Qtrly Exploration&Dev. Report
BHP Limited
31 January 2001
BHP LIMITED
QUARTERLY REPORT ON EXPLORATION AND DEVELOPMENT
September 2000 - December 2000
This report covers exploration and development activities for the quarter ended
December 31, 2000.
Unless otherwise stated, BHP's interest in the projects referred to in this
report is 100%.
DEVELOPMENT PROJECTS
The following projects are in various stages of development:
MINERALS
Copper Projects
Escondida Phase IV Expansion, Chile (BHP 57.5% interest)
BHP and its joint venture partners in the Escondida copper mine in northern
Chile committed to the Escondida Phase IV development project during the
quarter. Phase IV represents a major brownfield expansion of a core BHP asset
and supports the Company's strategy to add material and high value growth to its
Minerals business.
The Phase IV expansion will increase ore processing capacity by 85 per cent
resulting in an average increase in copper production of 400,000 tonnes per
annum (average total production of 1.2 million tonnes per annum) over the first
five years of production.
The development has an estimated capital cost of US$1,045 million. BHP's share
is US$600 million. Contractor mobilisation to site commenced in December and
bulk earthworks are ongoing. First production is expected in September 2002 with
full production achieved by April 2003.
Escondida Norte, Chile (BHP 57.5% interest)
The pre-feasibility study on the Escondida Norte deposit is currently
approaching completion, with the internal review scheduled for the second
quarter of 2001.
A new mineral resource model for the sulphide ores, suitable to support the
feasibility study, was completed in December 2000 and is awaiting external
audit. Condemnation drilling for the proposed waste dump area is complete, with
oxide mineralisation intersected below the selected crusher/conveyor site
requiring additional follow-up drilling.
Conceptual engineering is 90 per cent complete, with various timing and process
options considered to permit project optimisation with current mining and
strategic development plans, including the Phase IV expansion. An environmental
impact study for the project is complete and has been presented for public and
governmental review.
Escondida, Chile - Revision of Resources & Reserves (BHP 57.5% interest)
In conjunction with the recently announced Phase IV expansion project a
significant review of copper resources and reserves models at the Escondida mine
is in progress.
The first stage of this review was completed in February 2000 with an updated
geological interpretation and resource model, which included significant infill
drilling in the areas of current mine production combined with a change to the
Mineral Resource classification criteria.
The primary purpose is to improve geological knowledge and confidence as the
open-pit expands to exploit the more complex and variable contact zone between
the quartz-monzonite porphyry intrusion and the host andesite volcanic sequence.
A more rigorous interpretation of the Measured, Indicated and Inferred Resource
classifications has resulted in a movement of tonnes to lower confidence levels.
This realistically reflects variable confidence in geological and grade
continuity in various parts of the deposit.
The significant increase in the estimated resources is due to the release, for
the first time, of 'Low Grade Ore'. (Low Grade Ore is material that is below the
current concentrator cut-off grade, but has a copper grade above the economic
cut-off grade.) This material is currently being stockpiled and will be
processed through the concentrators at the end of active mining.
Also newly reported is 'Mixed Ore' material (mixed oxide-sulphide mineralogy)
occurring at the top of the enriched copper ore horizon. This may be processed
to produce concentrate or cathode. As the process option has not been defined at
this time, this material is reported as a Mineral Resource only.
Mineral Resources and Ore Reserves estimates for the Escondida mine at 31
December 2000, compared to the previous 30 June 2000 estimates, are tabulated
below. All Resource and Reserve figures are reported in 100% terms and include
depletion from mining in the period July to December 2000. All tonnes and grade
information has been estimated more precisely than the rounded numbers that are
reported, hence small differences may be present in the totals. It is important
to note that the Total Mineral Resources are inclusive of resources that are
used to define Ore Reserves.
