Statement re BHP Iron Ore
Broken Hill Proprietary Company Limited
11 November 1999
BHP IRON ORE OFFERS STAFF EMPLOYMENT CONDITIONS TO PILBARA AWARD EMPLOYEES
BHP Iron Ore today took another step to improve its overall productivity and
business performance by offering about 1,000 employees the choice to move from
industrial Award based conditions to staff conditions under State workplace
agreements. The employees work at its Port Hedland and Newman Western
Australian iron ore mining, railing and ship loading operations.
Iron Ore employees currently employed under a State Award now have the choice
of staying with the Award or changing over to workplace agreements which are
commonplace in the West Australian mining industry.
Overall, the workplace agreements are in-line with the conditions provided to
the 600 existing Iron Ore staff employees. The workplace agreement conditions
exceed the conditions in the Award and the current Enterprise Bargaining
Agreement and include improved superannuation, sick leave and salary.
BHP Iron Ore President-elect Graeme Hunt said that the offer is consistent
with the changing nature of the work being undertaken by the Company to
re-shape its iron ore business in the face of an increasingly competitive
international iron ore market.
'We've made significant progress in tackling our cost structures over the past
18 months to offset steep (11%) price cuts earlier this year,' Mr Hunt said.
'We have a workforce second to none but, based on our experience with the
existing industrial relations system at our Iron Ore operations including
recent inter-union disputation, we no longer believe it can deliver the
progress we need to compete successfully in the global market.'
'By necessity, we have had to broaden the range and type of work being done by
employees at all levels of the business to enhance our competitiveness. It is
now appropriate that we introduce a common system for acknowledging and
rewarding all employees' efforts.'
'I believe that our employees want to be a positive part of changes in our
business and be recognised for their own effort and contribution,' he said.
'Moving to common staff conditions removes distinctions in conditions of
employment and creates a sense of 'ownership' of their workplace.'
FOR FURTHER INFORMATION CONTACT:
Media Relations: Stedman Ellis
BHP Iron ore - Perth
Tel +61 8 9320 4330
John Crowley
BHP Iron ore - Perth
Tel: +61 8 9320 4395
Mandy Frostick
Manager Media Relations
BHP Group - Melbourne
Tel: +61 3 9609 4157
Investor Relations: Dr Robert Porter
Vice President Investor Relations - Melbourne
Tel: +61 3 9609 3540
FACT SHEET
----------
BHP Iron Ore is the world's second (to CVRD, Brazil) largest exporter of iron
ore, and Australia's leading producer. In BHP's financial year ended May
(YEM) 1999 the business shipped 61.7mt, valued at about $1.5 billion, to
integrated steelmakers in Asia, Australia and Europe. The open pit mines
which supply this iron ore are located in three areas of the Pilbara region in
Western Australia - Newman, Yarrie and Yandi. Mining operations are connected
by rail to ore handling and ship loading facilities at Nelson Point and
Finucane Island, Port Hedland.
The world steel industry is under considerable pressure, and as a result there
is strong pressure on raw materials suppliers with iron ore prices falling by
11% at the last price negotiation. Competitors inside and outside Australia
have pushed both prices and costs down, and BHP Iron Ore is focussing on
improving efficiencies and reducing costs wherever possible. Considerable
restructuring has been undertaken over the past 10 years, and this has been
accelerated this year. At the same time, the business is preparing to meet
expected future growth in the medium term. Projects being progressed include
a feasibility study for development of massive reserves in Mining Area C
(MAC). Environmental approvals for this project have been received and Native
Title negotiations commenced.
BHP Iron Ore achieved an LTIFR of six in YEM 1999, maintaining the previous
year's rating.
Products
--------
The Newman mines - Mt Whaleback and satellites OB23/25 and Jimblebar - produce
high-quality Brockman hematite lump and fine ore. Orebody 29, also one of the
Newman mines, produces geothite-hematite (Marra Mamba).
The Yarrie/Nimingarra mines produce hematite bedrock and hematite conglomerate
- of high value in the steel making process due to low phosphorus and alumina
levels.
The Yandi mine produces pisolitic high grade ore, a commercially successful
product due to its high calcined iron, low phosphorous and low alumina
content.
Total iron ore resources in these locations are in excess of 10 billion
tonnes.
Production
----------
Operating performance for YEM99 (Millions of Dry Metric Tonnes)
Mines Ore Shipped
----- -----------
Newman 32.7
Yarrie/Nimingarra 6.4
Yandi 22.6
Total 61.7
Markets
-------
In YEM 99 almost 49% of shipments went to Japanese steel makers. Other major
markets included South Korea (14%), China (10%), BHP Steel (11%), Europe (9%),
Taiwan (6%).
Sales Revenue
-------------
YEM 99 - $1.650 billion.
EBITDA
------
YEM 99 - $807 million.
Direct Payments to Government
-----------------------------
YEM 99 - $90 million in royalties; $10 million in payroll tax.
Employees
---------
A permanent workforce of 1 700 (about 1 000 wages) and about 500 mining
contractors employed at October 1999.
Unions
------
AWU, CMESTU (CFMEU), TWU, MEWU and CEPU are eligible to represent employees at
our operations and are party to awards and agreements with BHPIO which are
registered with the WA Industrial Relations Commission.
