BHP's Groote Eylandt made #9 on the OZ 2009 mine rich list.
Iron awe dominates the mining rich list
Thursday, 24 December 2009
ONCE again BHP Billiton has emerged with Australias richest mine and proven to be the lands most profitable miner. By Noel Dyson.
BHP Billiton's Yandi iron ore mine.
In the mining sector there has long been a feeling that BHP is not really a miner. It could be the companys predominantly steelmaking roots the iron ore mining was really a means to feed its blast furnaces. It could be the fact that it has diversified into petroleum production too. Whatever the reason, BHP was often considered Rio Tintos poor mining relation. Well, the big Australian (technically the big South African-Anglo Australian) has proved those nay-sayers wrong for a second time.
Rio Tinto may have the largest iron ore infrastructure in the land and produce more tonnes, but BHP has the richest mine for the second year in a row and that mine is Yandi.
This time around it also has the third, fourth, fifth, ninth and 10th mines in the list with Area C, Newman, Goonyella, Groote Eylandt and Blackwater. Goonyella and Blackwater are owned by the BHP-Mitsubishi Alliance. These mines are pretty much all held in joint ventures but BHP calls the shots.
Rio Tinto made it to number two on the list with its Yandicoogina mine. It also had mines six, seven and eight with West Angelas, Mesa J-Pannawonica and Mt Tom Price.
It is no surprise the iron ore mines were at the top of the pile this year given the nearly 80% price increase won last year. While the price came back about one-third this year, it was still a healthy return the second-highest price on record.
Australias big iron ore miners are also reaping the benefits of infrastructure they have developed over the past four decades. Iron ore mining is essentially a logistical exercise where infrastructure pays.
Looking at the list of richest miners ranked by profit, BHP was again atop the pile with its diminished but still healthy profit of $7.2 billion.
It must be noted that petroleum plays a part in BHPs fortunes and oil prices were at record levels through some of this period. Petroleum aside, earnings before interest and tax for the companys iron ore group increased 34.5% over the past financial year to $US6.23 billion. BHPs iron ore group is centred in WA but includes Samarco in Brazil, which produced a tidy 2.75 million tonnes.
Rio Tinto came in second with a $5.2 billion profit, down about 40% on last year.
Yandi continues to be BHPs biggest iron ore mine in terms of production. In the September quarter, BHPs total iron ore output was about 32.2Mt. Yandis 10.2Mt production accounts for almost one-third of that.
Area C is closing the gap. In 2008 it was quite away behind Yandi, but in the September quarter it produced a respectable 9.2Mt. That came about because of the work done on it as part of BHPs $US1.85 billion Rapid Growth Project 4. That project added 26 million tonnes per annum to BHPs total iron ore capacity taking it to 155Mtpa.
Late last year BHP gave the go-ahead to RGP5, a $US4.85 billion program that involves double tracking the companys Newman line and adding two berths to Finucane Island. RGP5 will take BHP to 205Mtpa. Yandi will get an additional 40Mtpa with the other 10Mtpa being split between the six-year-old Area C and Newman.
The Yandi orebody was developed in 1991 with first shipment from the site coming in the next year. Its capacity was expanded between 1994 and 2003 to more than 42Mtpa.
While BHP is closing in on 205Mtpa, Rio Tinto is already pretty much there and has plans to head to 320Mtpa.
To help pull off that feat, it has turned to some alternative technologies, such as robot trains and trucks. The robot trains have been put on hold until the company gives the green light to go to 320Mtpa. The robot trucks, however, are on the ground at West Angelas. Rio has also set up a remote operations centre which will allow it to manage a large part of its Pilbara operations from Perth.
If iron ore continues its stellar run, and there is talk of a 20% price rise next year, it could again be the stand-out commodity. With the efficiency gains Rio is pushing for, one of its operations could well be holding the top spot in this list next year.
Looking at the top 25 of the richest miners, there are some stand-out profit increases. Cape Lambert ranked 11th on the list boasts a stellar 10,407.6% profit increase.
Next highest in the profit leap stakes is 23rd ranked Medusa Mining with its 2928.3% net profit leap, followed by fourth-placed New Hope Corporations 2050.8% hike.
Cape Lambert and New Hope can largely put their stellar profit leaps down to asset sales. Cape Lambert sold its namesake magnetite project to the China Metallurgical Group Corporation for $400 million and banked most of that in the 2008-09 financial year. New Hope reported a net after-tax profit of $1.7 billion from the sale of its New Saraji project to BMA. However, the Queensland coal producer would have reported a tidy 82% net after-tax profit without the sale, thanks to its coal operations.
Medusa Minings near 3000% profit hike comes from operations. The Philippines gold miner enjoyed a 216% hike in revenue to a record $57.2 million thanks to an average gold price of $US880 per ounce. It produced a record 48,000oz from its Co-O mine on the Filipino island of Mindanao. The company also managed to cut cash costs to $US213/oz from $248/oz in 2008.
Given the run gold has had and continues to enjoy, could a gold mine feature highly on next years richest mines list? This year not a single gold operation managed to crack the top 50, but it could happen.
Coal looks to have a better chance of being king next year. Iron ore may be on the top for now but coal producers have enjoyed a healthy year too. The return of queues at coal ports means there is strong demand for the black stuff. Chinas stimulus spending is likely to push up steel demand, which should factor into the coal sector.
Goonyella took fifth spot in the richest mines list. Could it go all the way next year?