Table 1 Escondida Ore Reserves as at 31 December 2000
Proved Ore Reserve
Tonnes Grade Rec. Metal
Ore type (millions) (%TCu) (%SCu) (millions lbs)
Reserves at 30 June 2000
Sulphide Ore 1,051 1.32 - 26,077
Oxide Ore 140 - 0.77 1,980
Reserves at 31 December 2000
Sulphide Ore 984 1.31 - 24,244
Low Grade Ore 219 0.62 - 2,332
Total Sulphide 1,203 1.18 - 26,576
Oxide Ore 124 - 0.71 1,606
Probable Ore Reserve
Tonnes Grade Rec. Metal
Ore type (millions) (%TCu) (%SCu) (millions lbs)
Reserves at 30 June 2000
Sulphide Ore 852 1.06 - 16,976
Oxide Ore 140 - 0.64 1,645
Reserves at 31 December 2000
Sulphide Ore 631 1.08 - 12,810
Low Grade Ore 257 0.62 - 2,751
Total Sulphide 888 0.95 - 15,560
Oxide Ore 95 - 0.54 942
Total Ore Reserves
Tonnes Grade Rec. Metal Metall.
Ore type (millions) (%TCu) (%SCu) (millions lbs) Rec.(%)
Reserves at 30 June 2000
Sulphide Ore 1,903 1.20 - 42,924 87
Oxide Ore 280 - 0.71 3,651 85
Reserves at 31 December 2000
Sulphide Ore 1,615 1.22 - 37,054 87
Low Grade Ore 476 0.62 - 5,083 80
Total Sulphide 2,091 1.08 - 42,137 -
Oxide Ore 219 - 0.63 2,548 85
Table 2 Escondida Mineral Resources as at 31st December 2000
Measured Resource
Tonnes Grade Cont. Metal
Ore type (millions) (%TCu) (%SCu) (millions lbs)
Resources at 30 June 2000
Sulphide Ore 1,069 1.31 - 30,873
Oxide Ore 143 - 0.76 2,396
Resources at 31 December 2000
Sulphide Ore 989 1.31 - 28,580
Low Grade Ore 236 0.61 - 3,174
Total Sulphide 1,225 1.18 - 31,754
Oxide Ore 134 - 0.68 1,992
Mixed Ore 60 0.64 0.23 847
Indicated Resource
Tonnes Grade Cont. Metal
Ore type (millions) (%TCu) (%SCu) (millions lbs)
Resources at 30 June 2000
Sulphide Ore 954 1.03 - 21,663
Oxide Ore 152 - 0.61 2,044
Resources at 31 December 2000
Sulphide Ore 718 1.05 - 16,621
Low Grade Ore 433 0.61 - 5,823
Total Sulphide 1,151 0.88 - 22,444
Oxide Ore 123 - 0.48 1,302
Mixed Ore 176 0.64 0.23 2,483
Inferred Resource
Tonnes Grade Cont. Metal
Ore type (millions) (%TCu) (%SCu) (millions lbs)
Resources at 30 June 2000
Sulphide Ore 332 0.92 - 6,734
Oxide Ore 15 - 0.48 159
Resources at 31 December 2000
Sulphide Ore 572 1.04 - 13,090
Low Grade Ore 402 0.61 - 5,406
Total Sulphide 974 0.86 - 18,496
Oxide Ore 94 - 0.50 1,036
Mixed Ore 136 0.84 0.29 2,519
Total Resource
Tonnes Grade Cont. Metal
Ore type (millions) (%TCu) (%SCu) (millions lbs)
Resources at 30 June 2000
Sulphide Ore 2,355 1.14 - 59,187
Oxide Ore 310 - 0.67 4,579
Resources at 31 December 2000
Sulphide Ore 2,279 1.16 - 58,291
Low Grade Ore 1,071 0.61 - 14,403
Total Sulphide 3,350 0.98 - 72,694
Oxide Ore 351 - 0.56 4,330
Mixed Ore 372 0.71 0.25 5,848
Notes to the tables
* TCu = total copper; SCu = acid soluble copper
* Rec. Metal = Recoverable Metal; Metall. Rec. = Metallurgical Recovery;
Cont. Rec. = Contained Metal
* Competent Person - Sean Brennan
* Cut off Grades: Sulphide Ore 0.7% TCu, Low Grade Ore 0.53% TCu and <0.7%
TCu, Oxide Ore 0.2% SCu
* Proved Reserves include current stockpiles of sulphide and oxides ores
(above respective cut-off)
* Recoverable metal is calculated by applying metallurgical recovery factors
and then deducting a further 2% of metal to reflect estimated global mining
losses.
