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BHP: Performance & development
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performance & development
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BHP has emerged from a difficult year with a strong safety performance, operations enhanced by automation and reduced carbon emissions, and development projects on track using local suppliers
In his introduction to the operational review for the nine months ended 31 March 2021, BHP Chief Executive Officer Mike Henry highlighted a strong safety and operational performance, with record year-to-date production at Western Australia Iron Ore, the Goonyella Riverside metallurgical coal mine in Queensland and concentrator throughput at Escondida in Chile. Major projects are being ramped up, he said, bringing on new supply in copper and iron ore, with the Spence Growth Option producing copper in Chile and Samarco in Brazil recommencing iron ore pellet production at one concentrator in December 2020. The South Flank iron ore project in Australia is on track to begin production in the middle of the year. One of BHP’s other growth projects, the Jansen potash project in Saskatchewan, Canada, remains on track for a final investment decision in mid-2021.
performance & development
IRON ORE
Despite restrictions associated with the Covid-19 pandemic, Western Australia Iron Ore (WAIO) achieved record production in FY2020 and again in the nine months to 31 March 2021. WAIO is an integrated system of four processing hubs and five mines connected by more than 1,000 kilometres of rail infrastructure and port facilities in the Pilbara region of northern Western Australia. The reserve base is relatively concentrated, allowing development to be planned around integrated mining hubs connected to the mines and satellite orebodies by conveyors or spur lines. This approach enables the value of installed infrastructure to be maximised by using the same processing plant and rail infrastructure for a number of orebodies. WAIO consists of four main joint ventures: Mt Newman, Yandi, Mt Goldsworthy and Jimblebar. BHP’s interest in each of the joint ventures is 85 per cent, with Mitsui and ITOCHU owning the remaining 15 per cent. The joint ventures are unincorporated, except Jimblebar. At each processing hub – Newman, Yandi, Mining Area C and Jimblebar – the ore is crushed, beneficiated (where necessary) and blended to create high-grade haematite lump and fines products which are then transported along the Port Hedland–Newman Rail Line to the Finucane Island and Nelson Point port facilities at Port Hedland. WAIO continues to focus on operating safely, implementing a series of preventive measures designed to minimise the spread of Covid-19. To meet border controls introduced by the Western Australian Government, more than 900 employees and contractors in business-critical roles were temporarily relocated to Western Australia, including train drivers and train load out operators. Construction began in July 2018 on the South Flank iron ore project in the Pilbara region. When operational, South Flank will be one of the largest iron ore processing hubs in the world. The project will include a crushing and screening plant, an overland conveyor system and rail-loading facilities. Commissioning activities for South Flank are expected to commence in the June 2021 quarter and the mine is expected to produce 80 million tonnes per annum (Mtpa), replacing volumes from Yandi as it reaches the end of its economic life in the early-to-mid 2020s. The project is expected to create 2,500 construction jobs, more than 600 operational roles and generate
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opportunities for Western Australian suppliers. The mine is expected to produce iron ore for more than 25 years.
COPPER
BHP mines for copper in Chile and Peru, as well as Australia. For the nine months to March 2021, its Chilean assets experienced a substantial reduction in their operational workforces as a result of Covid-19 restrictions, a situation which is expected to continue for the remainder of the financial year. Copper production at Escondida decreased by eight per cent to 821 kt, as record concentrator throughput was offset by the impact of lower concentrator feed grade and lower cathode volumes. Concentrator throughput continues to be prioritised over cathode production as a result of the reduced operational workforce and to prioritise yield of ore. Copper production at Pampa Norte, also in Chile, decreased by 21 per cent to 149 kt, largely due to planned maintenance at Spence as well as the impact of a reduced operational workforce as a result of Covid-19 restrictions.
