#Official Mining Thread

[Will]

Only $78 million in royalties? That is pathetic, when you take into account the market value of what the mining companies are extracting from OUR land.

These natural resources belong to the people of SA and Australia. I have never understood why the government doesn't own and operate these resources, to ensure that every cent goes to the people.

[Wayno]

Only $78 million in royalties? That is pathetic, when you take into account the market value of what the mining companies are extracting from OUR land.

These natural resources belong to the people of SA and Australia. I have never understood why the government doesn't own and operate these resources, to ensure that every cent goes to the people.

We should note that South Australia (& Australia in general) benefits in a variety of ways beyond royalties:

• * Company Tax: the mining companies pay huge amounts of tax to the Fed Govt
  * Direct Jobs: SA gets more jobs from large mining operations
  * Indirect Jobs: Support industries also grow
  * Housing: each additional family needs to live somewhere and typically spends $400k+ on a house
  * Personal Income Tax: Each person employed at a mine pays heaps of income tax to the Fed Govt
  * Personal Expenditure: More people employed = more general expenditure = more GST revenue for the SA Govt

There's a whole bunch of other peripheral financial benefits to SA (such as people having more cash to buy cars, go on local holidays, buy beer, eat at restaurants, etc...)

Royalties obviously need to be set at an internationally competitive level that encourages industry to invest. In fact the SA Govt is currently offering a "grace" period for new mining ventures - they get a royalty discount that lasts for 5 years. This is quite attractive and is a major reason why we are starting to see the "boom"

But yes i do agree with you - we only get $37 for every ounce of gold produced. This was a fair royalty when gold was worth $400 an ounce, but I believe it should be reviewed given gold is now around $900 an ounce.

[Will]

* Direct Jobs: SA gets more jobs from large mining operations
* Indirect Jobs: Support industries also grow
* Housing: each additional family needs to live somewhere and typically spends $400k+ on a house
* Personal Income Tax: Each person employed at a mine pays heaps of income tax to the Fed Govt
* Personal Expenditure: More people employed = more general expenditure = more GST revenue for the SA Govt[/list]
There's a whole bunch of other peripheral financial benefits to SA (such as people having more cash to buy cars, go on local holidays, buy beer, eat at restaurants, etc...)

But wouldn't these benefits still eventuate if the mines belonged to the state?

[AtD]

But wouldn't these benefits still eventuate if the mines belonged to the state?

First rule of government. The private sector can do everything for half the cost and twice as fast than any government department, as long as there's a profit to be made. The difference in work culture between the two sectors is amazing.

The textbook example is every government enterprise must keep its costs within the annual allocated budget (often regardless of revenue it may generate). If the enterprise is set to exceed the budget, it must cut costs (ie, cut services). If the enterprise beats the budget, it must return the revenue back to treasury. So just before budget season, you’ll find many government executives taking trips to conventions in Europe, because they know if the money isn’t spent, it’s lost.

Cynical, but that’s my experience here in Canberra.

[Will]

But wouldn't these benefits still eventuate if the mines belonged to the state?

First rule of government. The private sector can do everything for half the cost and twice as fast than any government department, as long as there's a profit to be made. The difference in work culture between the two sectors is amazing.

But if the state owned the mines we would get more than $78 million per annum.

[AG]

I tend to agree with the sentiment that the private sector generally does a better job at delivering these projects and services than the government. The government does not have expertise in things such as mining, processing and transportation, something that these companies undertaking these projects do have and can perform far more efficiently than the government ever will.

[AtD]

But if the state owned the mines we would get more than $78 million per annum.

Not necessarily! Governments are not (and never can be) profit maximisers, because there will always be a political lobby group somewhere which will distort the market process. Biggest examples off the top of my head for this case will be the trade unions, the Property Council and the green lobby. The union will lobby for higher wages (public sector wages have always been higher), the construction industry will lobby for lower prices and the greenies will lobby for cut production. Now you have a lower profit margin and a lower volume.

Two million BHP shareholders making $100 million profit is better than a government representing 21 million making $50 million profit. Include the forgone tax from company profits, forgone capital gains tax on shares, foregone future investment in the industry (as government intervention always scares private investors away), and then the forgone future income (and taxes on the income) generated by this investment that never occurred. This is why privatisation is the big thing these days.

[Wayno]

another one...

http://www.news.com.au/adelaidenow/stor ... 01,00.html

AUSTRALIA'S largest zircon mine will be built near Ceduna, heralding a South Australian resources investment surge worth close to $1.8 billion.

Perth mining company Iluka Resources yesterday approved the $420 million project, 200km northwest of Ceduna. The world-class mineral sands mine is expected to create 250 jobs during construction and will employ about 120 people during its 10-year life.
The approval signals the start of a chain of mine openings, capped by the $1 billion Prominent Hill copper and gold mine, where construction is in full swing and production is due to start late this year.

