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Jacqui McGill addresses the South Australian Chamber of Mines and Energy Business Luncheon

Jacqui McGill, Asset President, Olympic Dam
South Australia Chamber of Mines and Energy (SACOME) Business Luncheon
Adelaide, 8 July 2016

Good afternoon.

We would like to Acknowledge that the land we meet on today is the traditional lands for the Kaurna people and that we respect their spiritual relationship with their Country. We also acknowledge the Kaurna people as the traditional custodians of the Adelaide region and that their cultural and heritage beliefs are still as important to the living Kaurna people today.

I would also like to acknowledge the Kokatha peoples, the traditional owners of the land on which Olympic Dam operates and I pay my respect to their Elders past and present. I also extend that respect to other Aboriginal and Torres Strait Islander people who are present today. I would like to particularly acknowledge Chris Larkin, Chair of the Kokatha and we look forward to continuing to work with the Kokatha.

I’d like to quickly just mention that it’s NAIDOC week, which celebrates the history, culture and achievements of Aboriginal and Torres Strait Islander peoples – we’re proud to support some local events in SA so I would encourage you get out there and take a look.

Finally, welcome to all of the distinguished guests here today.

My presentation is going to focus on a few key areas – firstly, I’ll provide an update on how Olympic Dam is tracking on our journey to become a safe, reliable and globally competitive business. As part of this, I’ll be sharing some details about where our business is at on the cost curve and also our grade journey – as it’s quite a different and unique story which underpins our future outlook. And finally, which I’m sure will be of most interest to you, I’ll talk about our plans for the next five years, including opening up the Southern Mine Area (SMA) and heap leach.

Everything in our business starts and ends with safety – so it’s appropriate that’s where we start today. Quite simply, as it stands, Olympic Dam’s safety performance is not where I’d like it to be. Now some people might say that’s because compared to a coal or iron ore mine, our risk profile is very different – we have underground mining, smelting operations, molten metal, refining activity – however I don’t accept that what we need to do in terms of reducing our injury rate is impossible. It simply means we have to work harder than the rest - and we’re not afraid of hard work. Our goal as leaders is to stop allowing a polarity between safety and production and focus on ensuring that the conversation is only about safe production. 

I've got a team that are really good at delivering top class results, and I know that with the right level of focus, we can transition this operation – from one with characteristics similar to the left of this slide and with a propensity for injury and a belief that zero is unachievable… to one where it's considered unacceptable for us to injure anyone, any day.

In doing so, Olympic Dam will be an operation where our employees and contractors not only know that zero harm is achievable, but that by looking out for their teammates, by taking care of each other, by reporting issues as soon as they occur, that we actually achieve this. 

We have pockets of this culture today. In our underground operation, there are team members in the development crew who've had 1500 days with no injury. Those familiar with development work will know this is hard work - it's on the face, involves mobile equipment, lots of activity - and yet these crews can achieve 1500 days. But they have what we call ‘a culture of care’ - they look out for each other. If somebody isn't at their best, they speak up. And this is what we need to replicate right across our business.

Critical to us meeting this goal will be the continued hard work of all our teams. Let me share a great example of this with you – at OD, we call these ‘bright spots’ which are our way of celebrating our team’s success and acknowledging great work.

In August last year, a team member was seriously injured after he was entangled in the drill steel of an underground development drill (jumbo). Following any significant incident, we carry out a full, in-depth investigation. From this, our team commenced work to design and develop an automated system to shut down boom movement and rotation if a team member moved out of the safe zone. Currently this requires a worker to press a safety switch on the drill to stop it rotating, but any safety system is much more effective if it does not rely on human behaviour. 

Working with our contracting partner, OEM Atlas Copco, our team were able to develop a solution involving lasers to detect movement and can automatically shut down a machine if a worker enters the risk zone. The system was only in the early stages of investigation in Europe, however in June, the system was trialled on one of our jumbos at Olympic Dam. Pleasingly, it worked very well in our field tests and we are now working with Atlas Copco to finalise the design so that we can install it across all of our development drills (jumbos) and production drills (simbas). 

This is a fantastic example of what’s possible and demonstrates great team work with our contracting partner, Atlas Copco. Even more pleasing is that the team member injured in the original event is back working at full duties. Our newly designed development drills will mean we won’t experience another serious incident like this again. What I’m really proud of is that because we are working with Atlas Copco as the OEM, this will be available for others to use also – making a safer industry, not just a safer Olympic Dam.

While safety is central to everything we do, reliability is also a critical success factor for Olympic Dam. We need to be able to produce our products consistently, month in month out, with boring predictability against our plans, in order to be truly successful. 

Many of you would be aware that in January 2015, the Svedala mill suffered an electrical failure.  The Svedala mill accounts for approximately 60% of the feed to our processing plant. Following the electrical failure, repairs were undertaken and the mill safely resumed operation ahead of schedule on 15 June 2015.

This was a very challenging time for the business however as you’ll see in this graph, our teams have worked exceptionally hard and our mill utilisation is now above pre-outage levels.

