The Pilbara mining

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Summary

The Pilbara is a mining region located around 1,100 km north of Perth, in Western Australia. Iron ore is the major commodity mined in the Pilbara. The Pilbara is a major supplier of iron ore to steel industries in Asia and Europe. BHP Billiton and Rio Tinto are the major iron ore producing companies in the region and in June 2009 agreed to a joint venture to combine all of both companies' iron ore assets in Western Australia. The joint venture has the potential to create an unrivalled and dominant iron ore business throughout the region and the world.

Rio Tinto's Pilbara iron ore operations include 11 mines, three shipping terminals and a privately owned heavy freight rail network, with an annual capacity of 220 million tonnes. BHP Billiton Iron Ore owns seven iron ore operations, including the world's largest single-pit open-cut iron ore mine, two separate single track rail systems and two separate port operations in the Pilbara. The Pilbara

Introduction

The Pilbara is a 510,000 square-kilometre mining region located around 1,100 km north of Perth, in Western Australia (www.bhpbilliton.com). Iron ore is the major commodity mined in the Pilbara, producing over 96 per cent of Australia's iron ore exports. Iron ore production for the region in 2004/05 was worth approximately $8 billion (www.pdc.wa.gov.au). The major iron ore producing companies in the region are BHP Billiton and Rio Tinto. In June 2009 BHP Billiton and Rio Tinto agreed to a joint venture to combine all of both companies' iron ore assets in Western Australia (www.riotintoironore.com).

Geology

The Pilbara region contains the 80,000 square-kilometre Hamersley Iron Province. The Province is characterized by the ‘Hamersley Group', a group of late Archaean and early Proterozoic rock formations. During the formation of the Hamersley Group, different types of rocks were deposited in layers. This resulted in iron-rich layers being deposited alternately with silica-rich layers. This is known as Banded Iron Formation (BIF). Unenriched layers of BIF are usually uneconomical and contain around 30 per cent iron (www.riotintoironore.com).

Bedded Iron Deposits

Bedded iron deposits are formed due to the natural enrichment of BIF. A number of the commercially viable deposits in the Pilbara, including the Brockman and Marra Mamba Iron Formations, were formed by this natural enrichment. The natural enrichment process of the BIF involved circulating ground waters. Hydrous iron oxides, such as goethite, replaced non-iron minerals and magnetite oxidised to haematite (www.riotintoironore.com).

Channel Iron Deposits

Channel Iron Deposits (CIDs) in the Pilbara were formed by iron particles being concentrated in ancient river channels. The iron particles were deposited into the river channels by the weathering and erosion of bedded iron deposits. These particles were rimmed and fused by goethite which was deposited by iron-enriched ground water (www.riotintoironore.com).

CIDs occur as mesas, small flat-topped hills, which can range from about 5 - 40 metres in thickness. Their key characteristic is the occurrence of small rounded haematite ‘pea-stones', approximately 0.1mm - 5mm in diameter, hosted in a goethitic matrix (www.riotintoironore.com).

Detrital Iron Deposits

Detrital iron deposits (DIDs) are formed by the deposition of ore fragments into natural structures such as valleys and drainage channels. The ore fragments are formed by the weathering and erosion of bedded iron deposits. DIDs can occur as naturally cemented or as loose gravels and in many deposits both types are present (www.riotintoironore.com).

Rio Tinto

Rio Tinto's Pilbara iron ore operations include 11 mines, three shipping terminals and a privately owned heavy freight rail network. The operations in the Pilbara began in 1966, at the Mount Tom Price mine, and currently have an annual capacity of 220 million tonnes (www.riotintoironore.com).

In the Pilbara, Rio Tinto owns all of Hamersley Iron's six mines, Brockman, Nammuldi, Mount Tom Price, Marandoo, Paraburdoo and Yandicoogina, as well as operates the Channar mine (60 per cent), the Hope Downs mine (50:50 joint venture with Hancock Prospecting Pty Ltd) and the Eastern Range mine (54 per cent). Rio Tinto also has a 53 per cent operating interest in the West Angelas and Mesa J mines, owned by Robe River Iron Associates (www.riotintoironore.com).

Rail and Ports

The rail system is a vital part of Rio Tinto's iron ore operations. The rail system services all 11 mines and transports ore to Rio Tinto's two ports, Dampier (100 per cent ownership) and Cape Lambert (53 per cent joint venture with Robe River). Advanced on board computers allow for a single man operation with the train control centre located in Perth (www.riotintoironore.com).

Mining and Processing

All of Rio Tinto's Pilbara operations use open pit mining methods. All the operations also contain on-site processing facilities. Ore from Eastern Range and Channar is partly processed on site with the secondary crushed material being sent to Paraburdoo processing plant via a conveyor belt for further processing. A range of different processing techniques are used at the 11 mines, ranging from conventional crushing and screening, to ore beneficiation processes to improve the ore quality (www.riotintoironore.com).

