As greater pressure is placed on Australian mining companies to compete in a tough world market, the time for collaboration has never been more real.
Pooling resources, ideas and industry know-how to maximise costs and improve productivity is a focus of mining companies everywhere.
Just recently, evidence of this surfaced as Glencore Xstrata Plc, the world`s fourth-biggest mining company, started to make serious inroads in the collaboration stakes. Information at hand points to Glencore Xstrata speaking with Rio Tinto and BHP Billiton Ltd with the sole purpose of discovering if there were ways the miner could reel in cost savings at its struggling coal and nickel mining operations in Australia.
One of the major issues faced by Australian mining companies is the remote locations and large distances that separate mining operations from the port and ship loading facilities. Soaring infrastructure costs severely disadvantage Australian mining companies and prevent profitable mines from being developed. Many mining companies in the WA Pilbara for instance, work in close proximity to one another, yet they rarely share their rail and road networks.
This creates massive additional costs for earth works and literally hundreds of kilometres of railway line to be laid. Miners such as Rio Tinto, BHP and Fortescue Metals Group operate independent rail networks and are reticent to allow any other mining company to use the rail network.
In some instances in the Pilbara, larger miners have shared their infrastructure with smaller, junior miners – allowing them to use the existing infrastructure.
This could involve using roadways, rail networks and mineral processing plants. This very scenario was enacted as junior iron ore miner BC Iron struck a deal with Fortescue Metals Group to utilise its infrastructure.
This agreement came at a cost to BC Iron who gave away a vast chunk of its company’s operating profits to Fortescue in return for the use of its road and railway tracks.
Back to the Glencore Xstrata collaboration
Glencore Xstrata is assessing a bid for BHP`s Nickel West assets in Western Australia, which are located near Glencore’s nickel project. The sale also has attracted rival Mick Davis, former CEO of Xstrata Plc, whose X2 Resources has studied bidding.
As well as Australian mining companies, we are now seeing global mining companies looking to make cost savings as record-breaking boom in metals prices leveled out.
Australian coal mining targeted
A combined Glencore- Rio coal business on the east coast of Australia would realise cost savings greater than $500 million, Credit Suisse Group AG said last week.
Regarding the possible coal tie-up, Glencore Chief Executive Officer Ivan Glasenberg said, “There`s a lot to be done where we can get substantial synergies.”
“We`ve been talking to Rio Tinto for a long time”
“We`re talking to Rio Tinto, but it takes time for both sides to assess each other`s assets. We`ve been talking to them for a long time. How far we`ll get and how soon we can reach an agreement, I don`t know. But it`s something that clearly makes a lot of economic sense.”Ě
Glencore reported a 2013 pro-forma adjusted net income of $4.58 billion, which was described by a leading financial services company as an “exceptionally strong”Ě result.
Glencore is the world`s biggest exporter of power-station coal and owns the Ravensworth, Mount Owen and Liddell coal operations in Australia`s Hunter Valley [More information on Glencore’s coal mines in NSW]. The international mining company has previously held talks with Rio to discover how they can share mines and infrastructure to cut costs. Rio`s interest in the region is via its Coal & Allied unit, which runs three mines.
BHP Billiton – Glencore Xstrata collaboration opportunities
Glencore Xstrata are interested in the BHP nickel assets given their proximity to the Murrin Murrin mining and refining project, which is operated by Glencore`s Minara unit.
BHP has booked impairment charges on the Nickel West assets of almost $1.6 billion in the past two fiscal years after prices for the metal fell.
“We will kick the BHP tyres,” Glasenberg said in a telephone interview from London. “It`s something that would make sense, but the BHP nickel asset has had its problems in the past”
Mining jobs outlook as Australian mining companies look to merger
What can current mine workers and people looking to work in mining in Australia take away from this article? It’s obvious that mining in Australia is undergoing a complete transformation from the heady days of high commodity prices, increasing global demand and high paying mining jobs – lots of them.
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