* 'Total Sulphide' is the sum of Sulphide Ore and Low Grade Ore
As is customary at Escondida, Measured, Indicated and Inferred Resources are
used to generate an Ultimate Pit shell. This allows the maximum size of the pit
to be used in strategic mine planning activities and reasonably reflects the
future mining potential of the deposit, subject to future infill drilling.
Resource management practice at Escondida is to maintain future production in
the period 0 to 10 years, drilled out to Measured + Indicated only resource
categories. The current infill drilling program is in part aimed at ensuring
less than 5% tonnage contribution of Inferred Resource in this period. Beyond 10
years there is an increased proportion of Inferred Resource contributing to the
production schedule, averaging 30% in the period 11 to 20 years.
Reported Proved and Probable Reserves (Table 1) are derived from the Measured
and Indicated Resources within the ultimate pit after mining factors have been
applied. Removing Inferred Resources from pit optimization results in a
smaller, intermediate pit and a consequent reduction in the reserve base. Proved
and Probable Reserves of Sulphide Ore, Low Grade Ore and Oxide Ore in this
smaller pit, as at end December 2000, are reduced to 1,405 million tonnes at
1.27% TCu, 332 million tonnes at 0.62% TCu, and 156 million tonnes at 0.63% SCu,
respectively.
Tintaya Oxide Project, Peru
The updated feasibility study has been completed and detailed engineering
continues. The feasibility study is now being reviewed by senior management
prior to Board submission.
Subject to approval, construction of the Oxide Project will take approximately
15 months. Annual production is expected to peak at 34,000 metric tonnes of
Grade 'A' cathode at a direct cash cost of less than US40 cents per pound.
Tintaya Antapaccay Project, Peru
The geologic model has been updated based on the results of last quarter's
drilling program and a revised structural model. A new block model was created
based on this information. Mine planning and scheduling is now in progress to
determine the optimum sequence. Work towards land compensation agreements
continued through the period.
Agua Rica, Argentina (BHP 70% interest)
The joint venture is continuing to evaluate development options for the project
that may reduce capital and operating costs. Activity at the field site was
limited to environmental monitoring and tenement management.
Iron Ore Projects
Mining Area C, Western Australia (BHP 85% interest)
Negotiations with registered groups under the Native Title Act Section 29 notice
proceeded during the quarter and agreement has been reached with one group in
relation to an infrastructure title and with another group in relation to the
mining lease.
Pre-feasibility Study work is now moving to the final stages, with the Eastern
rail alignment accepted as the preferred route.
Yandi Lump, Western Australia (BHP 85% interest)
BHP is examining the possibility of producing an iron ore lump product from its
Yandi operations in Western Australia and currently has a one million tonne
trial underway with the Japanese Steel Mills.
BHP is the first company to produce a lump product from the Yandi type deposits.
The development of the market has been in conjunction with the Japanese Steel
Mills. The project is in the pre-feasibility phase and has potential to add
another higher value product to BHP.
Orinoco HBI Plant, Venezuela (BHP 50% interest)
Construction on Module 2 was essentially complete by the quarter ended 31
December 2000. Production has been delivered from both modules and three of the
four trains during the second half of calendar year 2000. Train 4, which was
scheduled to be commissioned by the end of the calendar year, did not start up
until 18 January 2001.
The plant has a capacity of 2.2 million tonnes per year. Production has been
constrained due to significant ramp-up difficulties.
Coal Projects
San Juan Underground, New Mexico, USA (BHP 100% interest)
San Juan underground mine development received BHP Board approval during mid-
October. Notice was received from the United States Bureau of Land Management
that BHP's bid for lease NMNM 99144 had been accepted contingent on Justice
Department review. With the acquisition of this lease, BHP will have sufficient
reserves to meet contracted sales requirements through to 2017.