Products

There are a number of different ore types that are produced by Rio Tinto's Pilbara operations. The Mesa J mine produces Robe River Lump and Fines, which is transported by rail to the port at Cape Lambert and exported into Japan, Europe and Asia (www.riotinto.com). The Yandicoogina mine produces Hamersley Iron Yandicoogina Fines (HIY - F), with the rest of Rio Tinto's mines contributing to form Pilbara Blend Lump and Fines. Ore from the Hamersley Iron operations is transported by rail to the port of Dampier and is exported to supply the European and Pacific Rim steel industries (www.riotinto.com).

BHP Billiton

BHP Billiton Iron Ore owns seven iron ore operations in the Pilbara. This includes the world's largest single-pit open-cut iron ore mine, Mount Whaleback, which stretches for more than five kilometres and is nearly 1.5 kilometres wide. Smaller deposits adjacent to Mt Whaleback are Orebodies 29, 30 and 35. BHP Billiton's smaller satellite mines are Orebodies 18, 23 and 25 and Jimblebar, which are located near the town of Newman. Located approximately 100 kilometres north-west of Newman are the Area C and Yandi mines. BHP Billiton's other iron ore operation in the Pilbara is the Yarrie mine, located around 200 kilometres east of Port Hedland (www.bhpbilliton.com).

Rail and Ports

BHP Billiton Iron Ore owns and operates two separate single track rail systems and two separate port operations, Nelson Point and Finucane Island, which are located either side of the harbour at Port Hedland. One track runs from the Newman area to Nelson Point and services the mines at Mt Whaleback, Jimblebar, Area C, Yandi and Orebodies 18, 23, 25 and 29. The trains travelling on this line can reach up to 3.75 kilometres long and usually consist of six locomotives and 208 cars, carrying around 125 tonnes of ore each. The other runs from the Yarrie mine to Finucane Island. Trains on this line usually consist of just one locomotive pulling up to 90 cars (www.bhpbilliton.com).

Advanced technologies such as specialised computer software allow for all train movements to be controlled from a traffic control centre in Port Hedland. The rail systems also play a major role in the blending of ores. Ore is delivered to the ports in specific volumes and grades to ensure the ores are blended correctly to meet the grade requirements of the customer (www.bhpbilliton.com).

Mining and Processing

All of BHP Billiton Iron Ore's operations in the Pilbara use open pit mining methods. This involves conventional drilling and blasting of the ore which is then transported by haul trucks and put through the primary crusher. The primary crusher breaks down the ore into lumps approximately the size of a football. These lumps are then passed through a secondary crusher to produce lumps of ore that are about the sized of a grapefruit. The grapefruit-sized lumps are then sent to stockpiles to be loaded onto trains. Mt Whaleback also contains a beneficiation plant to remove any high grade ore from the contact waste (www.bhpbilliton.com).

Products

BHP Billiton Iron Ore's operations in the Pilbara produce eight different products, Newman Lump and Fines, Yandi Lump and Fines, Yarrie Lump and Fines and Mining Area C (MAC) Lump and Fines. The iron ore is transported to Port Hedland by rail and is exported to steelmakers in Japan, China, Taiwan, Korea, Europe and Australia. Nelson Point receives ore from Mt Whaleback, other Newman mines and Yandi, while ore from the Yarrie and Area C mines is sent to Finucane Island (www.bhpbilliton.com).

Discussion

Joint venture

In June 2009 BHP Billiton and Rio Tinto agreed to establish a production joint venture that would combine both of the companies' Western Australian iron ore assets. The joint venture will mean all current and future iron ore assets and liabilities will be owned 50:50 by the two companies. The joint venture between the two largest companies operating in the Pilbara will create an unrivalled and dominant iron ore business (www.riotintoironore.com).

Due to the companies' overlapping resources, it is expected that the joint venture will reduce costs, add significant value and increase the efficiency of the operations. This is expected to be achieved by combining mines in close proximity into single operations, shorter rail hauls and providing greater blending opportunities to maximise recovery and operating efficiencies (www.riotintoironore.com).

Iron ore produced during the joint venture will be split evenly between the companies' and sold independently. The ore will be sent in equal volumes to company designated ships for distribution. BHP Billiton is required to pay Rio Tinto US$5.8 billion at financial close for equity type interests to raise its interests in the joint venture to 50 per cent (www.riotintoironore.com).

Conclusions

The Pilbara region is Australia's primary iron ore producing region, contributing to more than 96 per cent of iron ore exports. The joint venture between the two largest companies operating in the Pilbara, Rio Tinto and BHP Billiton, will provide the companies with cost reductions and significantly increase the efficiency of their operations. It also has the potential to create an unrivalled and dominant iron ore business throughout the region and the world.

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