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Posts Tagged ‘consultants’

Breaking down BHP Billiton’s iron ore production costs

September 29, 2011 2 comments

BHP Billiton organized a site tour of its Western Australia Iron Ore operations this week, providing valuable information about its production costs:

Source: BHP Billiton Site Tour Presentation, September 27 2011

Observations:

  • BHP positions itself in the cost curve around $39/t CIF. Average iron ore price for the year ended June 2011 was $163/t, resulting in a 76% operating margin.

Implications:

  • Combining the data from the two charts above, BHP’s breakdown of total iron ore costs of $39/t CIF China are as follows:
    • US$9.4/t – Contractors
    • US$7.0/t – Secondary taxes & royalties
    • US$4.3/t – Freight, distribution & demurrage
    • US$3.5/t – Depreciation, depletion & amortization
    • US$3.1/t – Fuel & energy
    • US$2.7/t – Raw materials & consumables
    • US$2.7/t – Labor incl. consultants
    • US$0.4/t – Exploration
    • US$5.9/t – Other

©2011 | Wilfred Visser | thebusinessofmining.com

Consultant’s 2011 Mining Reports

September 22, 2011 Comments off

Deloitte: The top 10 issues mining companies will face in the coming year:

  1. International investment fuels the sector
  2. Volatility is the new normal
  3. Engaging stakeholders takes centre stage
  4. Political agendas to the force
  5. You’ll need a long term plan
  6. The war for talent rages on
  7. Maintaining the search for that elusive pot of gold
  8. Climate change disclosure and adaptation are getting harder
  9. Inadequate infrastructure hampers growth
  10. Exploring new revenue opportunities

Source: Deloitte – Tracking the Trends 2011


Ernst & Young: The top 10 business risks of 2011-2012:

  1. Resource nationalism
  2. Skills shortage
  3. Infrastructure access
  4. Maintaining a social licence to operate
  5. Capital project execution
  6. Price and currency volatility
  7. Capital allocation
  8. Cost management
  9. Interruptions to supply
  10. Fraud and corruption

Source: Ernst & Young – Business risks facing mining
and metals 2011–2012


PWC: Game changing trends:

  • Mining companies have continued to outperform the overall market
  • Market cap is (almost) back
  • Undervalued industry? The Price to Earnings (P/E) multiple has declined in 2010
  • During 2010 we saw BHP Billiton, Vale and Rio Tinto step clear of the rest of the industry
  • Return on equity and return on capital employed lag despite record profits
  • There has been a fundamental shift in the cost base of the industry.
  • Operating cash flow returns, but investing lags

Source: PWC – Mine 2011

©2011 | Wilfred Visser | thebusinessofmining.com