Mining giant BHP Billiton has opted to further the trend of running its mines directly in lieu of outsourcing their management to external contractors.
As part of the growing trend of miners restoring their outsourced operations to in-house status, BHP Billiton has announced that it will assume direct control of the last of its iron ore mines in the Pilbara to remain under the management by an external contractor.
Following a near seven year history at the Orebody 18 iron ore mine in the Pilbara, mining services firm Macmahon will be relieved of its duties by June of this year when BHP steps in to operate the project directly.
According to BHP iron ore president Jimmy Wilson the change will mark the final step in the conversion of the mine into a 100 per cent owner-operated concern.
BHP hailed Macmahon’s operation of the mine during its tenure as manager as a success, and said that the two companies would strive to make the transition a smooth one.
BHP’s decision serves to reaffirm a trend which has emerged in recent years, and seen resource companies resume direct control of their mines in lieu of outsourcing their management to external contractors.
BHP itself was responsible for launching the trend with the acquisition of HWE Mining in 2011, which at the time was entrusted with the operation of some of its iron ore mines in the Pilbara,
In the past few years, BHP and Glencore Xstrata further advanced the trend by restoring the direct operation of a number of their Queensland coal mines.
While the chief motivation is the reduction of costs achieved by ousting contractors from the earnings chain, safety considerations also serve as key factor, prompting iron miner Fortescue to resume direct control of some of its mines in the Pilbara after uncovering the dubious safety record of one of its contractors.
Another factor behind the drive towards in-house operation has been the increased fussiness of miners with respect to which sections of a pit are excavated, as part of efforts to optimise efficiency and drive down costs amidst more difficult market conditions.
The opinion of many miners is that direct operation is preferable to outsourced management under such circumstance.