Terramin Australia's $70 million lead/zinc mine at Strathalbyn is due to start production in June, while the Mindarie mineral sands mine in the state's east, developed at a cost of $110 million, exported its first concentrates in January.

Hillgrove Resources' $130 million copper and gold mine in the Adelaide Hills was approved in December and is expected to start exports in the middle of next year.

Acting premier Kevin Foley said Iluka's decision to go ahead with its mine was "the latest in a steady roll call of mining projects that have been given the green light in South Australia".

The Honeymoon uranium mine near Broken Hill also was expected to start production this year but this week its owner, Uranium One, said it would be on hold while a partner was found to develop the project.

A decision from BHP Billiton on the go-ahead of the expansion of Olympic Dam – at a rumoured cost of at least $20 billion – also was expected next year.

In 2001, SA had only four operating mines – Olympic Dam, the Leigh Creek coal mine, the Beverley uranium mine and OneSteel's iron mine at Whyalla.

The number will have more than doubled by the end of this year. More than 30 are in planning or development stages.

SA, however, still is dwarfed by Western Australia and Queensland, which, in 2005-06, contributed a combined 72 per cent of the nation's $91.8 billion in minerals produced, Australian Bureau of Statistics show.

"If the question is are we in a mining boom . . . I really don't think we'll be in that position until some time in 2009," SA Chamber of Mines chief executive Jason Kuchel said. He welcomed Iluka's move and said it highlighted the state as an attractive place to invest.
Mineral Resources Development Minister Paul Holloway said the Iluka mine was expected to contribute about 3 to 5 per cent of the Strategic Plan target of increasing mineral production to $3 billion-a-year by 2014.

Iluka said the mine was expected to start production in early 2010 and run for at least 10 years. Exploration could extend mining "well beyond 2020".

Iluka expects to be granted a mining lease and have its mining and rehabilitation plan approved by the State Government in the second half of this year. The mineral sands contain zircon, used in ceramics and paint pigments, and rutile and ilmenite.

The site, known as Jacinth-Ambrosia, touches on the Yellabinna and Nullarbor reserves.

In its mining lease application, Iluka acknowledges "environmental issues will be the biggest concern to the community".

The company pledges those issues will be "addressed and managed" and, after the mine is exhausted, the site will be "in a condition suitable for ongoing biodiversity conservation, visitor use and enjoyment".

Iluka's South Australian general manager, Hans Umlauff, said the project was world-class. It is "one of the most significant zircon developments globally in many decades," he said.

He said the company had received strong support from the State Government, Ceduna District Council and Eyre Regional Development Board.

The mineral sands lie 8m to 15m below the surface in two deposits 5km long by 900m wide. Collected by bulldozer, they will be fed through a concentrator plant then trucked to Ceduna and exported from Thevenard to Geraldton in WA for processing. Iluka will upgrade the road to Ceduna and build a storage facility at Thevenard.

I agree that SA is still (frustratingly) pre-boom, with probably 12-18 months before production really starts to ramp up...

[monotonehell]

I agree that SA is still (frustratingly) pre-boom, with probably 12-18 months before production really starts to ramp up...

Considering the overburden involved in contemporary mining I'm unsurprised. (All the alluvial and near surface stuff has been long found we're now digging deeper and bigger holes)

[skyliner]

another one...

http://www.news.com.au/adelaidenow/stor ... 01,00.html

AUSTRALIA'S largest zircon mine will be built near Ceduna, heralding a South Australian resources investment surge worth close to $1.8 billion.

Perth mining company Iluka Resources yesterday approved the $420 million project, 200km northwest of Ceduna. The world-class mineral sands mine is expected to create 250 jobs during construction and will employ about 120 people during its 10-year life.
The approval signals the start of a chain of mine openings, capped by the $1 billion Prominent Hill copper and gold mine, where construction is in full swing and production is due to start late this year.

Terramin Australia's $70 million lead/zinc mine at Strathalbyn is due to start production in June, while the Mindarie mineral sands mine in the state's east, developed at a cost of $110 million, exported its first concentrates in January.

Hillgrove Resources' $130 million copper and gold mine in the Adelaide Hills was approved in December and is expected to start exports in the middle of next year.

Acting premier Kevin Foley said Iluka's decision to go ahead with its mine was "the latest in a steady roll call of mining projects that have been given the green light in South Australia".

The Honeymoon uranium mine near Broken Hill also was expected to start production this year but this week its owner, Uranium One, said it would be on hold while a partner was found to develop the project.

A decision from BHP Billiton on the go-ahead of the expansion of Olympic Dam – at a rumoured cost of at least $20 billion – also was expected next year.

