Resources Development Minister Colin Barnett has welcomed BHP’s decision to continue operating its hot briquetted iron plant at Port Hedland.
Mr Barnett said it was a clear signal the company was committed to downstream processing its Pilbara iron ore deposits in the long term.
“I am pleased the BHP board has decided to continue with this important project,” he said.
“Enormous effort has been put in over the past year to get on top of the technological and operational difficulties.
“It is tremendously reassuring to see a company like BHP - and its workers - so dedicated to having a go at iron ore processing.
“While there is still a considerable way to go before the plant can produce at its design capacity, full credit must go to the team working on the project at Port Hedland in the face of widespread criticism and difficult operating conditions.”
Mr Barnett said since the start of the Pilbara iron ore industry in the 1960s, the State had required iron ore companies to move towards processing the ore into more valuable products - including HBI and eventually steel.
He said this was an explicit condition for the Government’s ongoing support for mining operations and the export of a large volume of iron ore.
“I understand the decision to continue operations was not an easy one,” the Minister said.
“It is pleasing that BHP has seen fit to continue to honour its secondary processing obligations to the State in this way.
“In return, I have indicated the State Government will assist the project in its difficult, early years.”
Mr Barnett said the State Government had held discussions with BHP and a relief package had been negotiated - covering the commissioning phase.
He said the assistance package was related to royalty and rental relief for three years only and was estimated to be worth between $9 million and $11 million in foregone revenue to the State in total over that three-year period.
“In contrast, the extra benefits to the State from the ongoing operations of HBI will total about $150 million over 10 years from new royalties and payroll tax,” the Minister said.
“Considerable flow-on regional benefits through service contracts and small business can also be expected.”
Mr Barnett said the State assistance would include an iron royalty holiday for ore processed through the HBI plant for three years.
This only applied to the ore processed through the HBI plant and not to 58 million tonnes of ore produced by BHP, worth about $1.4 billion, which brought in about $66 million in royalties a year to the State.
Rental relief for the land used to process iron ore through the plant would be extended for the three-year period.
There would also be an extension of the stamp duty relief under the State Agreement Act which covers the HBI plant so that stamp duty on assignments was waived until December 31, 2003.
This would allow new partners to come into the project - if BHP decided to allow that - without incurring a financial penalty until December 2003.
“It is important to remember this plant will generate new income for the region and the State and will allow BHP to refine this major value-adding operation to make better use of iron ore fines which at present have a limited market,” Mr Barnett said.
“Add to that the local business and employment benefits and it is clear such assistance is entirely appropriate.”
Mr Barnett said BHP had committed to spend further capital.
“The HBI plant currently employs about 700 direct and contract staff and represents the culmination of $2.6 billion of investment by BHP over the last four years,” he said.
“Construction began in 1996, the first briquettes were produced in February 1999, and the plant was officially opened in July 1999.
“At full operation it will produce between two million and 2.5 million tonnes of HBI per year, which is used as a feedstock for modern steel operations throughout the world.”
Media contact - Diana Callander 9222 9686