The BHP Group Ltd (ASX: BHP) share price is up around 0.5% after the news that the resources giant has found a way to extend the life of its Yandi iron ore mine.
BHP is one of the world's largest iron ore miners, so being able to extend one of its iron mines could be useful.
How is BHP extending the life of its mine?
It is being reported by the Australian Financial Review that the Yandi mine's life can be extended by at least five years.
Previously, it had told investors that this mine would come to the end of its life in 2021.
Why is this mine so important? Asian steelmakers reportedly like it because of the low levels of impurities like aluminia.
It has long been practice for mining businesses to use hyperspectral imaging to determine the value of samples.
But, the AFR has reported that BHP's iron ore division has made algorithms that can read the hyperspectral images to find which parts of the Yandi geology would be most easily processed by its processing plants that sort Yandi's saleable iron ore from the unwanted material.
A few years ago, Yandi's processing plants started experiencing extra clay and moisture from the bottom of the mine.
Iron plays the major role in BHP's profit, which is an important influencer on the BHP share price.
The AFR quoted the Yandi general manager, Mr Heal, who said:
At the end of the mine life, you have dealt with most of what you believe is the good material and you are left with the leftovers.
Three or four years ago we started to see those problems emerge in our [Yandi processing] plant and it was impacting our throughput because of the constant need to clean up spillage and blockages. Things that would require us to stop the plant, clean it up, hose it out.
Through the application of this index and some smarter ways of doing mine planning and scheduling, instead of having a natural decline at the end of our mine life, the last two years have actually been record years for Yandi because we have cracked this problem.
How much iron ore will it be able to produce?
It was acknowledged that future production volume from Yandi may be around 25% of the 68 million tonnes produced in the year to 30 June. However, it's possible that BHP may be able to get more than five years of life out of the mine. This could help the BHP share price.
Overall, in FY22 BHP is expecting that it's going to produce between 249 mt to 259 mt of iron ore. That would be a range of between a 2% drop to a 2% rise compared to FY21. In FY21 it produced 254 mt (up 2% on FY20). In FY20 it did 248 mt of iron ore production.
Is iron ore an important part of the future?
BHP said that after its investment in its potash project called Jansen, the proposed separation of petroleum and exit of its non-core coal assets, BHP will be focused on high-quality iron ore and metallurgical coal for the steel that is needed for infrastructure including for renewable energy, copper to support unprecedented demand for renewable energy, nickel for batteries and potash to make food production and land use more efficient.
