(Bloomberg) -- BHP Billiton Ltd. approved the $2.9 billion development of its South Flank iron ore project in Western Australia to replace existing mines.
The world's biggest mining company expects production to start in 2021 at the project, which is intended to replace depleting mines rather than adding new supply, BHP said in a statement Thursday.
The development of South Flank will help BHP increase the quality of its iron ore at a time when high-grade material is selling at a premium. China's unprecedented steps to reduce pollution have increased the cost of iron ore as mills seek more efficient grades, which means they need less of the material to make the same amount of steel.
South Flank will help increase the company's overall iron ore grade to 62 percent from 61 percent. BHP does not have the higher-grade ores of its rivals Vale SA and Rio Tinto Group. While the global market is well supplied, BHP says it has yet to hit its peak and the company expects to reach an annual output record in the year to July. It plans to lift output to 290 million tons by mid-2019.
South Flank could produce as much as 80 million tons a year if approved and would replace the Yandi mine once it's depleted.
To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Liezel Hill, Alex Devine
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