BHP speeds up iron ore updating

BHP Billiton is speeding up the modernisation of its Pilbara iron ore division, with efforts to reduce spending on contractors coinciding with the launch of a high-tech remote operating centre in Perth.

BHP Billiton is speeding up the modernisation of its Pilbara iron ore division, with efforts to reduce spending on contractors coinciding with the launch of a high-tech remote operating centre in Perth.

BHP's iron ore chief, Jimmy Wilson, will open the "integrated remote operating centre" with WA Premier Colin Barnett on Tuesday, starting an era in which much of the mining and logistics work in the Pilbara will be done from Perth.

The project is designed to keep pace with Rio Tinto, which operates a similar multimillion-dollar set-up at Perth Airport. Roy Hill Holdings is also developing one for its $US10 billion iron ore mine, port and rail project.

Investors will closely watch Mr Wilson's comments for any guidance on iron ore production, with the company trying to meet its target of producing 183 million tonnes in the 2013 financial year.

Mr Wilson is likely to be quizzed about the future of contractors on BHP's Pilbara mines, after renewed reports that the company is seeking to bring some contracting work in-house.

That has become a trend in Australia's coal sector, with BHP, Xstrata and others doing so in a bid to lower costs.

Mr Wilson said last week that equipment supplies were cheaper now than during the peak of the mining boom, and there is now growing suspicion that BHP wants to spread the in-housing trend from its coal division to iron ore.

The trend is just another blow for mining services companies, which are suffering under the new era of austerity. Profit downgrades have already been announced by Worley Parsons, UGL, Transfield Services, Calibre and Ausdrill and on Monday drilling contractor Boart Longyear issued its second profit warning in two months.

It warned the downturn in resource spending was yet to reach its nadir, suggesting analyst forecasts for earnings to be as high as $US211 million were too optimistic.

"Market conditions have continued to soften since the update provided at its annual general meeting in May, particularly with respect to its drilling services business," Boart said in a statement.

"The company believes expectations for 2013 full-year revenue and EBITDA should be reduced below these ranges given the significant industry volatility."

Sixteen months ago Boart announced the biggest profit in its 120-year history, but its fortunes have dimmed significantly since then, leading to the sacking of its chief executive and its share price falling by 85 per cent.

The outlook is not quite as bad for miners, with UBS analysts speculating that the rise to power of Kevin Rudd could be a positive for the industry, particularly if Mr Rudd shifts the carbon tax to a floating price sooner than planned now.

"This would be good for business but it would mean a bigger hole in the budget," the analysts wrote.

In the unlikely event that Mr Rudd were to reduce the impost from both carbon and mining taxes, UBS estimates it could give a boost of up to 3 per cent to the earnings of big miners such as BHP and Rio Tinto.

"In our opinion, it is likely that there will be changes to the MRRT and carbon tax with Kevin Rudd as Prime Minister," they wrote.

Big miners will send in their mining tax receipts for the June quarter over the next 10 days and are likely to make contributions for the June quarter if UBS estimates are correct.

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