Development work commenced during early November utilizing leased equipment and
contract miners. Thirty-four permanent underground employees were hired out of a
planned underground work force of 200. A contractor was selected to complete the
surface facilities construction and commenced detailed engineering and
preliminary earthworks. In addition, the contractor selected to complete
pressure grouting at the shaft site commenced work during December.
Bids were received for the ventilation shaft contract, which will be awarded in
January with work scheduled to commence during March. Underground development
equipment was ordered, with first deliveries made late in the quarter. Bids were
also requested and received for the longwall mining equipment. Selection of this
equipment will be made during mid-February.
Goonyella Mine, Queensland (BHP 52.1% interest)
Exploration mining ceased in mid-November in accordance with the scope and
budget requirements. The outcomes of the exploration mining phase are now being
fully analysed and documented as part of the feasibility study.
More drilling is planned in 2001 to ascertain coal quality in an adjoining area.
It is also expected that an additional 3-D seismic survey will be completed by
April-May 2001, subject to the impact of the wet season conditions.
Saraji Mine, Queensland (BHP 52.1% interest)
Exploration activities for the Saraji longwall pre-feasibility study continued
with 20 line kilometres of
2-D seismic surveys and six coal quality drill holes.
Dendrobium, Illawarra Coal (BHP 100%)
During the quarter, feasibility scope of work continued. This included
additional exploration, technical studies in mine design covering strata
control, ventilation, gas drainage and hydrology. Engineering studies have
continued, covering underground equipment, stockpile, rail transport, processing
and surface infrastructure aspects. This has led to detailed discussions with
potential equipment/service providers.
These efforts are being conducted in parallel with widespread stakeholder and
community consultation while progressing the Government approval process,
including the development of an Environmental Impact Statement which will be
submitted early next year. Work to date is on schedule and within budget
allocations.
Base Metal Projects
Gag Island Nickel, Indonesia (BHP 75% interest)
Discussions continue with both PT Aneka Tambang and Falconbridge to resolve the
various issues relating to Falconbridge joining the Gag Island joint venture.
Progress on these issues includes:
* BHP has proposed clarifications to several commercial issues and PT Aneka
Tambang is studying the proposal
* BHP has had numerous meetings with the Indonesian Department of Forestry
seeking a 'comfort letter' recognizing PT Gag Nikel's prior right to use
surface mining techniques in a forest that was later declared protected
* Discussions with Falconbridge on the Scope of Work for studies and the
Feasibility have begun. Process investigations have not been finalized
Preparation is underway on the island for a resumption of drilling, pending
resolution of the above issues.
In Newcastle NSW, BHP's pilot facilities are being reassembled and upgraded
after relocation from Reno, Nevada.
Diamonds and Industrial Minerals Projects
Ekati Diamonds, Canada (BHP 51% interest)
Final results were received for bulk samples from the winter 2000 exploration
reverse circulation drilling programs for the Cougar, Wolverine, Zach and Lynx
pipes:
Pipe Kimberlite samples Total Carats Average Grade
(dry tonnes) (+1mm) (cts/tonne)
Cougar 74.3 0.7 0.01
Wolveri 130.8 9.6 0.07
ne
Zach 63.3 11.3 0.18
Lynx 168.5 140.7 0.83
Commercial valuations were not carried out on the Cougar, Wolverine and Zach
parcels because of the limited diamond recoveries. The average value of the Lynx
diamond parcel reported by three Antwerp based diamond dealers (140.6 cts) is
US$139 per carat.
The Lynx pipe (approximately 0.6 hectares) is located about three kilometres
southwest of the Misery pit. The Cougar, Wolverine and Zach pipes are situated
within the core zone and the Lynx pipe is located within the buffer zone.