In 2001, SA had only four operating mines – Olympic Dam, the Leigh Creek coal mine, the Beverley uranium mine and OneSteel's iron mine at Whyalla.

The number will have more than doubled by the end of this year. More than 30 are in planning or development stages.

SA, however, still is dwarfed by Western Australia and Queensland, which, in 2005-06, contributed a combined 72 per cent of the nation's $91.8 billion in minerals produced, Australian Bureau of Statistics show.

"If the question is are we in a mining boom . . . I really don't think we'll be in that position until some time in 2009," SA Chamber of Mines chief executive Jason Kuchel said. He welcomed Iluka's move and said it highlighted the state as an attractive place to invest.
Mineral Resources Development Minister Paul Holloway said the Iluka mine was expected to contribute about 3 to 5 per cent of the Strategic Plan target of increasing mineral production to $3 billion-a-year by 2014.

Iluka said the mine was expected to start production in early 2010 and run for at least 10 years. Exploration could extend mining "well beyond 2020".

Iluka expects to be granted a mining lease and have its mining and rehabilitation plan approved by the State Government in the second half of this year. The mineral sands contain zircon, used in ceramics and paint pigments, and rutile and ilmenite.

The site, known as Jacinth-Ambrosia, touches on the Yellabinna and Nullarbor reserves.

In its mining lease application, Iluka acknowledges "environmental issues will be the biggest concern to the community".

The company pledges those issues will be "addressed and managed" and, after the mine is exhausted, the site will be "in a condition suitable for ongoing biodiversity conservation, visitor use and enjoyment".

Iluka's South Australian general manager, Hans Umlauff, said the project was world-class. It is "one of the most significant zircon developments globally in many decades," he said.

He said the company had received strong support from the State Government, Ceduna District Council and Eyre Regional Development Board.

The mineral sands lie 8m to 15m below the surface in two deposits 5km long by 900m wide. Collected by bulldozer, they will be fed through a concentrator plant then trucked to Ceduna and exported from Thevenard to Geraldton in WA for processing. Iluka will upgrade the road to Ceduna and build a storage facility at Thevenard.

I agree that SA is still (frustratingly) pre-boom, with probably 12-18 months before production really starts to ramp up...

Again, very useful, informative and encouraging Wayno.

I agree with your sentiments exactly - everything I have read indicates the same once the hype is uncovered - still, all things considered, all info concerning future SA prospects are VERY positive in mining. There is no guessing or tentative info anymore that I have seen for some time. BRW and even real estate mags are saying the same for SA. VERY VERY positive with accellerated inmprovement in state economics overall as a result. (from a smaller base level than WA and QLD for the moment).

Can hardly wait for it all to really kick in!

SA - STATE ON THE MOVE

[UrbanSG]

Prominent Hill seems to be our true start to the mining boom. Once it starts producing towards the end of this year our 'boom' should start to kick in. This is an article from the Herald Sun:

Oxiana find 'much bigger'
Christopher Russell

May 24, 2008 12:00am
OXIANA has yet to find the outer edges of its copper-gold deposit at Prominent Hill in South Australia.

"We cannot find the extent of it laterally," Oxiana managing director Owen Hegarty said yesterday.

Drilling was continuing east and west of the open pit that is under construction.

"We used to think of this as a vertical ore body. We now think the ore body is much, much bigger than that," Mr Hegarty told an SA Chamber of Mines and Energy lunch.

"So watch this space for further resource increases."

Oxiana's formal estimates have been that the site contains 1.9 million tonnes of copper and 3.7 million ounces of gold.

"But we're still counting on a daily basis up there (as exploration continues)," Mr Hegarty said.

However, Oxiana shares lost 9 or 2.6 per cent yesterday to $3.33.

First production from the $1.08 billion Prominent Hill project is due to begin in mid-November.

The open pit is expected to have a 10-year life, after which the mine will go underground - taking it through to at least 2030, perhaps longer.

Mr Hegarty said that, as well as failing to find lateral limits, "we haven't found the bottom of this ore body yet."

Infrastructure at Prominent Hill is 80 per cent complete and the processing plant 40-45 per cent done.

The ore will be exported as a concentrate, railed via Darwin, mostly to smelters in China and India.

Asked how it was that Oxiana seemed to have avoided any debate on value-adding beyond the concentrate stage - in contrast to BHP Billiton attracting political flak for a similar proposal in relation to the Olympic Dam expansion - Mr Hegarty said the product would be at "very saleable" concentrations.

[Wayno]

Oxiana find 'much bigger'
<snip>
Asked how it was that Oxiana seemed to have avoided any debate on value-adding beyond the concentrate stage - in contrast to BHP Billiton attracting political flak for a similar proposal in relation to the Olympic Dam expansion - Mr Hegarty said the product would be at "very saleable" concentrations.

what does "very saleable" mean? are they saying the concentration of in-ground CU/AU is so dense that the mere royalties will be more than enough to satisfy the SA Govt? I hope that's the case - chaching!

