It is not easy to reduce the supply chain costs for the resources such as iron ore and coal right now because all mining companies have already tried hard to minimise the supply chain costs and there is no much room left to reduce the cost.
However, a new concept sometime delivers a big development. Here is an example to show how the new concept potentially reduces the supply chain cost.
According to the Australian Financial Review today, Rich-lister Chris Ellison's firm Mineral Resources claims the track for its proposed Bulk Ore Transport System (BOTS) is about 75 per cent cheaper to develop than a traditional heavy-haul Pilbara rail line.
The first BOTS is slated to be built at BC Iron's 12 million tonne-a-year Iron Valley mine, where savings of $20 a tonne are expected.
The system's patent lies in the way its wagons are "driven", but the cost savings are found through the use of an elevated track, which the company claims is about 75 per cent cheaper to develop than a traditional heavy-haul Pilbara rail line. Because the supporting posts are pole-driven, the track does not require expensive earthworks or ballast and will stand as high as 10 metres, allowing it to pass over waterways or existing infrastructure. Each BOTS "train" is expected to be 2 kilometres long, travel at about 80 kilometres an hour and have the capacity to haul 4600 tonnes. In comparison, a traditional Pilbara train has a payload capacity of about 25,000 tonnes.
After a test line is built in China by China Southern Rail later this year, the first Australian BOTS line will be developed, pending approvals, from BC Iron's Iron Valley mine, which Mineral Resources operates, to Port Hedland port. Mr Ellison said the 331-kilometre line is expected to cost $1.5 billion to develop "from womb to tomb", including the track, supporting facilities, rolling stock and a proposed transhipping facility at the port.
When BOTS was announced in February, analysts approached it with caution. A month later, many remain unwilling to comment on the quirky proposal, as it is still unclear whether it is technically and financially viable.
Perth-based Katana Asset Management portfolio manager Romano Sala Tenna said if Mineral Resources can get BOTS off the ground, it will be "a game-changer" for the industry, but its viability hangs on whether the company can secure the necessary funds.
Subscribe to our English Newsletter