THE OIL-CRISIS DESASTER FOR BONG

Quoting from the Bong Mining Co. Technical Information Booklet (1980), "As consequence of drastic rise of energy costs in 1974/75 and further in 1978/79 BMC -mining an extremely low grade crude ore with an ironcontent of only 37% Fe on average- has lost its economic basis as of 1979." Heroic cost cutting measures and increased capital to provide more economic facilities never restored Bong to any worthwhile profitability. A small profit was projected for 1990 but the operation terminated in May 1990 by the civil war. In the 1960s Bunker C Oil could be obtained, often in distressed cargoes on the world market for 3 cents to 4 cents a US gallon. It was around 40 cents at the end of Bong´s life. Power and pellets depended on oil. The loss position of Bong requires some further explanation. The last year of total profitability, meaning covering all direct and indirect costs was 1977 and the most profitable was 1975. In 1978 and 1979 Bong was in a loss position on all costs both direct and indirect.

From 1980 to 1989 revenue from sale of products covered direct operating cost but only a part of depreciation, amortization, interest on borrowed funds and the like. In 1973/74 a minimum royalty was introduced that assured the Liberian Government of some minimum revenue. At the end of the operation the total investment in Bong was US$ 312,600,000. In addition, the European partners took care of the considerable losses of the company by supplying non interst-bearing stockholder loans. In time Bong could have worked its way back to profitability due to what was happening to sinter plants in Germany. These sintering plants were coming under increasing enviromental pressure and in time they might have no alternative but to return to Bong pellets with the possible restarting of pellet plant number one.

Operating Costs for Typical Years

The tables at the end of this section give some typical operating costs. Data for all the years was not available, but the figures should be of much to those readers in the iron ore industry. They show the steady march of inflation. The years shown in the first table have specific reference to the manner in which costs at Bong development. The first full year of production was 1966. In 1974 OPEC started to influence the cost of oil, which continued to 1981. The final year of full production was 1989. Mining costs were affected by increasing haulage distance to the crusher and concentration cost was affected by higher power costs resulting from higher oil prices. Pelletizing costs were held in check by the stabilization of oil prices. Heroic cost cutting efforts were put in place and oil consumption for pellets was reduced from 17 kg/mt to 10 kg/mt.

Tabulation of direct operating cost by major operating unit for various selceted years.

Partial tabulation of operating costs concentrator and pellet plant.


© James V. Thomson and Wolfgang Jacobs