Olympic Dam
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north of Adelaide in South Australia, is one of the world’s most significant deposits of copper, gold, silver and uranium. Olympic Dam consists of underground and surface operations, with a fully integrated processing facility from ore to metal. The underground mine contains more than 450 kilometres of roads and tunnels. Ore mined underground is hauled by an automated train system to crushing, storage and ore hoisting facilities. Olympic Dam copper production increased by 25 per cent to 155 kt in the nine months ending 31 March 2021, reflecting improved smelter performance and stability. Production for the March 2021 quarter itself was 55 kt, the highest quarterly production rate in five years. Production in the 2022 financial year is expected to be lower as a result of the major smelter maintenance campaign planned for the first half of the year. Late last year BHP decided against proceeding with a planned $2.5 billion expansion of Olympic Dam after studies of the ore body revealed weaker than expected results. The complex has a range of future growth options, however, from incremental debottlenecking through to large scale investments. A third phase of exploration drilling on the Oak Dam project has been completed with additional geotechnical and geo-metallurgical data collected to assist in the understanding of the deposit. Preparations are also well advanced for the next Smelter Campaign Maintenance to be executed early in FY2022. Downer EDI Ltd has recently announced that its Asset Services business has been awarded a major contract to provide maintenance and shutdown services at Olympic Dam as part of the Smelter Campaign Maintenance 2021 Project (SCM21).
Downer will deliver two work packages, involving specialist welding, boiler engineering and planning and scheduling services. The project is expected to run for approximately eight months until December 2021, with the major shutdown commencing in August. BHP has also awarded a $15 million contract to Boom Logistics for the supply of cranes, rigging and engineering services. “During the SCM21 shutdown, Boom Logistics will have 40 cranes and approximately 150 crew on site at Olympic Dam,” said CEO and managing director Tony Spassopoulos. “Shutdowns are an essential part of mining maintenance, contributing to safe and effective production and productivity improvement.” This year’s mobilisation of equipment will begin in June and will run from August to November 2021.
Newman East
BHP has copper operations in Western Australia, too. The company announced in February 2020 that it intended to introduce 20 autonomous trucks at its Newman East mine in WA by the end of the year, creating more than 40 new jobs and generating more than $33 million in contracts for Western Australian businesses. “We recognise how important it is for BHP to partner with local and small businesses, particularly as we move into a post-Covid economic recovery phase,” said Marie Bourgoin, BHP’s Newman Operations General Manager. “We are pleased to have been able to offer A$33 million in contracts to WA vendors for a range of work packages including autonomous conversion kits, trailers, training content development, and a number of engineering and construction packages.” Home to BHP’s Innovation Centre, the Newman East mine will be the second of the company’s Western Australian
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mines to transition to fully autonomous haulage. By November last year, 22 autonomous trucks had been fully deployed. BHP has operated a fullyautonomous truck fleet at its Western Australian Jimblebar iron ore mine since 2017. Bourgoin said there were no redundancies as part of the transition and more than 300 people in the Newman operations workforce were undergoing training and upskilling to work on an autonomous haulage site. “We have created new control centre roles, which many of our truck operators have transitioned into, as well as new opportunities in truck maintenance and fuelling,” she said.
South America
By the end of the current financial year, BHP expects to complete a trial of autonomous haul trucks at the Escondida copper mine in the Antofagasta region, and in April this year it was announced that the copper and zinc mine Antamina, (a joint venture in Peru in which BHP owns 33.75%, Glencore 33.75%, Teck 22.5% and Mitsubishi 10%) would do the same. “We are going to make a progressive conversion, with trucks with capacity of 380-400t,” said Antamina president Víctor Gobitz in a webinar. Antamina is currently focusing on bottlenecks in the crushing area and on new tailings management options. The company has obtained authorization from the environmental certification service for sustainable investments (Senace) to carry out US$180m worth of work to optimize equipment and modify auxiliary components in the mine’s concentrator plant. Antamina is among Peru’s largest copper and zinc producers but also mines molybdenum, silver, bismuth and lead. BHP owns 57.5 per cent of, and operates, the Escondida mine in the Atacama Desert in northern
Chile. Escondida’s two pits feed three concentrator plants, as well as two leaching operations (oxide and sulphide). The Centre of Integrated Operations (CIO) was inaugurated in July 2019 in BHP’s Santiago office and has since provided remote control services to the mine and process areas of Escondida and Spence. The CIO enables an operation that is safer and more productive by reducing people on-site and allowing them to work in a collaborative space. The Escondida Water Supply Expansion (EWSE) project was completed on time and budget in December 2019. Following the completion of the project, Escondida has eliminated water drawdown from aquifers for operational supply 10 years ahead of its FY2030 target. Also in Chile, Pampa Norte consists of two wholly owned operations in the Atacama Desert – Spence and Cerro Colorado – producing high-quality copper cathodes through leaching, solvent extraction and electrowinning processes. Pampa Norte copper production for FY2020 decreased by 2 per cent to 243 kt, mainly due to a 14 per cent decline in stacked ore grade. Production for the 2021 financial year is expected to be between 240 and 270 kt, reflecting the reduced operational workforce due to Covid-19, the start-up of the Spence Growth Option Project and expected grade decline of approximately seven per cent. The Spence Growth Option (SGO) achieved first copper sales in March 2021, following first copper production in December 2020. The ramp-up to full production capacity at SGO is on track and is expected to take approximately 12 months from first production, following which Spence is expected to average 300 ktpa of over the first four years. The BHP Operating System deployment at Spence started in January 2020 and is expected to continue during FY2021. Similar to Escondida, Spence
performance & development
will be undertaking studies on various material handling technologies, such as automated trucks, trolley assistance and in-pit crushers and conveyors to increase mine productivity and improve cost competitiveness.
