Fortescue’s plans for two massive mining hubs
There was standing room only at a Sydney Mining Club lunch on November 12th which featued a keynote address by the CEO of Fortescue Metals Group (FMG).
By Paula Wallace
While Andrew Forrest was apologetic about the analyst-centric nature of the presentation he was unabashed about the factors in Fortescue’s success.
He said the clever use of technology and innovation has brought FMG to the point of a 40 million tonnes per year rate of production from its Cloudbreak mine in the Pilbara region of WA, in record time. It plans to increase its total rate of production to around 100 million tonnes within the next three years and ultimately 155 million tonnes per year.
“The exploration model that we have pioneered is working, a new mining method is working, a new overburden removal method is being trialled now…trucks, plants, trains and ships, it’s as simple as that, it’s a cash powerhouse,” said Forrest.
“Innovation provided it is carefully researched pays in our industry.”
He said that 40 tonne axle loads are a first for the industry and that FMG has created arguably the world’s most efficient heavy haul rail.
“World-class only comes down to operating costs and…Fortescue is a very low cost operation.
“In terms of axle loads, for 55 million tonnes we’ll do 4.6 train trips a day. Our colleagues will do more…it’s just a serious difference.”
Reaching a production rate of 55 million tonnes per year is the nearest goal and the first step in creating FMG’s Chichester hub which it hopes to reach by the end of 2010.
Forrest outlined a re-organisation of the company that will build off its port and rail systems into a simple two-hub feed operation.
“I say simple because we’re just joining two very big dots, one is Asia and their thirst for steel making product and the other the Pilbara and our ability as Australia to supply them with their essential ingredient iron ore.”
The plan is to increase production to 100 million tonnes per annum from the Chichester hub, and “let it just sit there and optimise itself and have it run as a legacy for at least 30 years to generate enormous export revenues for Australia.”
Forrest said this would mark a historic ramp up.
“Only a few years ago, 95 million tonnes to 100 million tonnes, was about where BHP and Rio Tinto were, so we’re creating in our first hub the scale of that operation straight away.”
The short-term optimisation of the Chichester hub involves moving eight millions tonnes of iron ore from Christmas Creek mine to Cloudbreak for processing along with 34 million tonnes from Cloudbreak Mine; 19 million tonnes into the Christmas Creek plant which is being commissioned in the last quarter of 2010. That will result in 55 million tonnes being delivered to Herb Elliott Port for shipping.
The second hub which FMG will make a decision on commencing mining in 2010/11 is the Solomon which according to Forrest will “double the size of Fortescue”.
“Solomon is our next generation, it’s targeting four billion tonnes…part of the capital costs is to send the first 60 million tonnes from Solomon up into the port of Port Hedland creating 155-160 million tonne operation out of the port. We’ll achieve that in about five or six years.”
Beyond that FMG is looking at building a second port, located at Anketell Point and which would be known as the Pilbara Port.
Solomon will cost initially $1,200 million to expand the port of Port Hedland, $850 million for the rail, the mine around $850 million and the plant around $750 million.
“So, you’re looking at about $3.6 billion and these numbers are getting refined,” said Forrest
“There’s a full feasibility study running now and that will be complete by this time next year.”
In relation to the company’s exploration success to date, Forrest said, “Take us seriously, we’re never going to be short of resources, we’re never going to be short of energy and we’re certainly never going to be short of ambition for Australia.
“We’ve discovered in five years where those guys said there wasn’t any, in the Solomon, 6.3 billion tonnes.”
“We have iron ore for generations. Fortescue holds about 70,000 square kilometres in the Pilbara. BHP and Rio, they’re about 16,000 square kilometres between them. So when they merge they can still come and talk to us,” said Forrest.