BHP Billiton iron ore boss Jimmy Wilson has dismissed suggestions that the era of multi-billion-dollar greenfields iron projects in the Pilbara has come to an end, even as the mining giant focuses on extracting efficiencies rather than building new mines.
Mr Wilson also refused to be drawn into forecasting the iron ore price amid fears it could tumble in response to patchy Chinese economic data. He said few people had any idea about the outlook for Australia’s most valuable export commodity.
Speaking at the opening of BHP’s $US3.6 billion ($3.9bn) Jimblebar mine near the town of Newman, Mr Wilson said he and his team had “impressed ourselves” by boosting production forecasts from its West Australian operations from 207 million tonnes per annum to 217mtpa for this financial year.
The improved outlook had been achieved through operational improvements, productivity gains and technological innovation rather than any major capital spending.
But Mr Wilson rejected suggestions that Jimblebar, along with Gina Rinehart’s $10bn Roy Hill project, could be the last greenfields mines of the Pilbara iron ore boom.
He said the reluctance by miners to allocate billions of dollars towards new mines was driven by the fact that Chinese raw steel production had slumped from a growth rate of 24 per cent almost a decade ago to as low as 3.4 per cent in coming years.
“I think a lot of the companies are focused on efficiency and effectiveness ... which is something they haven’t been able to fully capture during this massive growth phase,” he said. “But to say that this (Jimblebar) is going to be the last greenfields mine outside (Roy Hill) would be a bit of a stretch in my view, over the next decade at least.”
State Premier Colin Barnett said he believed greenfields mines in the Pilbara would be built only to replace those that had run their course.
“Western Australia currently supplies about 60 per cent of China’s imports of iron ore. I think that will continue to grow but at a slower rate,” Mr Barnett said. “We won’t see the growth again that we’re seeing this decade, but the industry will stay strong for decades to come.”
Mr Wilson said he would not offer a prediction on the outlook for the iron ore price, which has fallen to $US112.50 a tonne — well down on last year’s average of $US135 a tonne.
“Predicting short-term prices is not my forte and I haven’t actually met too many people who actually do get that right,” he said.
But he believed iron ore prices would fall over time as lower-cost, higher-volume supply from the Pilbara came on to the market.
“I’m not going to give you my forecast in the long term — I can assure you if I did it would be wrong anyway,” he said.
Mr Wilson said he wanted BHP to boost its Pilbara production capacity to 270mtpa but he would need to convince the board to commit capital to such an expansion, although this would not require an additional mining hub or major port and rail infrastructure.
The move to 270mtpa would be achieved through the low-cost expansion of Jimblebar from 35mtpa to 55mtpa, as well as resolving bottlenecks and making other efficiency gains across all BHP’s Pilbara mines.
“We have to compete for capital so we’ll certainly put up our projects against the rest of the projects in the organisation and the board will make decisions around that,” Mr Wilson said.
The Jimblebar mine, which is 15 per cent-owned by Japan’s Itochu Corporation and Mitsui, began producing iron ore in September last year and is forecast to reach its capacity of 35mtpa by June next year.
The mine was designed around productivity measures and technology, including the use of driverless trucks.