Fortescue’s $ 900 million cost increase highlights labor shortages

Fortescue Metals Group has revealed a $ 900 million jump in costs in its flagship development of iron ore, highlighting how labor shortages and rising material costs are hitting the Australian mining sector.

The company, one of the world’s largest producers of iron ore, said Friday that its Iron Bridge mine would now cost between $ 3.3-3.5 billion to develop, due to factors including labor constraints, higher material costs and a strong Australian dollar, which had also caused a six-month delay.

The disclosure, part of a review of the project in the Pilbara region of Western Australia, followed the departure of three senior Fortescue executives in February. It marks the second time that costs on the Iron Bridge have skyrocketed, with Fortescue saying in February that the project would cost up to $ 3 billion, in addition to an original estimate of $ 2.6 billion in 2019. Fortescue leads December 2022 for the first production of iron ore in the mine.

Demand for workers in Western Australia is red because of a record rise in iron ore prices, which has encouraged resource groups Rio Tinto, BHP, Fortescue and smaller producers to invest in new mines.

Elizabeth Gains, executive director of Fortescue, said work limitations were primarily an issue for the group’s contractors working on the expansion of the Iron Bridge. Some of these employers are affected by difficulties in the labor movement in Australia due to coronavirus restrictions, he added.

The jump in Fortescue costs has marked the latest in a series of warnings from miners about a lack of manpower due to an iron ore boom and rising costs linked to the closure of international and state borders. of Australia because of Covid-19.

This week, BHP warned on a “lack of critical skills” of train drivers in Pilbara, a remote region that produces the vast majority of Australian iron ore. The world’s largest miner said it was recruiting 200 new train drivers and quickly pursuing staff training in maintenance-focused trades and qualifications.

Last month, Miner Resources Mineral lowered its annual iron ore production forecasts by 13% due to the lack of truck drivers caused by state border closures.

Employment in the resource industry in Western Australia increased from 5 percent to a record 135,001 last year, with investments of A $ 19 billion in the sector. This represented the first annual increase in investment in the mining and oil industry since the end of a previous boom in 2012-2013, according to Western Australian government statistics.

The unemployment rate is 4.8% in Western Australia.

“Pilbara is Australia’s power at the moment, in large part because of the world’s insatiable appetite for our iron ore,” said Michael Stutley, a partner at Kingston Reid, a law firm specializing in use. “The lack of skills has reached a critical level. If nothing is done, then [it] it will turn into a negative deal for the economy. ”

Stutley said Canberra needs to introduce “targeted job bubbles” with other countries to allow skilled workers to enter Australia and support the resource industry.

The Australian Conservative government has said the country’s international border will not reopen until mid-2022.

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