a lot of the benefits - albeit at a higher cost - within this period by running what we have at Caval Ridge a bit harder, and also by trucking some met coal from Peak Downs.
“This [coking coal] is a business that we think has good potential, and we look at it in that light.
“It is a particularly attractive business for us because of our position in the market, and the fact that India has no real metallurgical coal, unlike China.”
“There is no doubt that the Chinese tried to restructure their mining activities in both coals through their restructuring of steel, and it has probably made the bulks a little bit more investable than they would otherwise have been.”
However, despite the improvements, BHP says there is still further to go in productivity.
One area they're optimistic about is the prospect of significantly increasing productivity through applying top coal caving systems to their other operations.
“I just wanted to add that it is an interesting question on whether we can do further longwalls,” BHP CFO Peter Beavis said.
“One of the less well-known facts is the strength of our seams and the fact that we have top coal caving working at Broadmeadow.
“That longwall was the most productive longwall in Australia in this last period.
“That gives us opportunities to deploy that technology in further parts of our resource base.
“We are one of the very few that has the height of seams, and that is definitely something we are looking at, but of course, everything has to take into account the impacts on markets and the value, etc.”
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