BHP approves $4.5b South Flank iron ore mine in Western Australia

From the Australian Financial Review


BHP has warned of rising cost pressures as it and Fortescue Metals Group push ahead with $6 billion of new iron ore projects in Western Australia, with the scramble for workers and equipment set to intensify should Pilbara rival Rio Tinto pull the trigger on its own expansion.

The BHP board approved $US2.9 billion ($3.8 billion) worth of spending on the South Flank iron ore project on Thursday evening, with costs set to rise to $US3.4 billion once contributions from partners Mitsui and Itochu are included.

South Flank looms as BHP's biggest single project spend (excluding mergers and acquisitions) since it committed $US6.6 billion to the Jimblebar iron ore project in 2011, and the approval came barely three weeks after Fortescue announced it would spend $US1.27 billion on a new mine at Eliwana.

Rio Tinto is also expected to approve construction of a new mine at Koodaideri before the end of 2018, meaning Australia's three biggest iron ore miners will be building mines in the same region at the exact same time.

The big miners have already reported rising cost inflation in recent months, but BHP's Minerals Australia president Mike Henry pointed to $US184 million worth of early works spending that was approved for South Flank last year, and said he was confident that spending had given BHP the jump on its rivals.


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Sharon Taylor
Senior Research Analyst - Performance Property Advisory

Sharon heads up the research division at Performance Property Advisory. As part of our ongoing service to clients, Sharon provides contemporary advice in a range of areas, including growth suburbs and regions, demographics and employment rates, proposed infrastructure developments and other aspects that will contribute to a positive return on their investment.