Production Starts at BHP South Flank Mine with Iron Ore at Record Highs

Australian mining giant BHP is in sync to replace diminishing iron ore output from it’s existing Yandi mine which is nearing the end of its life. The first ore from its $4.6 billion South Flank mine in the Pilbara, WA was mined this month. 

BHP Iron Ore Corridor

South Flank is the biggest iron ore mine developed in Australia in over 50 years and comes at a time where Iron Ore prices are at a record high. A timely boost for not just BHP but for Australia. Australia’s most valuable export is iron ore and coming off the lockdown from COVID-19 is bringing in much needed revenue after massive budget drawdowns and increases in debt to avoid further economic and social disaster in the nation.

South Flank is expected to produce 80 million tonnes a year of iron ore BHP said the South Flank mine, alongside its “Mining Area C”, would form the largest operating iron ore hub in the world, producing 145 million tonnes per year. ‘

“South Flank’s ore will supply global steel markets for the next 25 years, helping to build electricity, transport and urban infrastructure across the globe,” BHP’s head of Australian mining Edgar Basto said. n’

Mike Henry, BHP’s CEO told a Bank of America global metals conference earlier this week that the increasing iron ore supply coming from its South Flank project was “perfectly timed” as the iron ore prices hit record highs on multiple markets.

Iron Ore

BHP’s exports of iron ore, by far its most valuable commodity, hit a new half-year record last year and will exceed that this year given the production and price rise.  China’s demand for the steel-making ingredient soared and BHP’s Jimblebar mine in the Pilbara performed strongly.  Australia’s iron ore mega trio BHP, Rio Tinto and Fortescue share prices have recently hit all-time highs. Australia’s biggest export is iron ore and the price of iron ore has surged as record-breaking steel output in China, with it’s massive post-COVID stimulus programs and disruptions affecting rival suppliers in Brazil such as Vale. 

On April 21 BHP gave the following guidance:

  • Production guidance for the 2021 financial year remains unchanged for petroleum and iron ore.
  • Copper guidance has increased to between 1,535 kt and 1,660 kt and reflects stronger than expected performance at Escondida.
  • Metallurgical coal guidance has been reduced to between 39 and 41 Mt as a result of significant wet weather impacts during the December 2020 and March 2021 quarters.
  • Energy coal guidance has been reduced to between 18 and 20 Mt as a result of significant weather impacts at New South Wales Energy Coal (NSWEC) and lower than expected volumes at Cerrejón.

Since then the Iron ore price hit a record high of $US230 a tonnes as China’s steel mills run overtime.  China’s aggressive post-COVID-19 infrastructure-building programs fuel extraordinary demand for steel. Factor in the fact that global seaborne supply has been constrained due to ongoing disruptions affecting output volumes at Vale’s iron ore mines in Brazil.

The simmering trade war between Canberra and Beijing, some would politely call them China’s bullying tactics is ongoing and has led to the  “indefinite suspension” of the China-Australia Strategic Economic Dialogue. This is aa key diplomatic channel, have stoked concerns that China may seek to escalate efforts to loosen its reliance on Australian cargoes.  However when it comes to Australia’s stranglehold on ironore supplies this has not worked in China’s favor..

This past week iron ore prices have slightly pulled back like a number of commodity prices as specualtors took profits.  Prices are still above the $US200 a tonne mark.

Australia’s Federal Resources Minister Keith Pitt, who visited the Pilbara mining province earlier this week, described South Flank as an important project that would generate thousands of jobs in the region and demonstrated “why the resources sector is so important to our national economy”. “Establishing Australia’s biggest iron ore project in half a century is a significant vote of confidence in the industry’s future and its long-term benefits to Australia,” Mr Pitt said.


BHP at it’s last earnings conference retained its 2021 financial year output target for WA iron ore but raised its overall iron ore target amid the gradual resumption of its jointly owned Samarco iron ore operation in Brazil (50 per cent owned by BHP). BHP and its partner Vale halted Samarco operations in 2015 after a dam collapse killed 19 people, poured mine waste into the local river and destroyed nearby villages. Samarco is expected to produce between 1 million tonnes and 2 million tonnes of iron ore in the financial year.

BHP said it was committed to supporting the Renova Foundation in its work to progress remediation and compensation programs to restore the environment and re-establish communities affected by the Samarco tragedy.

via BHP, Reuters

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