In our surface operations today, our milling processes are stable, with a focus on improving uptime. In our smelter, concentrate blending and burner modifications have improved capability and overall, this improved stability for our operations means higher feed rates and as a result higher overall copper cathode production. 

All of this has meant that this year we forecast we would exceed 200 thousand tonnes of copper production.  I look forward to the prospect of seeing our performance against this target in a week and a half time, when we report our operational results. To put this in context, this level of production would represent a record for Olympic Dam under BHP Billiton ownership. The last time production reached these levels was in 2005, and even then it was part of two years good production rather than a sustained trend. I truly believe this year’s production sets us up for bigger things to come on a sustainable basis.  However as I said, we will only be truly successful when we continue to deliver on our targets each and every month, without exception. While Olympic Dam will never be a boring place to work, I am happy to be boring in this way!

Being safe and reliable is necessary for success – but this alone is not sufficient. We also need to be able to return value to BHP Billiton and its shareholders. From a financial perspective, we’re continuing work to reset Olympic Dam’s cost base, through higher volumes and greater efficiencies. At the start of FY16, we set ourselves an ambitious target of reducing our cost base by 34%, to help move us from the 3rd to the 1st quartile of the ‘2014 Industry C1 Cost Curve’. The team has done a great job to move us in the right direction but of course we’re not alone –our global competitors are working just as hard to reduce their costs so our journey is not over, and more is not only possible, but necessary. This year has seen us get some runs on the board and I’m confident that we’re up to the challenge of maintaining Olympic Dam as a globally competitive business right here in South Australia.

As I said, we are not alone in reducing our cost base. However there is something that does set us apart and make Olympic Dam a bit special.

This slide charts the grade story over the history of Olympic Dam. Now as you can see, when operations started at OD there were grades of around 3 per cent copper. However in mining you always try and mine the highest grade first, and so as you would expect the grade has declined over time. 

But Olympic Dam is unlike most other operating mines – because our copper grade is actually increasing. That’s because we are starting to move into the Southern Mine Area, which represents 70% of the orebody that we haven’t even touched in our first 25 years of operation. This allows us to reverse the trend of declining grade, and indeed allows us to gradually increase the average grade of the ore we mine, back above 2% copper. 

Increasing grade provides an opportunity to increase production and reduce costs, however we’ve said a number of times that we are no longer looking at a “big bang” expansion of Olympic Dam. Instead, we will increase production capacity through low-risk, capital efficient underground expansions, including accessing the Southern Mine Area.  Without expansion capital, and remaining on current plans, this would allow us to increase production capacity to around 230 thousand tonnes of copper in FY21.

However as you’ll see from the slide, with some efficient investment of capital and further optimisation, Olympic Dam could further increase capacity, potentially up to280,000 tonnes of copper per year. Clearly this represents an attractive opportunity, and is something that we are studying carefully.

We also retain attractive options beyond 280,000 tonnes per annum. Continuing expansion underground, and successful on-site application of heap leach technology could provide an opportunity for further growth. This would see heap leach working in parallel with our current concentrator and uranium leach plant, feeding into an expanded smelting and refining facility. This could allow us to produce up to 450,000 tonnes of copper per annum, while continuing to use the current stope mining method with a significantly smaller footprint and capital cost than the prior open-cut design. 

While it is important to have a goal for the future, it is also important to acknowledge that we can only get there through our efforts today.  That is why priority 1, 2 and 3 for me and the amazing Olympic Dam team, is to ensure safe, reliable and cost competitive production at Olympic Dam, every single day. We don’t take anything for granted, and to grow tomorrow, we must be successful today.

So what does all this mean in practical terms? Well you can see some of the key facts and figures on the screen now – and what all these plans mean for people like our jumbo operators, truck drivers and refinery and smelter team members. To give you some further perspective, over the last 10 years, we’ve built about 170km of tunnels… so to deliver a further 120km in just another five years, means that all in all, it will be very busy!

As I mentioned earlier, for the first time in 10 years, Olympic Dam is forecast to achieve production in excess of 200kt for FY16. This result has been realised through the fantastic combined efforts of the mine and surface teams and against some significant challenges, including the Whenan shaft refurbishment. One of the many highlights to date has been the record throughput achieved in the smelter for the first nine months of this year, setting a new level for ‘what is possible’. 

While we have worked hard to reset our cost base, we must also continue to make significant investments to set us up for growth opportunities, and ensure the long term sustainability of Olympic Dam. Like all businesses, resources are limited so each investment decision must focus on safety and then weigh up the risk, and commercial business case.

I’ll move into the detail in the next slide but to give you some perspective, we've got a resource we can now access in the Southern Mine area which can deliver much better grade. It will also fill up the current refinery, which reduces the unit costs associated with running it, and ensures a much more efficient operation. 

As the slide shows, our capital profile is quite low over the next few years. And it’s really a normal sustaining capital program to:

  • Access the Southern Mine Area footprint
  • Mine the great ore there in terms of grade and copper to sulphur ratio;
  • Feed that higher quality ore through the existing operation
  • And finally, and most importantly, grow our copper production. 

