#Official Mining Thread

[Wayno]

We all knew this was coming. 46 month extension request. Just hope the Govt gets a decent interim spend commitment (in SA for the benefit of SA) from BHP, not just their own spend on getting their new 'heap leaching' technology right. Also maybe an increase on royalty payments once ODX finally expands. Oh, and a new office tower please - 40 storeys will suffice

BHP Billiton promise puts SA Government in hot seat

BHP BILLITON has promised to spend hundreds of millions of dollars over four years to get its planning right for its Olympic Dam mine expansion.

The mining giant yesterday formally asked the State Government to grant an extension to the agreement covering the expansion.

That puts pressure on the Government again to clear the way for BHP despite being hurt by the "disappointing" decision last month to defer the project indefinitely.

Mineral Resources and Energy Minister Tom Koutsantonis said the request meant BHP was serious about staying in South Australia and developing that mine.

"What they are debating is how they will do that and how much it will cost," he said.

"What you are seeing is BHP saying they have very deep roots in SA."

The indenture agreement, which was ratified by Parliament last year, is due to expire on December 15.

BHP last month said it would not meet the deadline as the capital costs were too high and it was going back to the drawing board to work out a more cost-effective system of expanding the copper, gold and uranium mine near Roxby Downs.

Yesterday, BHP asked for an extension to October 2016 - the first time a target date has been announced for completing the revised plans.

The date coincides with the expiration of federal approvals and Mr Koutsantonis said BHP had told him they were confident of being ready to go back to the BHP Billiton board by then.

Mr Koutsantonis and officials from the premier's office - but not Premier Jay Weatherill himself - met BHP's head of operations in SA, Dean Dalla Valle.

After the August deferral, Mr Weatherill said if BHP wanted an extension, it would need to seek permission from the community, which would be "very wary" of the miner because it had disappointed SA.

Yesterday, he took a more conciliatory approach.

"Although we remain disappointed by BHP's decision to put off the expansion, this confirms the company is committed to the project in the longer term," he said.

Mr Koutsantonis said the Government would take BHP's request seriously and give it due diligence.

"I won't make any comment about whether we will accept that request or not other to say I'll be carefully considering it," he said.

BHP had told him they expected to spend hundreds of millions of dollars advancing the project which would involve extracting the minerals by leaching them out of crushed ore.

This would be similar to, but more complex than, the systems used at BHP mines in Chile.

Mr Koutsantonis has authority to sign off an extension on his own, subject to it appearing in the parliamentary papers for 10 sitting days, when a move could be made to disallow it.

However, he said, he would consult Cabinet, the Opposition Leader and the Opposition resources spokesman as well as seeking crown law advice.

He may choose to take an extension request back to parliamentary debate or decide existing approvals are adequate and simply grant an extension.

In August, BHP cut back its design team from 190 to 50.

Mr Koutsantonis said much of the new work would involve university researchers rather than BHP employees directly.

BHP does not comment on financial projections for projects it has not approved.

However, BHP vice-president of external affairs Kym Winter-Dewhirst said it had given the minister an overview of how the project would proceed.

"The 46-month timing of the request is because we need to complete trials of heap-leach technology," he said.

BHP Billiton spent hundreds of millions of dollars and more than five years on environmental impact statements relating to the potential expansion of Olympic Dam.

In October, 2011, the expansion was awarded state and federal development approval with stringent conditions. In December that year the Indenture Act - an Act of state Parliament - ratified the approvals, but had a strict one year timeline for BHP to approve the new mine.

In August BHP announced the expansion would be indefinitely delayed.

WHY THE GOVERNMENT SHOULD SAY YES

Extending the current Indenture Act will save millions of dollars and shave years off any potential expansion which might still go ahead.

WHY THE GOVERNMENT SHOULD SAY NO

BHP has indicated it is looking at a vastly different mining proposal, which might have very different environmental impacts.

THE POLITICS

If Labor says yes - without securing new guarantees - they'll be portrayed as a weak party which is at the mercy of BHP. If they say no they'll be labelled "anti-development".

[Waewick]

they need to claw back something from the debacle.

[Will]

It is fascinating that despite what happened just a few weeks ago, the government has not learnt anything from it, and is now trying once again to put positive spin on Olympic Dam.

And regarding what the government should do, I think an outright yes or an outright no would send very bad signals. I beleive the government should say yes, but on a number of conditions, such as increasing the royalty rate by say 0.5% to 1% every year major works are delayed after December 2012. Furthermore, the government should seriously put pressure on BHP to move their world base metals HQ from Chile to Adelaide.

[Waewick]

agreed Will, they need to something that at least looks like bargaining rather than being too easy/too hard.

[paul]

Furthermore, the government should seriously put pressure on BHP to move their world base metals HQ from Chile to Adelaide.

I couldn't agree more with this comment. As it is, too often SA resources projects are run out of an interstate office or at best, have a token Adelaide office run by some B grade exec.

