BHP takes full control of its iron ore mines

The trend for mining companies to manage their own mines instead of hiring external contractors has continued, with BHP Billiton confirming the last contractor working on its Pilbara iron ore mines will be relieved of its duties.

BHP said it would take full control of an iron ore mine called ”orebody 18” by June, ending nearly seven years of work on the site by mining services company Macmahon.

BHP said Macmahon’s time in charge of the site had been successful and the two companies would work together to ensure a ”smooth transition”.

BHP iron ore president Jimmy Wilson said the change was the final step in making the company’s iron ore division 100 per cent owner-operated.

The past couple of years have seen many mining companies opt to take back control of their own mines rather than use contractors.

Part of the incentive for miners is to lower costs by removing the profit margin that contractors charge, but many miners also believe they are more in control of their safety reputations when they manage their own mines. Over the past six months Fortescue has taken control of its mines in the Pilbara after being concerned about the safety record of one of its contractors.

BHP and Glencore Xstrata have also taken many of their Queensland coal mines in-house in recent years. BHP started the trend in 2011 when it bought HWE Mining, which had been operating some of its Pilbara iron ore mines.

As part of BHP’s move to control orebody 18, the company will suspend operations at the Yarrie mine, which ranks as its smallest in the Pilbara. The move is believed to be linked to productivity and optimisation measures in the Pilbara, where BHP is rapidly expanding its production and exports.

Macmahon shares fell by half a cent to 12.5¢ on Tuesday, but Macmahon chief executive Ross Carroll said his company had a long-standing and positive relationship with BHP, and was already in talks with the miner about other potential contracts in the region.

Macmahon said most of the 200 workers it employed on orebody 18 would be redeployed elsewhere.

BHP shares closed 28¢ lower at $39.10.
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