Iron Ore and Energy In The Pilbura

As part of our Laparoundoz i have been pretty keen to get a first hand look at mining operations.

So had a good look at Karratha/Dampier and Port Hedland.

The Pilbara is where we the rubber meets the road so to speak, for Iron Ore, and where Australian makes a large slice of its export dollars, so whats going on here?

The conventional wisdom is that mining is dead, iron ore, oil, copper, any commodity you name is in oversupply, so why bother looking at it. 

But like most things it will cyclical, and the world still need all these commodities, so who will win and who will go broke? 

The share prices of all players are at historical low levels.

The industry here is massive, on the Rio Tinto mine tour at Mt Tom Price, the tour director gave us a few numbers

Rail system has 30 trains each with 30,000  capacity, so if half going to port and half going back 450,000 tonnes heading to port at any one time, travel time 4 to 5 hours.

If you are going to pick winners, Rio seem to have a very efficient operation in the Pilbara, and with most of the infrastructure built, they look  hard to beat.

Rios cost of producing and delivering to port is $23.50 (source Rio Tinto tour director)

with current prices that have risen to around $60, that makes a pretty profitable business. 

Even though they pay their train drivers approx $240k a year and truck drivers $150 k a year.

(Why didn’t I become a train driver, I wanted to when I was 5)

But that is changing, Rio is investing millions in new technology, the new mines  that Rio develop are autonomous, so no truck drivers required. Trains soon will soon all be all autonomous, to efficiency just gets better.

BHP and Fortescue have their rail networks in as well, but seem a bit behind in the technology stakes, but hard to get numbers on.

That leaves a problem for the

Rail Ownership Pilbura

juniors, like Atlas and Mt Gibson.

Although they are lobbying for access to the rail network, the network is already busy, and I don’t imagine the existing players letting them in, 

Rio have lifted production in the last few years , target was to lift from 240 million tonnes to 360 mt, they actually achieved 340 million tonnes, so a great effort.

In the Energy sector, Karratha is Woodsides WPL Home.The new offshore rigs are pretty much unmanned and automatic.

Went to Woodsides visitor centre in Dampier.

Woodsides North West Shelf Projects site, a $34 Billion Investment.

Its massive, and now its running is pumping Gas 24 hrs a day.I have recently bought a few more Woodside shares at just under $30, but they are still a bit underwater.However having seen this project, this will be a cash cow for Woodside WPL for many years, certainly gave me a lot more confidence in them!

So after spending some time here, and if i was going to pick winners, and put some money away for a few years, i think an investment in Rio Tinto RIO for Iron Ore and Woodside WPL for energy, might look a good investment in 5 years time.

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