COAL
BHP mines for coal in Colombia and Australia, where its operations are split between Queensland and New South Wales.
Queensland Coal
Queensland Coal comprises the BHP Mitsubishi Alliance (BMA) and BHP Mitsui Coal (BMC) assets in the Bowen Basin in Central Queensland where it enjoys key infrastructure including a modern, multi-user rail network and its own coal-loading terminal at Hay Point, near the city of Mackay. BMA is Australia’s largest coal producer and supplier of seaborne metallurgical coal. It is owned 50:50 by BHP and Mitsubishi Development and operates seven Bowen Basin mines (Goonyella Riverside, Broadmeadow, Daunia, Peak Downs, Saraji, Blackwater and Caval Ridge) and owns and operates the Hay Point Coal Terminal. With the exception of the Broadmeadow underground longwall operation, BMA’s mines are open-cut, using draglines and truck and shovel fleets for overburden removal. Autonomous trucks are being implemented at two of these sites, 34 at Daunia and 86 at Goonyella Riverside. Deployment at both sites is expected to be completed early in CY2022. BMC owns and operates two open-cut metallurgical coal mines in the Bowen Basin – South Walker Creek Mine and Poitrel Mine. BMC is owned by BHP (80 per cent) and Mitsui and Co (20 per cent). South Walker Creek Mine is located on the eastern flank of the Bowen Basin, 35 kilometres west of the town of Nebo and 132 kilometres west of the Hay Point port facilities. Poitrel Mine is situated southeast of the town of Moranbah and began open-cut operations in October 2006.
In the nine months ending 31 March 2021, Queensland Coal achieved record underground coal mined at Broadmeadow and record annual production at Caval Ridge and Poitrel. In September last year BHP signed a renewable power purchasing agreement to meet half of its electricity needs across its Queensland Coal mines from low emissions sources, including solar and wind. The agreement will help BHP reduce emissions from electricity use in its Queensland operations by 50 per cent by 2025, based on FY2020 levels. The agreement, with Queensland’s state-owned clean energy generator and retailer CleanCo, will run for five years from 1 January 2021. The agreement is the first of its kind signed by BHP in Australia and follows the company’s shift to 100 per cent renewables in its Chilean operations at Escondida and Spence from the mid-2020s. It will also support the development of new solar and wind farms in Queensland – the Western Downs Green Power Hub due for completion in late 2022, and Karara Wind Farm due for completion in early 2023.
New South Wales Energy Coal
New South Wales Energy Coal consists of the Mt Arthur Coal open-cut energy coal mine in the Hunter Valley region of New South Wales, which produces coal for domestic and international customers in the energy sector. Operated by Hunter Valley Energy Coal Pty Ltd, a wholly owned subsidiary of BHP, Mt Arthur Coal is approximately five kilometres south of the town of Muswellbrook, with workforce of around 2,000 people who predominantly live in the region. During FY2020, NSWEC transitioned to a strategy of optimising product quality, which resulted in a reduction in volumes and an increase in unit costs in the short term, but overall increased realised value. Truck productivity improvements were delivered in the second half of FY2020, enabling a step-change improvement across the company’s mining fleets. BHP is seeking approval for the Mt Arthur Coal mine to continue operating beyond 30 June 2026, when the current open-cut approval expires. As well as a new mining lease, New State Significant Development (SSD) and Commonwealth Environment Protection and Biodiversity Conservation Act approvals are required for operations to continue beyond 30 June 2026. The multi-year approval process will involve comprehensive assessment and review, and broad engagement to enable the local community and other key stakeholders to provide input. As announced in August 2020, however, BHP is
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assessing options to divest its thermal coal assets, including Mt Arthur Coal, to focus its portfolio on higher quality metallurgical coal, which means Mt Arthur Coal’s ownership or operating control could change before the continuation project is fulfilled.