Significant microdiamond results were received for the Kodiak, Pegasus and
Wildebeest pipes which were discovered during the summer 2000 drilling program:
Pipe Drill Dip Length Interval Sample Stones Stones Total
Hole Wt.(kg) (<0.5m) (>0.5m) carats
Kodiak 00-17 -53o 205.1m 23.3 - 203.6m 81.7 74 17 0.087
Pegasus 00-25 -45o 194.2m 28.4 - 194.2m 295.3 291 62 0.330
Wildebeest 00-17 -50o 71.0m 52.4 - 71.om 35.0 41 11 0.032
The Kodiak pipe is located within the core zone and the Pegasus and Wildebeest
pipes are located within the buffer zone.
PETROLEUM
Griffin, Australia (BHP 45% interest, operated)
Two wells in the field, Griffin-8 and Griffin-1, were re-entered to either shut
off water or perforate additional zones during November/December 2000. This
accessed additional reserves and generated incremental production of nearly
30,000 bopd, with the Griffin Venture producing just under 70,000 bopd in early
2001.
Work continues on interpreting the reprocessed 3-D seismic data to determine
potential further development opportunities in the broader Griffin field,
including a potential Griffin-9 infill well.
Keith, North Sea (BHP 31.83% interest, operated)
During the quarter, production began from the Keith oil field, located north
east of Aberdeen in UK North Sea block 9/8a.
The former appraisal well will access around 15 mmboe of proved and probable
reserves (4.8 mmboe net to BHP) for a total capital expenditure of approximately
A$62 million (A$19 million net BHP).
Initial daily production was approximately 15,000 barrels of oil and 15 million
standard cubic feet of gas, with the average rate during the first year expected
to be about 8,000 bopd.
Further development of this geologically complex field will be assessed
following the acquisition of technical data during production. Future phases, if
justified, offer the potential for significant additional volumes of
hydrocarbons.
Liverpool Bay - Hamilton East Field (BHP 46.1%, operated)
An environmental impact assessment has been conducted by BHP Petroleum in
Liverpool Bay for the proposed single well subsea development of the Hamilton
East gas field.
An environmental statement will be issued for public consultation later this
month with drilling currently targeted to begin during the second quarter of
2001. The well will be tied back 6.5 km to the existing Hamilton North platform.
First gas is targeted for the end of the year.
Ohanet Development, Algeria (BHP 45% interest. Joint operating entity comprising
SONATRACH/BHP)
The Risk Service Contract for Ohanet was gazetted on 12 November 2000, marking
formal government approval of the contract.
During the quarter, SONATRACH/BHP awarded contracts to Western Geco and to an
Algerian company, ENAGEO, covering a total of around 1,000 sq km of 3-D seismic
acquisition. Contracts for drilling, casing, tubings and core study work are
also expected to be awarded during January.
Engineering, Procurement and Construction contractor, ABB/PIL has now mobilised
to the site and commenced clearance works in January 2001. Most of the longlead
facilities equipment for the project has been ordered.
In December 2000 BHP announced the sale of a 15 per cent interest in Ohanet to
the Woodside Petroleum group, reducing the Company's capital commitment to the
project by around US$150 million. BHP's interest in the development now stands
at 45 per cent.
First production is scheduled for October 2003 and peak liquids production will
be around 58,000 barrels per day gross. BHP's share of revenue is taken from its
share of condensate and LPG produced.
ROD Integrated Oil Field Development, Algeria (BHP 17.3% interest. Joint
operating entity comprising SONATRACH/BHP/AGIP)
The Front End Engineering Design work is now well advanced and is expected to be
completed during the first quarter of 2001. The main drilling contracts will be
put out to tender during January.
During the quarter, a Final Development Report was submitted to the Ministry of
Mines and Energy for the RAR discovery, which is a single well target that will
be included as part of the integrated ROD development.
First production from ROD is scheduled for January 2003.
Typhoon, Gulf of Mexico (BHP 50% interest, non-operated)
The Typhoon development, consisting of the subsea completion and tieback of the
four existing appraisal wells to a mini tension leg platform (TLP), is being
developed jointly by Chevron (50%, operator) and BHP (50%). Peak production of
40,000 bopd and 60 mmscfd (gross) is expected, with first production scheduled
for third quarter 2001.
