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Iron ore producers that use Port Hedland, the largest iron ore port in Western Australia (WA), have agreed in principle to fund an A$200mn ($140mn) house buy-back scheme to allow an expansion to increase exports.
UK-Australian mining firm BHP and Australian producers Fortescue Metals and Roy Hill have agreed to fund the scheme to buy around 400 homes that are affected by dust from the port. This will make it easier for the firms to follow through with ambitions to expand exports.
The WA state government expanded the maximum capacity of Port Hedland by 7pc to 617mn t/yr in October but the dust issue has restricted throughput. This has become a more pressing issue with the disruption to Brazilian exports from Covid-19 creating an opportunity for Australian iron ore exports to meet firmer demand from a resurgent Chinese economy.
Port Hedland operated at around 568mn t/yr in May, which was above average but below the record 597.4mn t/yr achieved in June last year that is on track to be exceeded this month. The port is expected to export 524.9mn t of iron ore in the 2019-20 fiscal year to 30 June, rising to a peak of 547.5mn t in 2022-23, according to a report commissioned by BHP, Fortescue and Roy Hill.
The port's main export is iron ore, making up 47.78mn t of the 48.23mn t total shipped in May. But copper concentrate, manganese ore and spodumene concentrate are also shipped through the port.
BHP, Fortescue, Roy Hill, Mineral Resources and Atlas Iron use Port Hedland. BHP has outlined plans to reach 330mn t/yr from a target of 273mn-286mn t for 2019-20. Fortescue has applied to increase production to 210mn t/yr from a target of 175mn-177mn t this year. Roy Hill is looking to expand to 65mn t/yr from 55mn t/yr. Its major shareholder Hancock Prospecting has plans to increase output from Atlas Iron through the development of the 4mn t/yr Coruna Downs.
The expansion of Port Hedland fits withthe federal government's ambitions to fast track projects that support the economy, with iron ore Australia's most lucrative export. Iron ore prices have eased slightly from a 10-month high of $105.75/t cfr China for 62pc Fe on 8 June to $103.65/t yesterday, amid the supply disruptions in Brazil.
UK-Australian mining company Rio Tinto has WA's Dampier and Cape Lambert ports that it has sole use of for iron ore exports.
By Jo Clarke