So what is the Southern Mine Area – or SMA – that I keep referring to? Well in the simplest terms, it’s what I like to call the body of the guitar. This area was the location of the proposed Open Pit, which formed part of the major expansion project deferred in August 2012.  To date, we’ve been mining in the Northern area of the resource – or the neck of the guitar – which over time has seen a decline in grades. Around 70% of Olympic Dam’s resource footprint still remains untouched so our current plan centres on expanding underground into the Southern Mine Area to target high grades.  This high-grade ore will release latent capacity within our existing operations and build the foundation for longer-term value extraction.

I’ll now show you a graphic that shows the current mined stopes and how this would change over time as we move into the Southern Mine Area.  As you will see, this is a significant step forward for the operation.

Opening up the Southern Mine area will provide us with a much better grade in copper and copper Sulphur ratio in order to maximize the metal units through the existing surface facility.For some time now, you would have heard us talk about the application of heap leach technology at Olympic Dam as a potential low cost processing option for the future.  Many of you might also recall that we commenced column testing at Wingfield in 2010, which was followed by the 2013 commencement of the larger CRIB based testing. 

I am now pleased for you to be the first to know that this test-work is moving into another exciting phase, with smelter pilot plant test work soon to commence at Outotec in Finland. This test-work, due to commence in September this year, is aiming to determine the effectiveness of smelting concentrate from the heap leach process with existing OD concentrate in a pilot flash matte smelter. It then aims to produce blister copper in a novel hybrid DBF smelter arrangement, also at pilot scale. The findings from the testing are being used to assess the smelting process and technology alternatives for the concentrate generated from heap leach. The test work will be using around 1.5 tonnes of Olympic Dam ripios concentrate which has been produced from the existing heap leach CRIB demonstration facilities at Wingfield, along with 2 tonnes of existing Olympic Dam concentrate. 

You may be wondering why this work is being completed in Finland – well unfortunately there is no flash smelting pilot facility available in Australia which can complete this test work, and given the small scale of this work, it is not viable to construct one. Other smelter technology alternatives will also be assessed.

Obviously this is an important next step in considering the application of heap leach technology at Olympic Dam, and we remain on-track to complete the heap leach trials in FY19.

Now while heap leach is the most significant example of where Olympic Dam is using technology to advance our operations, it isn’t the only one. And you’ll see on the slide now that improving safety and production through the use of technology is not only a focus for Olympic Dam but right across BHP Billiton. The recent company restructure – and Olympic Dam’s move from the Copper business to Minerals Australia – is enabling greater information sharing, and the opportunity for us to better leverage successful projects across operations, regardless of commodity. While still early days, there have already been some great examples of this – some of you may recall hearing me talk about one of our warehouse team members, Nilesh, who came up with a great idea to install a low cost detection solution that alerts forklift drivers when someone is in close proximity. Not only has this solution now been implemented across OD, but Nilesh has also shared his idea with colleagues in our West Australian Iron Ore operations, as well as in Coal in Queensland, who are working with him to install something similar for their warehouses also. A fantastic outcome.

At Olympic Dam, one of the projects I’m really excited about is our trial of UAVs – or drones – and you can see here a couple of pictures of these incredible machines in use on site. While we’re only in the early stages of the trial, we believe these drones could assist us greatly from both a safety, as well as production perspective for tasks including monitoring and inspecting plant equipment; surveying stockpiles; thermal imaging; as well as reducing our overall spend on scaffolding. Anthony Howie who’s leading this work in our team is here today – so please have a chat to him if you’d like to know more.

So today I have provided some insights into the future of Olympic Dam and our five year plan.  It is fair to say that we have come a long way since the deferral of the Olympic Dam Project in August 2012.  Clearly, the plan for Olympic Dam has changed considerably since that time, however we are of the view that our current plan is not only achievable but sets Olympic Dam on a journey which is sustainable, delivers value and sees us becoming a truly globally competitive business. While all plans are subject to change and are not without risk, we believe that as a team, we can and will deliver.

The scale of the Olympic Dam orebody means that it is a generational resource for South Australia. Interestingly – and one for the history buffs here today –while we are firmly focussed on the view ahead, our teams on site will soon be reminded of our past. We’re preparing to mine what we call the Limes, which was first intersected by the so called ‘discovery hole’ way back in 1976! According to legend, RD10 was the 10th and last hole drilled in the famed initial exploration program, which kicked off the Olympic Dam story – within six years, the Whenan shaft sink had commenced and the rest, as they say, is history!

There is a rich 40 year history of Olympic Dam, and we believe that if we maintain focus on being a safe, reliable and globally competitive business, then Olympic Dam can continue to deliver jobs and economic development in in this State for many more decades to come. Focussing on what is important today also provides a very real opportunity for greater future success, and expanding opportunity for South Australia, and South Australians.

Thank you very much.

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