[Waewick]

Weatherill's 'outrageous' mining vision for SA as a fly-in, fly-out worker hub for nation
adelaidenow
October 03, 20127:43PM

PREMIER Jay Weatherill today outlined an "outrageously ambitious objective" to make South Australia the nation's fly-in, fly-out mining services hub - then challenged the mining industry to tell him how to do it and who would pay for it.

Mr Weatherill raised the vision at the Premier's Round Table Forum on the Minerals and Resources Industries, which he promised in the wake of BHP Billiton deferring the expansion of the Olympic Dam project.

About 100 mining industry leaders, unionists, lobbyists and politicians attended the forum at which Mr Weatherill outlined a glowingly positive future for mining.

And he noted BHP Billiton's deferral of the Olympic Dam mine expansion has "significant advantage" in limiting competition for skills for other smaller projects, which combined are bigger than the Dam project.

Mr Weatherill said SA's affordability, liveability and available skills base made it an ideal site for a national mining skills hub where people could fly to projects in WA and Queensland - even overseas.

"The possibilities for the state are enormous but we are limited by our own imaginations from exploiting them," Mr Weatherill said.

Mr Weatherill took the audience through the seven strategies he outlined when he took over as Premier and noted the state has the world's biggest uranium and copper mines.

"We need to make ourselves the mining services hub for the nation," he said. "It is an outrageously ambitious objective but it is already happening in part."

Outside the meeting, South Australian Mines and Energy chief executive Jason Kuchel said top of their wish list was a bulk commodities port for iron ore exports to encourage mining development, but Flinders Ports chief executive Vincent Tremaine said such investment could not be justified on existing volume - a situation other attendees likened to the chicken and the egg syndrome.

Other speakers at the forum variously noted that regardless of the BHP decision, mining exploration has risen 10-fold in the past two decades to be worth $330 million a year, mining production had tripled since 2004 to $6 billion a year and in the same period mineral exports had soared from 13 per cent to 40 per cent of State exports with 20 operational mines, 27 in approval stages and 90 in the pipeline.

I love the idea of Weatherill idea (well I think it is an idea that many many people have had)


But it needs to be perused a lot more.

[SRW]

Other speakers at the forum variously noted that regardless of the BHP decision, mining exploration has risen 10-fold in the past two decades to be worth $330 million a year, mining production had tripled since 2004 to $6 billion a year and in the same period mineral exports had soared from 13 per cent to 40 per cent of State exports with 20 operational mines, 27 in approval stages and 90 in the pipeline.

Fabulous bit of perspective there.

[Wayno]

yep, truly a chicken & egg situation.

Outside the meeting, South Australian Mines and Energy chief executive Jason Kuchel said top of their wish list was a bulk commodities port for iron ore exports to encourage mining development, but Flinders Ports chief executive Vincent Tremaine said such investment could not be justified on existing volume - a situation other attendees likened to the chicken and the egg syndrome.

[Waewick]

I guess from an economic development situation, isn't that the point of a Government? to fix the chicken and egg situation (obviously with a sound cost benefit ratio)

[Wayno]

yes but, not but, yes but...What if the State Govt (via our taxes) invested mega-millions of dollars in mining infrastructure (e.g. ports) and no-one came (due to economic & other issues beyond our control)?

The State Govt already has a truly excellent program in place (PACE) to attract mining investment. It's been very successful, but not enough to overcome some of the challenges unique to SA (e.g much of SA's geology is quite tricky from a 'dig it up and ship it out' perspective - look no further than ODX for a classic example, the mother lode is buried deep deep underground).

I'm sure the govt has looked at the infrastructure need from every angle. The latest angle (being pushed by Weatherill) is to make SA the hub for mining 'services' related industries. This means industry that could be located near Adelaide and SA regional towns. Examples of services companies include Leighton, Downer EDI and Macmahon and others who provide plant & equipment, tooling, novel approaches to mine accommodation, civil engineering, training, etc. The services industry doesn't sit in the limelight, but still accounts for something like 0.5% of Australian GDP and 30,000 jobs. I'm not sure how many mining services jobs currently exist in SA, but i bet it's small and can grow with govt assistance.

[Wayno]

Not surprises here, move along...

BHP Billiton gets extension to indenture agreement with South Australian Government for billion-dollar Olympic Dam expansion to 2016

THE SA Government has granted BHP Billiton another four years to decide if it wants to spend billions to expand its Olympic Dam mine in the state's Far North.

The government today granted an extension to the indenture agreement to October 10, 2016.

BHP Billiton has agreed to spend $650 million during the research phase of the project. Of this, $110 million has been committed to community-related activities.

In August, BHP announced plans to shelve the $30 billion expansion of the copper, uranium and gold project in SA's north due to high capital costs.

BHP's agreement expires on December 15, and the miner had requested for the extension in September this year.

At the time Mineral Resources and Energy Minister Tom Koutsantonis had said he was "carefully considering the request".