[rhino]

I wish they would do the processing on site. I would love to have another new boom town up in the desert to buy real estate in!

[Wayno]

From PIR website, another piece of good news...

HUGE MINING INVESTMENT TO BOOST STATE
Wednesday 21 May 2008

Acting Premier Kevin Foley says the decision by the board of Iluka Resources to invest $420 million in developing the Jacinth-Ambrosia project, north-west of Ceduna, will provide a major boost to the South Australian economy.

Mr Foley welcomed the approval by the Iluka board of the investment in the heavy mineral sands project, the first step toward tapping the enormous mineral wealth of the Eucla Basin.

“Today’s announcement by Iluka Resources is further evidence of how the unprecedented surge in mineral resources exploration in South Australia can be successfully translated into new mining operations,” Mr Foley says.

“Jacinth-Ambrosia is just the latest in a steady roll call of mining projects that have been given the green light in South Australia.

“The renewed confidence resource companies have to invest in this State is due in no small measure to the Rann Labor Government’s very tangible support for mineral exploration.”

Minister for Mineral Resources Development Paul Holloway says he is heartened by Iluka’s confidence that further discoveries of mineral sands are likely to be made within its tenement holding of more than 52,000 square kilometres in the Eucla Basin.

“Iluka’s decision to go ahead with a $420 million capital investment in this project confirms that the centre of mineral sands industry in Australia is about to shift to South Australia,” Mr Holloway says.

“New projects, such as Jacinth-Ambrosia and the potential for other discoveries within the Eucla Basin, send a strong signal that South Australia will eventually take over from Western Australia as the country’s major source of mineral sands.”

Subject to the necessary regulatory approvals, Iluka plans to begin mining and shipping heavy mineral concentrate from South Australia by the end of first quarter in 2010.

The project is estimated to contribute about 3-5% of the South Australian Strategic Plan target of increasing mineral production to $3 billion by 2014.

Investment by Australian Stock Exchange-listed Iluka Resources in the mineral sands project will create up to 250 jobs during the construction phase of the project.

A large percentage of these positions are to be filled locally including opportunities for indigenous workers.

Iluka Resources expects to create 110 permanent jobs during the operation of the mine.

The Jacinth-Ambrosia deposits are expected to produce an estimated 2.9 million tonnes of recoverable zircon during the estimated 10-year life of the mine.

Iluka expects to sustain annual production of about 300,000 tonnes of zircon from the Jacinth deposit from the first full year of operation in 2011 until 2014.

Zircon is primarily used for its high temperature resistance and offers great resistance to chemical attack. The resource is mainly used in the ceramics and refractories industries.

Mr Holloway says the go-ahead for investment in the Jacinth-Ambrosia project underlines the success of the Rann Government’s Plan for Accelerating Exploration, or PACE, initiative.

PACE was introduced in July 2004 and has contributed to a large upsurge in mining exploration, which has led to many new potential developments such as Jacinth-Ambrosia.

The funding provided through PACE has helped exceed the goal for mineral exploration spending set out in South Australia’s Strategic Plan.

Expenditure in mining exploration in South Australia reached a record $331 million in 2007, more than triple the $100 million target set out in State’s Strategic Plan.

[Wayno]

MINING TENEMENT RENTS & PRODUCTION ROYALTIES

Here's how the SA Govt collects fees from mining companies

Mining Rents
* Annual rental of a Mining Lease/Extractive Mining Lease (per hectare) $31.25 (Minimum rental $81.00)
* Annual rental of a Retention Lease (per hectare) $15.80 (Minimum rent $81.00)
* Annual rental of a Miscellaneous Purposes Licence (per hectare) $15.80 (Minimum rent $72.50)
* Annual fee of an Exploration Licence (per square kilometre) $6.15 (Minimum fee $318.00)

Royalties - Existing Mines
The royalty is equivalent to 3.5%. The value of the minerals will be the ex-mine gate value that fairly represents the market value (excluding GST) of the minerals at the time that the minerals leave the area of:
* the mining tenement from which the minerals were recovered; or
* if the minerals have been transported to a miscellaneous purposes licence, that licence.

Royalties - New Mines
A company may apply for ‘New Mine Status’ for their newly-approved mining lease. The Minister may, by notice in the Gazette, declare that a mine will be taken to be a 'new mine'. For the period of 5 years royalty payable will be equivalent to 1.5 per cent of the value of the minerals.

Obviously a BIG reason for the ramp up in exploration across SA is the huge discount to the standard royalty rate for new mines - and quite a substantial discount it is given the size/scale of the mines being discovered!