#Official Mining Thread

[Howie]

Santos and Petronas do some tag team action on LNG project.

Petronas to buy 40% in Santos LNG project
India Infoline News Service / Mumbai May 29, 2008 10:55
Petronas will make an initial cash payment of US$2bn, plus a further US$500mn once the partners decide to build a second LNG processing unit

Australia's Santos said on Thursday it has selected Malaysia's Petronas as a partner in its proposed liquefied natural gas (LNG) development in Gladstone in the state of Queensland. State-owned Petronas will pay US$2.5bn for a 40% stake in the project, Santos told the Australian Stock Exchange.

Petronas, Asia's biggest LNG producer, will make an initial cash payment of US$2bn, plus a further US $500mn once the partners decide to build a second LNG processing unit, Adelaide-based Santos said.

Santos will remain as operator and own the rest of the A$7.7bn (US$7.4bn) project. The Gladstone LNG project will have an initial capacity of at least three million metric tons a year, with first shipments scheduled for early 2014.

Australia's third-biggest oil and gas producer said in April it was in talks with a number of potential partners for the Gladstone LNG venture that will be one of the first worldwide to use coal-seam gas as a fuel.

Santos gained as much as A$2.76, or 15%, to a record A$21.74 in Sydney trading at 2:03 p.m. local time.

[Wayno]

Santos and Petronas do some tag team action on LNG project.

Petronas to buy 40% in Santos LNG project
India Infoline News Service / Mumbai May 29, 2008 10:55
Petronas will make an initial cash payment of US$2bn, plus a further US$500mn once the partners decide to build a second LNG processing unit

Australia's Santos said on Thursday it has selected Malaysia's Petronas as a partner in its proposed liquefied natural gas (LNG) development in Gladstone in the state of Queensland. State-owned Petronas will pay US$2.5bn for a 40% stake in the project, Santos told the Australian Stock Exchange.

Petronas, Asia's biggest LNG producer, will make an initial cash payment of US$2bn, plus a further US $500mn once the partners decide to build a second LNG processing unit, Adelaide-based Santos said.

Santos will remain as operator and own the rest of the A$7.7bn (US$7.4bn) project. The Gladstone LNG project will have an initial capacity of at least three million metric tons a year, with first shipments scheduled for early 2014.

Australia's third-biggest oil and gas producer said in April it was in talks with a number of potential partners for the Gladstone LNG venture that will be one of the first worldwide to use coal-seam gas as a fuel.

Santos gained as much as A$2.76, or 15%, to a record A$21.74 in Sydney trading at 2:03 p.m. local time.

this is great for Santos, but unfortunately it's an LNG project in Queensland so more jobs and royalties for them...

[UrbanSG]

I wish BHP would hurry up. The huge scale and current proposed merger with Rio keep holding this one up. It really is the single most important project for SA, we need more details (hopefully something before the end of the year as BHP are suggesting) Article from Bloomberg.com:

BHP Says Labor, Tool Shortages Strain Olympic Dam (Update2)

By Rebecca Keenan

BHP Billiton Ltd., the world's biggest mining company, said labor and equipment shortages forced it to stagger the proposed expansion of Australia's Olympic Dam uranium, copper and gold mine, forecast to cost at least $6 billion.

``Doing it all in one go in this kind of environment would be very difficult if not impossible to execute,'' Graeme Hunt, the Melbourne-based company's president for uranium and development of Olympic Dam, said in an interview. BHP said in December the expansion will be undertaken in at least four stages.

A global mining boom has stoked competition for skilled workers and raised prices for equipment and contractors at a time of record fuel costs. The development cost of Olympic Dam, the world's biggest uranium deposit and fourth-largest copper lode, may rise threefold to as much as $15 billion, according to estimates last year by Merrill Lynch & Co. and JPMorgan Chase & Co.

``They have to factor in a much higher number for labor and skills shortages,'' Michael McCormick, who helps manage about $155 million at Leyland Private Asset Management in Sydney, said by phone. ``It is very important for their growth profile to be able to get the expansion done with costs relatively under control.''

BHP, which has made a hostile $177 billion bid for Rio Tinto Group, rose 92 cents, or 2 percent, to A$46.02 at the 4:10 p.m. Sydney time close on the Australian stock exchange.

``It will be a much bigger project than what we were originally thinking,'' Hunt said, also declining to give a cost estimate. ``So more steps in the staircase, but going higher.''