But Mr Koutsantonis said he believed the extension request meant BHP was saying they had very deep roots in South Australia and were not going anywhere.

BHP sought an extension to October 10, 2016 and suggested a lower-cost alternative to the proposed expansion set out in the company's environmental impact statement.

[Wayno]

Ok, so BHP appear serious about hanging around in SA.

BHP to splurge $650m on the state
A MARINE research institute, support programs for South Australian companies and an arid-land nature corridor will be established as part of the deal between BHP Billiton and the State Government to extend approvals for expanding Olympic Dam for another four years.

The initiatives will flow from $110 million the miner will invest in the community as part of a $650 million package aimed at giving the expansion the best chance of going ahead, BHP said yesterday.

Premier Jay Weatherill, who in August said South Australians must be "wary" of BHP, said yesterday he was convinced the company had "recommitted itself to South Australia" and approvals would be extended to 2016.

"This package of measures, this $650 million package which is about jobs now and jobs in the future, will go a long way to restoring SA's confidence in BHP," he said.

BHP Billiton chief executive Marius Kloppers said he could not guarantee the expansion would go ahead. However, the company was working hard to make its numbers work.

"We're committing over half a billion dollars for new technology in order to do so," he said. "We wouldn't be doing so if we weren't very serious about trying to make this a reality."

The spending commitment is in addition to $US1.2 billion BHP allocated earlier for advance work, principally orders for mining trucks and equipment, accommodation and early site works.

Most of the new cash, $540 million, will be spent proving up mining and processing techniques, which BHP believes will be more cost-effective than its earlier plans for the copper, uranium and gold mine.

BHP has contracted metallurgical research in Adelaide and will start digging at Olympic Dam for on-site trials but could spend some of the research money outside SA.

In mid-August, the BHP board decided the economics of the expansion as earlier envisaged did not stack up and it needed to go back to the drawing board and could not begin work by the indenture agreement's December 15 deadline.

Mr Weatherill said the Government accepted BHP needed an extension.

"The world-class resource at Olympic Dam will be unlocked, but on a longer time line," he said. "There is no doubt this is a world-class ore body. There is no doubt they want to develop this resource."

Opposition Leader Isobel Redmond said the extension was "good news for SA" but she highlighted government comments - made before BHP deferred the project - that an extension was unlikely to be justified.

[skyliner]

Not exactly surprised at any of this. I made this comment weeks ago based on wasted investment if BHP did nothing with OD. Very happy about this needless to say. SA does not need an economic scenario like with the State Bank and Myer years ago.

ADELAIDE - TOWARDS A GREATER CITY SKYLINE

[Will]

From the Advertiser:

SA's mining and energy sector providing a path to prosperity

Business Editor Christopher Russell

November 27, 201212:00AM

IT may come as a shock to the "it'll never happen in South Australia" brigade but the mining and energy sector in this state is continuing to grow.

Oil and gas companies will spend about $1 billion on exploration in the Cooper Basin as the race for lucrative shale gas supply speeds up, Beach Energy estimates.

Next month, Arrium will be delivering iron ore from its new Peculiar Knob mine near Coober Pedy to the redeveloped wharf at Whyalla.

Rex Minerals has completed its pre-feasibility study on building a $900 million Hillside copper mine near Ardrossan on Yorke Peninsula.

Early next year, OZ Minerals will start building a 6km to 7km underground decline to get rigs close to its Carrapateena ore body.

Centrex Metals is expecting to get environmental clearance for Port Spencer, near Tumby Bay, within weeks, putting in place a crucial piece of its plan to develop a string of iron mines on Eyre Peninsula.

Then of course there is the elephant of the Outback, if not the room, Olympic Dam, where BHP Billiton this month pledged to spend an additional $650 million over the next four years to have another go at getting at the trillion-dollar lode.

Welcome to the first SA Business Journal special quarterly report on mining and energy. It is clear from the snapshot of some of the resources and services companies whose stories are reported here that the industry has growing momentum.

This includes not only activity at the mining sites but, importantly, a network of service providers in Adelaide and regional centres.

South Australia is also a leader in research, development and training, with close co-operation between industry and academia.

Of course, there have been setbacks in the wake of the commodity price falls and the tightening financial markets - most notably the deferral of the expansion of Olympic Dam because of high costs.

Last week, Minotaur chairman Derek Carter warned that many junior resources companies are facing a financial squeeze.

On the same day, OZ Minerals managing director Terry Burgess said mining companies had been paying too much for labour and contractors and the situation was unsustainable.

Saying you were mining copper was like telling people you were organising a wedding - the service providers simply layered on extra margins because they knew you would pay.

Those days of easy money coming and going from miners chasing the boom are over and there will be a shake-out.

But the diversity, resilience and professionalism of this state's mining and energy sector continues to offer a path to prosperity that can and will be shared by the community.

[rhino]

Good, positive article. Thanks for posting it.