The second well (236-2) should be completed in May 2001. Construction on the TLP
hull and topsides at McDermott's yard in Morgan City, Louisiana, is continuing
with installation planned in May 2001. In December the MMS (Minerals Management
Service) granted Royalty Relief for the Typhoon Field.
Zamzama Extended Well Test, Pakistan (BHP 38.5% post commerciality equity,
operated)
Construction of the production facilities is well advanced and the project
remains on schedule to produce first gas by the end of the first quarter 2001.
Markets have now been identified and negotiations have commenced in relation to
Phase 1 of the full field development.
EXPLORATION
MINERALS
The Discovery Group of BHP Minerals carries out worldwide grass-roots
exploration for all of BHP's minerals businesses. During the quarter a process
of re-organisation, to align the Discovery Group with the BHP Minerals portfolio
management model, was completed.
The Discovery Group is also responsible for exploration and development work
relating to existing mines.
Falcon Airborne Gravity Gradiometer Technology.
The deployment of BHP's proprietary airborne gravity gradiometer technology
(called 'Falcon') is continuing in Australia and North America.
The deployment of Falcon continues to progress well and has opened up new
opportunities for BHP both in its own right and with partners. New targets
identified by the survey over the DHK joint venture ground were recently
announced by the partners and will be followed up when feasible.
Following the successful campaigns the two aircraft will be moved to Southern
Africa and South America during the forthcoming quarter.
PETROLEUM
Wells drilled during the quarter or in the process of drilling at 31 December
2000.
WELL LOCATION BHP EQUITY STATUS
Chinook-1 Walker Ridge 70%, BHP Hydrocarbons
Block 425, Operator found but not in
Gulf of Mexico commercial
quantities.
Plugged and
abandoned.
Mad Dog-3 Green Canyon 23.9% Operator Hydrocarbons
Block 783, - BP Amoco encountered.
Gulf of Mexico The need for an
additional
appraisal well is
being determined.
Atlantis-2 Green Canyon 44%, BHP Well- Appraisal well
ST1 Block 743, Operator confirmed a
Gulf of Mexico lateral extension
of the known
range of the
Atlantis
hydrocarbon
accumulation of
up to 1.6
kilometres (one
mile) from the
original
wellbore, and
also confirmed
the continuity
and quality of
the Miocene
reservoir sands.
Cavalier-1 WA-9-L, 16.67%, Plugged and
Dampier Basin, Operator- abandoned.
Australia Woodside
Gaea-1 WA-1-L, 16.67%, Gas-condensate
Dampier Basin, Operator- discovery.
Australia Woodside Plugged and
abandoned.
Eva Eva Secure Block, 41.18% Drilling ahead.
South Bolivia Operator -
Repsol
EXPENDITURE
Information related to exploration expenditure will be included in the BHP Half
Year Profit Report, to be released on 8 February 2001.
COMPETENCE AND RESPONSIBILITY
The following statements apply in respect of the information in this report that
relates to any stated Mineral Resources or Ore Reserves.
* The information is based on and accurately reflects information compiled by
the person named under each relevant section of the report
* Each named person is either a Corporate Member or Fellow of The
Australasian Institute of Mining and Metallurgy or the Australian Institute
of Geoscientists and is a full-time employee of a member company of the BHP
Group;
* Each named person has sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration and to the
activity which he or she is undertaking to qualify as a Competent Person as
defined in the 1999 Edition of the 'Australasian Code for Reporting of
Mineral Resources and Ore Reserves'. Each named person consents to the
inclusion in the report of the matters based on their information in the
form and context in which it appears.
For information contact:
Media Relations: Investor Relations:
Michael Buzzard: Robert Porter:
Senior Media Relations Advisor Vice President Investor Relations
(BH) (61 3) 9609 3709 (BH) (61 3) 9609 3540
Mobile (61) 417 914 103 Mobile (61) 419 587 456
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