Cerrejón
BHP recently sold its one-third interest in Cerrejón to Glencore. Cerrejón is one of the world’s largest open-cut export energy coal mines, located in the La Guajira province of Colombia. Cerrejón also owns and operates integrated rail and port facilities through which the majority of production is exported to European, Asian, North and South American customers. Production at Cerrejón decreased by 50 per cent in the nine months to 31 March 2021, largely as a result of a 91-day strike in the first half of the year and subsequent delays to the restart of production, as well as the impact of a reduced operational workforce due to Covid-19 restrictions.
NICKEL
All of BHP’s nickel operations (mines, concentrators, a smelter and refinery) are located in Western Australia, where Nickel West is a fully integrated mineto-market nickel business. Low-grade disseminated sulphide ore is mined from Mt Keith, a large openpit operation. The ore is crushed and processed on-site to produce nickel concentrate. High-grade nickel sulphide ore is mined at Cliffs and Leinster underground mines and Rocky’s Reward open-pit mine. The ore is processed through a concentrator and dryer at Leinster. Nickel West’s concentrator plant in Kambalda processes ore and concentrate purchased from third parties. The three streams of nickel concentrate come together at the Nickel West Kalgoorlie smelter, which uses a flash furnace to smelt concentrate to produce nickel matte. Nickel West Kwinana then refines granulated nickel matte from the Kalgoorlie smelter into premium-grade nickel powder and briquettes containing 99.8 per cent nickel. Nickel matte and metal are exported to overseas markets via the Port of Fremantle. Over 75% of BHP’s nickel is now sold to global battery material suppliers. Nickel West is expected to complete construction soon of a nickel sulphate plant at the Kwinana nickel refinery, with first product due in the second half of FY2021. Nickel sulphate is used in the lithium-ion batteries that power electric vehicles. The Nickel West resource transition, involving the construction of three new mines, continued to progress during FY2020, with two of these mines now in
full production. The Mt Keith satellite mine (Yakabindie) entered production in December 2019 and is now the primary source of feed to the Mt Keith concentrator. The Venus underground mine transitioned to full production in September 2019, with ore hoisted to the Leinster concentrator. Leinster B11 (the first block cave to be developed by BHP, located beneath the Leinster underground mine) is expected to commence the undercut phase during the first half of FY2021, providing increasing quantities of ore to the Leinster concentrator as the project progresses to full caving. Nickel West signed an agreement to acquire the Honeymoon Well development project on 19 June 2020 and the remaining 50 per cent interest in the Albion Downs North and Jericho exploration joint ventures, located approximately 50 kilometres from Mt Keith. Nickel West production increased by
performance & development
19 per cent to 67 kt as a result of major quadrennial maintenance shutdowns in the prior period and strong performance from the new mines. Production for the March 2021 quarter was impacted by the planned maintenance undertaken at the Kwinana refinery during the quarter. Guidance for the 2021 financial year remains unchanged at between 85 and 95 kt. BHP announced its intention in February this year to reduce emissions from electricity use by up to 50 per cent at the Nickel West Kwinana Refinery. A 10 year renewable power purchasing agreement has been signed with Risen Energy to supply up to 50 per cent of its electricity needs at the Kwinana Refinery from Merredin Solar Farm. “We have established significant renewable power supply agreements for our Kwinana nickel refinery, Queensland Coal operations, and Escondida and Spence copper mines,” said Mike Henry. “With our focus on keeping our people safe, costs down and productivity up, we are well positioned to finish the year strongly and continue delivering the essential products the world needs.”