Ownership Structures
--------------------
BHP Iron Ore acts as manager and sales agent for participants in the Mt Newman
Joint Venture, Mount Goldsworthy Mining Associates Joint Venture and the Yandi
Joint Venture. In each, BHP Minerals Pty Ltd owns an 85% proportion and in a
variety of arrangements Itochu/CI Minerals Australia Pty Ltd and Mitsui Iron
Ore Corporation Pty Ltd share 15%. The Jimblebar project is 100% owned by BHP
Minerals Pty Ltd.
Changes in Employment Arrangements - BHP Iron Ore
BHP Investor Relations Investment Briefing Paper November 1999
----------------------------------------------------------------
Overview
--------
BHP has moved to change the nature of its employment arrangements with
approximately one thousand of its Western Australian iron ore employees from
an award based (enterprise bargaining agreement) to an individual staff
employment contract basis.
The change is designed to:
- Overcome limitations and restrictions on the pace of change within the
existing industrial relations system.
- Remove the barriers and differences between all employees to create a more
flexible, more productive and more focussed workforce.
- Further improve the cost structure, productivity and competitiveness of
BHP's Western Australian iron ore mining, rail and shiploading operations.
Nature of the Changes
---------------------
Currently, one thousand of BHP Iron Ore's 1,700 workforce are covered by
enterprise bargaining agreements formulated between workplace unions and the
Company. In the place of this form of arrangement, employees have been
offered individual employment contracts which place employees on normal staff
employment conditions.
The main features of the new staff employment conditions, relative to the
previous award or enterprise bargaining agreements include the following:
- Salary - a total salary taking account of all requirements of the job and
providing individuals with the ability to improve earnings based on
performance.
- Superannuation - improved superannuation.
- Performance-related incentive scheme which rewards the individual based on
individual and business performance.
- Individual performance assessment - annual individual performance appraisal
for salary review and career development.
- Responsibility - employees to take greater responsibility in their work
areas, which in turn will be a key factor in performance appraisal.
It is expected that total salary costs will be in the order of A$10million on
a 100% take-up basis. The higher indicative annual salary costs are less than
1% of cash costs per tonne of iron ore produced and will be significantly more
than offset by productivity gains. In addition accrued sick leave
entitlements will be cashed out at a one off expected cost of A$10 million
(provision for these costs has already been made).
Context of Changes
------------------
BHP's Iron Ore operations are located in three areas of the Pilbara region of
Western Australia - Newman, Yarrie and Yandi. The world steel industry is
under considerable demand and price pressure, and as a result raw material
suppliers have faced significant reductions recently in the price received for
iron ore, evidenced by a 11% decrease in prices at the last (1998) price
negotiations.
Competitors inside and outside Australia have pushed both prices and costs
down. Despite significant improvements in efficiencies, BHP Iron Ore's costs
per tonne are generally higher than the other main producer. Component of
this cost differential relate to structural factors, such as mine distances
from port, stripping ratios and other factors. However, the ability to deliver
further productivity gains, in part through the change in workplace employment
arrangements, will enhance cost competitiveness and the delivery of enhanced
shareholder value.
Over the last 18 months Iron Ore management have reviewed every aspect of the
business, reflected in:
- a 20% reduction in employee levels over the last 12 months,
- a 17% reduction in the cost of ore shipped for the 2000 financial
year-to-date (from the base comparative year of 1998) - this is equivalent to
about $140 million annualised cash costs taken out of the business,
- a series of operational productivity improvements, such as an increase in
the tonnes of ore moved per man hour by 17% (above 1998 levels); reduction in
the Whaleback truck fleet from 50 to 27; reduced waste/ore ratios;
introduction of continuous stockpile management leading to significant
improvements in ore quality.
Project Phoenix - Impetus for Workplace Change
----------------------------------------------
Over the past three months BHP Iron Ore has undertaken a concentrated review
of its business as part of its ongoing programme to improve overall
competitiveness. The review, known as Project Phoenix, provides a blueprint
to build on business initiatives taken over the past 18 months to set a new
direction for the Company.
Project Phoenix has delivered a range of recommendations, from fundamental
operational improvements and greater productivity through better work
practices, to a number of longer term strategic initiatives. Some of the
changes identified have already been implemented and have had an immediate
impact on helping reduce BHP Iron Ore's production costs. Others will become
evident as full implementation is achieved.
Despite the significant improvements made to date, a change in workplace
arrangements is integral to the achievement of further sustainable efficiency
improvements.
Experience with the existing industrial relations system at iron ore,
including recent inter-union disputation, has undermined confidence in its
ability to enable the Company to progress the changes needed to increase
competitiveness.
Both Project Phoenix and the changes to workplace arrangements will continue
to advance productivity gains in areas such as;
- additional liftings, changes to shift arrangements in areas such as track
maintenance, reduced rail cycle times.
- further improvements in lump/fine ratios, shovel loading and truck tonnage
rates.
These changes will lead to lower operating costs and will also allow the
better utilisation of existing infrastructure for higher capital efficiencies.
BHP Iron Ore
------------
BHP Iron Ore is the world's second largest (to CVRD, Brazil) exporter of iron
ore, and Australia's leading producer. In the 1999 financial year, BHP shipped
61.7 million tonnes, valued at A$1.65 billion and EBITDA of A$807 million.
Almost 49% of shipments went to Japanese steelmakers with other major markets
being Korea (14%), China (10%), BHP Steel (11%), Europe (9%) and Taiwan (6%).
Prepared by BHP Investor Relations
----------------------------------
For clarification contact: Dr Robert Porter
Vice President Investor Relations - Melbourne
Tel: +61 3 9609 3540
Mobile: +61 419 587 456
E-mail: porter.robert.r@bhp.com.au
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