Exports grow as Chevron, Roy Hill ramp-up

16 October 2017
Business News

Western Australia’s 10 biggest exporters shipped $96 billion worth of products overseas over the past year, an increase of almost 10 per cent on the previous corresponding period, according to research by Business News.

Four iron ore miners are ranked in the top 10 biggest exporters list, with exports of the steelmaking commodity totalling about $60 billion between them.

They were led by Rio Tinto, with iron ore sales from its operations of $24.1 billion in calendar year 2016, its most recent full-year reporting period.

That figure includes the equity share of Rio’s joint-venture partners, including Hancock Prospecting.

Rio’s export numbers are bolstered to $24.9 billion when including the Dampier Salt and Argyle Diamond operations, calculations by Business News found.

The state’s second biggest exporter was BHP Billiton.

BHP shipped about $22 billion of iron ore in the latest financial year, an increase of nearly $6 billion on the previous period largely driven by improved iron ore prices.
The figure is for the operation as a whole, and includes both BHP’s equity share and the shares of partners such as Japanese company Mitsui & Co.

Sales from the Nickel West arm of the business were up around $200 million to be $1.3 billion for the year, giving BHP total exports of $23.2 billion.

Fortescue Metals Group was in fourth place, with sales of $11.2 billion, around 15 per cent higher than the previous period, while new entrant Roy Hill Holdings was in eighth position with exports of $3 billion.

Roy Hill, which is 70 per cent owned by Gina Rinehart’s Hancock Prospecting, is likely to be hitting an annualised run rate of 55 million tonnes most months by December.

Energy producers are also beginning to stake a claim on the BNiQ Search Engine list, with third placed Woodside Petroleum joined by Chevron Australia following the start-up of the Gorgon project in 2016.

Woodside’s export revenue as the operator of Pluto LNG, North West Shelf Venture and projects under the Australia Oil umbrella was $15.5 billion in calendar 2016, its most recent financial year reporting period.

That was about $3 billion lower than in the previous period, driven largely by lower revenues through the North West Shelf project.

Business News estimates revenue from North West Shelf Venture to have been $9.3 billion, down partly due to reductions in condensate and oil sales, while Pluto sales were roughly stable at $3.4 billion.

Chevron has entered the list in ninth place, with $2.9 billion of revenue from the Gorgon project in the 2017 financial year, according to estimates by consultancy EnergyQuest.

About 6.5mt of LNG was shipped from Gorgon by the US-headquartered company over that 12-month period, EnerqyQuest found.

Data from the state Department of Mines, Industry Regulation and Safety shows a big boost to the state’s LNG exports from the start-up of Gorgon, with a statewide production volume of 28.7mt in the 12 months to June 2017.

The shipments were valued at around $12.7 billion, an increase of about 20 per cent on the previous year, according to that data.

The BNiQ Search Engine number for revenue from the three LNG facilities is higher due to the inclusion of oil, condensate and LPG sales.

With Gorgon’s third and final processing train having begun operation last March, Chevron can be expected to ship close to its capacity of 15.6mtpa in the 2018 financial year, which at current prices would mean revenue of about $7 billion per year.

The recent start of production at the Wheatstone project would provide a further boost for Chevron, with full capacity of about 8.9mtpa.

Both Wheatstone and Gorgon operating at full capacity would mean the two Chevron operations producing exports of at least $10 billion, putting the company into fifth place on the BNiQ Search Engine list, assuming 2017 financial year LNG prices.
Prelude operator Shell will join the list when that project is completed.

The four other businesses rounding out the top 10 will be familiar to readers.
Gold Corporation, the only state-owned entity on the list, exported around $7.9 billion of precious metals in the 2017 financial year, about 9 per cent lower than in the previous period.

Almost all gold mined in WA is processed through the corporation’s refinery.
The two alumina exporters, Alcoa of Australia and Worsley Alumina operator South 32, placed in seventh and 10th respectively, with combined exports of nearly $5 billion.

Grain handling cooperative CBH Group again featured on the list, with forecast exports of $3.1 billion, although that number is not the company’s finalised figure.

The cooperative was the only non-resources player to feature.

Four more iron ore miners hold positions in the group from 10th to 20th, including Citic Pacific Mining.

Business News has calculated a revenue figure of $1.2 billion for the Chinese company’s Sino Iron project using reported tonnage figures and the current market price for iron ore.

That makes the estimate conservative, as magnetite is usually processed to be a higher grade than the hematite exported by other producers.

Iron ore exporter Mineral Resources also features in the top 20, having expanded its ambit to include other commodities such as lithium.

Speaking at a recent WA Mining Club lunch, Roy Hill chief executive Barry Fitzgerald said the company had hit its capacity 55mtpa run rate in the month of September.
The coming months would bring a reduction from that level, Mr Fitzgerald said, due to planned shutdowns, but he expected the project would be consistently operating at capacity by the end of the year.

Roy Hill had an ambitious ramp up target, he said.

“We set a big, hairy, audacious goal about a very rapid ramp-up,” Mr Fitzgerald told the forum.

“Originally it was going to be 15 months; we didn’t get the plant until February (2016) so we thought we’d leave it at 10 months.

“We didn’t make that.”

The operation ran into issues last November when production plateaued at an annualised run rate of around 35mt.

“The reality was that the orebody had a few more difficulties than we thought; the material was much harder (than anticipated), there were difficulties in blending,” Mr

Fitzgerald said.

That led to significant unforeseen wear on equipment.

Mr Fitzgerald said the company changed its approach to mining and materials handling at the site’s three pits.

This contributed to a big improvement in throughput in July 2017, which was nearly 70 per cent higher than in the previous month.

The business has further plans to boost productivity, according to Mr Fitzgerald, including improving train operation efficiency to lift the number of ore moving trips from 5.5 to six per day.

That will be followed by the introduction of cruise control, and potentially, an eventual move to automated trains similar to the system being pursued by Rio Tinto.
Automation is also being introduced in the company’s drilling operations by the second quarter of next year.

Mr Fitzgerald said that could unlock efficiencies by enabling deeper data analysis of orebodies.

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