3 Hurdles BHP is Confident it will Overcome
Like many in the mining sector, BHP Billiton has been hit hard by decreased demand and price. The company’s stock was among the ASX’s heaviest fallers this week, and although most analysts believe BHP will pull out of the decline in the long term, some do not agree.
There are three specific issues that BHP will have to overcome, but with the company’s commitment to productivity, efficiency and continued safety, they are confident the hurdles will be overcome.
Although BHP is pretty well diversified, iron ore is the company’s primary generator of revenue; they are even looking to ramp up annual production rates in the future. However, the price of iron ore has dropped recently, and could fall much lower (and sooner rather than later). Even though BHP maintains a low breakeven price, a fall that large could end up affecting overall margins.
BHP opened the Jimblebar iron ore mine 23 April of this year, in the Pilbara region of Western Australia. The US$3.2 billion mine has already delivered the first production in the quarter which ended in September of 2013. The mine is expected to deliver 35 mtpa in phase one capacity by the end of the 2015 financial year. This, plus the installation of four mobile crushers, will increase the total capacity of the Western Australia Iron Ore supply chain to over 220 mtpa.
“Mobile crib rooms and fuelling stations have been positioned closer to the mine pits so our trucks and equipment spend more time moving earth and less time travelling or parked out of action,” said Jimmy Wilson, BHP’s iron ore president.
“Our pursuit of productivity gains and operational excellence is delivering significant value at Western Australia Iron Ore. The business is now well positioned to deliver high margin volume growth at a substantially lower cost.
“We are also pleased to announce we are extending our Jimblebar autonomous truck trial to the neighbouring Wheelarra operations using six Caterpillar 793-F trucks in the second trial.”
The price of coal has been in a rapid decline since the beginning of 2011. Even BHP’s boss does not see relief in the short term. This had led the company to look at sacrificing short-term earnings in the hopes that the long-term outlook remains strong. BHP’s approach could deter investors.
Over the last few decades, the industry as a whole has been committed to making considerable investments in technology, in turn making mines safer and more efficient. This efficiency will be key in the coming months and years – production will remain high, but at a lower cost to the company.
In a speech from April of 2014, BHP president Dean Dalla Valle conveyed that the company has the equipment, technology, infrastructure and expertise to operate safer and more efficient than ever before. And although the tough time has called for hard decisions, the company is working to transform the culture of the industry to keep up with the changing prices and demands. BHP Billiton’s goal is to continue to remove barriers by working smarter (but not sacrificing safety) to deliver long-term productivity gains.
Much like the other two factors, the slowing of growth in China has affected BHP, but also many other companies in the sector, including Fortescue Metals Group and Rio Tinto. BHP has no control over this situation, and can only hope to cover any losses with the revenue from their increased efficiency move.
Net zero benefits the mining industry and the environment
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The Oren Marketplace
Environmental management, social license to operate, safety, renewable energy to lower emissions and operational efficiency for mining can be supported by a range of digital solutions enabling dynamic operations. To address these issues, Shell and IBM joined forces to create the Oren Marketplace – the first B2B solutions platform for the mining sector.
With the adoption of many of the digital solutions offered through Oren, mining companies can adapt in real-time to risks or adjust plans ahead of a problem occurring. The goal is a shift towards proactive management as the optimal outcome for all stakeholders – community, shareholders, and employees.
Emitwise was founded with the goal of helping industries across all sectors reduce their carbon footprint. Similarly, Shell aims to become a net-zero emissions energy business by 2050, or sooner, in step with society and its customers. And Oren is focused on offering innovative products and services that can help mining companies track and reduce their emissions.
“Oren is the starting point for how we help our mining customers to de-carbonise,” explains Carol Chen, Global Lubricants Marketing, Vice President, Shell. “It’s our ambition to work with sectors like mining to help them find their own pathway to net-zero emissions through collaboration. The Oren marketplace offers a great opportunity for collaboration between the miners and technology companies that are joining this digital marketplace.”
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Emitwise is one of many solutions providers on the Oren platform seeking to address the pain points and environmental concerns of heavy industries like mining. To discover a range of solutions that can further support your operation’s digital transformation and commitment to sustainability, visit the