BHP Billiton Ends Deal With Mining Contractor Downer EDI
BHP Billiton Ltd. has now decided to end their current contract with Downer EDI Ltd. which was in place to clear ground at its Goonyella Riverside mine in eastern Australia. This was a segment of the larger effort to cut the costs of its Australian coal operation. This call to end the contract embodying what’s known as pre-strip work on land around the existing mine creates the significant aftermath of 427 contractors being cut from work. BHP reported that this action was necessary in the name of the continued viability of its coal business.
While rich in resources, Australia is up against a severe slowing in mining investment. This slowdown is made all the more severe as it comes off the decade-long resources boom Australia had been enjoying. Thousands of jobs have been cut across the industry, particularly in mining-focused states such as Queensland and Western Australia, prompting the central bank to cut interest rates to a record low to support other parts of the economy. The combination of China’s economic growth tailing back from its previously blazing pace in addition to Australia’s surge in supplies continues to put extra pressure on Australian mining companies maintaining the viability of their operations.
Dean Dalla Vale, president of BHP's coal division, said the termination of the contract with Downer continued cost-cutting measures underway for more than 18 months. “Further measures to address wage and other costs are being undertaken at all mines in Queensland and New South Wales as we continue our detailed reviews of every aspect of our coal operations to ensure every operation remains operating cash positive,” Mr. Dalla Vale said. “The coal industry is undergoing a difficult transition and to be globally competitive we have to reset the cost base of the business…Coal producers face challenging decisions.”
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”