BHP’s RGP5 decision last year caught many by surprise, given a number of other projects, including Alcoa’s Wagerup expansion in Western Australia, Rio Tinto’s Pilbara plans and Fortescue Metals Group’s growth projects, have been put on hold.The fact BHP is going ahead with RGP5 shows the big Australian’s thoughts on where Chinese demand is going. It is essentially saying that while China seems to have the brakes on at the moment, its demand for iron ore will remain strong in the longer term.RGP5 is a $US4.8 billion investment, which includes a previously approved capital spend of $US930 million.The project will increase the installed capacity of BHP’s Pilbara operations by 50 million tonnes per annum to 205Mtpa. First production from RGP5 is expected to be delivered in the second half of 2011.Most of the production growth will come from the Yandi and Area C operations. It will also deliver infrastructure upgrades including upgrades of additional shipping berths at Finucane Island, substantial double tracking of the company’s rail system and extra crushing, screening and stockpiling facilities at Yandi.The double tracking shows how BHP is thinking. The sort of capacity expansions BHP wants are clearly beyond what its existing rail infrastructure can deliver. To get more means adding extra tracks. Adding extra tracks alongside the existing ones is not a straightforward process. Trains have to be slowed as they pass the track works, which in turn diminishes throughput.This is not a decision to be taken lightly when iron ore prices are high and customers are screaming for tonnes, tonnes, tonnes. Why risk missing out on any of those lucrative tonnes?However, with things a bit quieter but a belief that the demand is going to grow to accommodate an extra 50Mtpa, why not?Macmahon Holdings has been one of the first suppliers to benefit from the RGP5 decision. It has been awarded a $50 million contract for construction work at Port Hedland.The Macmahon work involves preliminary construction work to help dredging at Finucane Island. It includes seawall construction and the placement of 750,000 cubic metres of armour rock; and mew containment ponds for dredge material.
