Archive
Breaking down BHP Billiton’s iron ore production costs
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
Russia’s ARMZ Buys Mantra for $1.15 Billion
“Russia’s ARMZ Uranium Holding Co. agreed to acquire Australia’s Mantra Resources Ltd. for about 1.16 billion Australian dollars (US$1.15 billion) in its ongoing bid to acquire low-cost sources of uranium for its parent company, State Atomic Energy Corp., Russia’s largest utility.
At the same time, ARMZ entered an option agreement to flip Mantra to Vancouver-based Uranium One Inc., for the same price it paid. ARMZ agreed to acquire a 51% stake in Uranium One earlier this year, establishing Uranium One as ARMZ’s platform to acquire additional uranium sources for State Atomic Energy. “
Source: Wall Street Journal, December 15 2010
Observations:
- Canadian miner Uranium One is controlled by ARMZ, which in turn is controlled by State Atomic Energy (or Rosatom), the Russian utility that controls 17% of the world’s nuclear fuel production.
- Uranium One operates 3 mines in Kazakhstan, with an additional development project in the country, and various exploration projects and an In Situ Leach mine in the United States.
Implications:
- Rosatom is attempting to secure access to uranium ore as global demand is expected to increase strongly over the next decade. The company is smartly using Uranium One, with its proven mining and processing experience, as a vehicle to produce.
- Depending on the success of international climate change conventions and the approach to small-scale nuclear energy in these conventions the exploration of uranium deposits might experience a surge. However, as uranium deposits typically have a very different geological composition than gold deposits it will not be easy for the many small gold exploration companies to switch to uranium.
©2010 | Wilfred Visser | thebusinessofmining.com
Joint Venture Finds Gold on Ocean Floor
“AngloGold Ashanti Ltd.’s marine exploration venture with diamond giant De Beers SA has turned up gold on the ocean floor and continues to hunt for large deposits, the gold producer’s chief executive said Friday.
Two vessels belonging to De Beers are two-thirds of the way through their exploration off the coast of New Zealand and continue to search off South Africa and Canada, Mark Cutifani said in an interview at the company’s Johannesburg head office.
‘We are finding gold, but the key will be finding those areas where the grades [of the gold found] cover the cost,’ he said. ‘We aren’t there yet.'”
Source: Wall Street Journal, December 10 2010
Observations:
- AngloGold Ashanti and De Beers have teamed up to combine their knowledge of marine mining and gold deposits, hoping to find underwater deposits of gold.
- AngloGold has put in $40mln for 3 years of exploration, a very small amount compared to the billions spend in the exploration industry on land annually.
Implications:
- The only implication of the announcement by AngloGold’s executive is that the most interesting places that were explored by the joint venture don’t hold levels of gold that make underwater mining feasible.
- A successful exploration effort by the JV might cause a strong increase of sub sea exploration efforts. Dredging companies, specialized miners are the most likely actors in this area, as there are very few synergies between undersea mining and traditional mining apart from processing of the dredged/mined material.
©2010 | Wilfred Visser | thebusinessofmining.com
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