Rio Tinto ramps investment in Tom Price
The world’s second largest iron ore producer is continuing to hike its operations in Western Australia’s (WA) Pilbara region. Local WA and Pilbara Aboriginal businesses have benefited from continued investment to the tune of $385mn (A$500mn). This figure represents 85% of the spend so far by Rio Tinto, and principal contractor Mondium, on construction of the Western Turner Syncline Phase 2 (WTS2) expansion which began early last year.
At its peak level of construction, the development work will support a workforce of over 1,000 people with the majority employed by WA businesses, including Guma Warnii, Monadelphous, Mondium, Kerman Contracting, Whittens, North West Mining & Civil, MACA Civil, Linkforce and Aerison.
Rio Tinto approved a planned $749mn (A$1 billion) investment in the mine in November 2019 to sustain production capacity of its iron ore business in the Pilbara. The investment allows for the mining of existing and new deposits at WTS2 and includes construction of a new crusher and a 13-kilometre conveyor which will help lower greenhouse gas emissions from the mine by 3.5 percent compared to road haulage. First production from the new deposits at WTS2 is expected in the second half of 2021.
Premier and Minister for State Development, Jobs and Trade, Mark McGowan commented: “The Pilbara region is the engine room of the nation, and thanks to Western Australia’s strong management of the pandemic, we can expect more job-creating projects to come online in the coming years.
“Rio Tinto has been embedded in the Tom Price community for decades and have made a significant contribution to the town. I congratulate Rio Tinto for its commitment to this important project.
“This project will ensure Tom Price has a bright future and my government is committed to ensuring mining communities have first class services to support local families.”
Rio Tinto Iron Ore managing director of Pilbara Mines, Matthew Holcz, said Rio Tinto’s commitment to Tom Price and regional communities remains as strong as ever.
“We are proud the vast majority of contracts we have awarded to date have been to Western Australian businesses, including Pilbara Aboriginal businesses. This investment demonstrates our commitment to spending with local businesses, buying locally and supporting our communities through the creation of jobs."
BHP deliberates ditching fossil fuels for greener mining
The world’s biggest miner, Australian-based BHP, is supposedly considering withdrawing from a multi-billion dollar contract, which would see the company generate more than US$2bn due to mounting pressure over aligning its business with ongoing climate concerns and ESG-compliance measures.
Exiting the agreement would mean BHP escalate its distancing from oil and gas and subsequently cut down on the amount of fossil fuels used by the company when mining.
It’s estimated that the petroleum business being debated upon could actually be worth around US$15bn but is still under talks to be put up for sale.
Global Mining Giant Considers Greener Future
BHP has made itself clear that it wants to avoid becoming unable to sell its assets. As competition within the market increases following higher numbers of oil giants wrestling with investors to deal with climate pressure, so too are the number of mining rivals looking to make environmental changes for the future.
However, BHP currently has the upper hand as a stalwart mining company that established itself back in the 1960s, allowing it the time to grow and dominate over other fast-appearing mining competition.
Mike Henry, BHP Chief Executive, has an optimistic outlook for the future of oil and gas despite worries over rising demand to align his business with the Paris Climate Agreement. Henry argues that prices remain promising due to a lack of industry-wide investment.
BHP’s petroleum business won’t be easy to say goodbye to. Forecasted to generate around 6% of profits during the ongoing financial year (US$2bn), and around US$1.6bn revenue produced by BHP petroleum in the six months leading to December 2020, BHP is due to take a hit no matter what agreement they choose.
On the other hand, distancing itself from thermal coal and petroleum would arguably aid the company’s case to possible - and valuable - investors who may be required to fund BHP’s increased output to places such as Australia and Mexico in the near future.
BHP considers cutting billion-dollar contract to aid climate
An exit away from petroleum has the potential to be “a powerful corporate catalyst,” says Dominic Kane, Analyst at JP Morgan.
“We believe an exit would likely ring-fence BHP’s exceptional cash flows for non-fossil fuel organic growth, mergers and acquisitions and generous shareholder distributions since BHP could avoid a major new capital investment phase this decade in petroleum.”
BHP is also set to sanction a giant US$5.7bn Canadian potash mine in August of this year, already seeing potash as a long-term substitute for gas and oil going into the future. The company has also previously announced plans to abandon its 80% share in its joint endeavour with Mitsui, owner of two lower-quality mines in Queensland, Australia.
BHP is scheduled to report its annual results on August 17, after which it may become clearer on whether the company will choose to focus its shift to a low-carbon economy or whether it will stay with its current contract into the coming year.