BHP Billiton Expected to Spend $3.5-Billion in Iron Ore Expansion
Australia-based mining company BHP Billiton (ASX:BHP) (NYSE:BHP) is gearing up to increase iron ore production with the help of a $3.5-billion expansion at its Pilbara mines in Western Australia.
According to Business Review Australia, the move will increase the company’s production to an annual capacity of 290 million tons per year, up from the previous target of 270 million tons.
Although it’s not likely iron ore prices will reach $100 a ton again anytime soon, BHP is prepared to take the chance in a “bigger-than-expected” expansion to bring more iron ore into the market.
“We would say it is quite unlikely that we would see prices north of $US100 a ton, so our forecasts are obviously based on something below that,” CEO Andrew Mackenzie said.
Iron ore prices fell to $90.10 on Friday as Chinese steel mills continued to run down iron ore inventory amid low steel prices. According to analysts for Macquarie, a continued lack of buying for the precious metal was possible.
“Mills do report that they plan to increase purchasing activity of both iron ore and coking coal, although whether this happens or not will almost certainly depend on how demand conditions evolve in the coming weeks,” the bank said in a note to clients.
However, because of BHP’s low operating costs ($40/ton), iron ore prices would have to drop farther than anyone is predicting for the expansion not to be a success.
“We have looked at quite big capital costs and so on, but by just sitting back with what we’ve got and making what we’ve got much more productive, we’ve seen our way through to achieving that with minimal capital,” said Mackenzie.
The Australian reported if everything goes according to plan, the Pilbara iron ore expansion will give BHP an extra $5.85 billion of annual revenue.
Along with revealing a 23 percent increase in annual profit last week, the company sent shockwaves across the mining industry last week as it announced a demerger of its non-core assets.
Newmont acquires Canada’s GT Gold in $325mn deal
Newmont, the world’s biggest gold miner, has acquired Canada’s GT Gold in a deal worth $325mn. The gold giant now controls the Tatogga gold-copper project in the Traditional Territory of the Tahltan Nation.
“With the acquisition of GT Gold and the Tatogga project in the highly sought-after Golden Triangle district of British Columbia, Canada, Newmont continues to strengthen our world-class portfolio,” commented Newmont President and CEO Tom Palmer.
“We look forward to continuing to build a respectful and meaningful relationship with the Tahltan Nation, including the community of Iskut. The relationships we have with Indigenous communities, First Nations and host communities are critical to the way we operate. We will partner with the Tahltan Nation at all levels, and with the Government of British Columbia to ensure a shared path forward as the Company understands and acknowledges that Tahltan consent is necessary for advancing the Tatogga project.”
Newmont’s acquisition includes the Tatogga project, comprised primarily of the Saddle North deposit, which has the potential to contribute future significant gold and copper annual production. There are also further exploration opportunities beyond the known deposits at Saddle North within the land package. The Tatogga project adds to Newmont’s existing interest in the prospective Golden Triangle through the company’s 50% ownership in the Galore Creek project.
Newmont is the world’s leading gold company and a producer of copper, silver, zinc and lead. A world-class portfolio of assets, prospects and talent is anchored in favourable mining jurisdictions in North America, South America, Australia and Africa. The American miner is celebrating its 100th anniversary this month.
With gold prices on the rise, the last six months has seen gold industry M&A activity accelerating. A recent Mckinsey report, advises that the industry need to be mindful of mistakes made during the previous gold price boom, when growth was chased unidirectionally by several companies.