Rio Tinto cast doubt on the timing and viability of the expansion of Olympic Dam, the Australian reported March 27, citing Rio Chief Executive Officer Tom Albanese. BHP said in February it had arranged a $55 billion loan to help fund the Rio purchase.

Hunt cited ``equipment shortages, building all that in the middle of the Australian desert, access to skills, lead time'' as reasons for the decision to stagger the development of Olympic Dam. The decision wasn't driven by the financing, he said.

Open Pit

The expansion will increase the mine's copper output fourfold to 730,000 metric tons a year, boost gold production eightfold and uranium by almost fivefold, according to company forecasts. Creating an open pit mine will require the removal of about 1 million tons of earth every day for four years, according to the South Australian government. The desert ore body dates back 1.5 billion years

``It was always going to be a stretch doing it in one lot,'' Peter Chilton, who manages $1.4 billion at Constellation Capital Management in Sydney, said today by phone. ``If you buy something of that magnitude and don't develop it quick enough it doesn't look good.''

Chief Executive Officer Marius Kloppers said in December such projects would be more expensive to build than a couple of years ago. The cost may have increased to $20 billion, the London-based Times reported last November, citing unidentified people close to BHP. The company acquired the mine when it bought WMC Resources Ltd. in 2005 for A$9.2 billion ($8.8 billion).

``The schedule now is to complete the pre-feasibility study by the end of the year,'' said Hunt, adding the company wouldn't release a cost estimate until the assessment was completed. ``The configuration of the project looks nothing like the WMC project. We will release it when we are ready and we will explain what the expansion steps look like in more detail and what we think it will cost.''

To contact the reporter on this story: Rebecca Keenan in Melbourne at [email protected]

Last Updated: May 29, 2008

[Wayno]

Only 7 months til year end when BHP announce their Olympic Dam plans...tick tick tick

Personally, i'm expecting short-term (4-6 year) disapointment with the scale of this mine, with long-term joy.

[Wayno]

Terramin will be starting its Zinc production in about 2 months time.

http://business.smh.com.au/terramin-put ... -2j31.html

WITH its first shipment of zinc from its $70 million Angas mine in South Australia just two months away, Terramin Australia seems unable to get enough of the metal that many have shunned due to a declining price.

The Adelaide company is expected to emerge from a trading suspension today to reveal a $16.5 million fully underwritten share purchase plan, which could help it pick up a second zinc project in Algeria.

The zinc price has nearly halved in the last year and rival miners such as Zinifex and Kagara have looked to add copper and nickel production to diversify revenues.

But at the Patersons Go West Conference in Sydney yesterday, the executive chairman of Terramin, Kevin Moriarty, insisted his company would remain a pure zinc and lead producer.

"We think it's better to stick to something we know well," he told the Herald. "You have got to buy projects at a price that is not at the top of the market. That's why we are staying with it."

In recent weeks, the heads of large zinc producers such as Xstrata, Teck Cominco and Zinifex have said the zinc price - now trading at less than $US1 a pound - is unsustainable despite forecasts of a supply surplus.

Mines such as Perilya's Broken Hill operation and Teck's Lennard Shelf operation in Western Australia are struggling to break even at present prices.

"I suspect the penny will start dropping and prices will move ahead in time to save them," Dr Moriarty said, but he added new capacity could be delayed as a result of the low zinc price.

Foster Stockbroking agreed in a recent report, noting forecast mine production was more likely to slip backwards than to exceed production targets.

Terramin expects to produce 30,000 tonnes a year from Angas starting in August, providing the company with cash flow to help build its flagship project: the Tala Hamza zinc deposit in Algeria. Tala Hamza is expected to cost up to $US356 million ($371 million) to construct, but will produce at least 120,000 tonnes of zinc a year.

Terramin has already attracted attention from corporate quarters due to the promise of Tala Hamza. After being denied the opportunity to visit Terramin's project, the acquisitive Canadian group Lundin Mining appeared on the register with a 4 per cent stake.

"They are not the only ones interested in it," Dr Moriarty said.

But despite its shares having risen tenfold in the past three years, investors should not expect Terramin to agree to a takeover any time soon.

"We are telling our shareholders to stand by for 10- to 20-fold growth [in the next two to four years]," Dr Moriarty said.

Terramin expects to pull $70million per year (based on 30,000tonnes, and current prices of ~$2300 per tonne)

Since this is a "new mine" we (SA Govt) will get $1m (1.5%) per year as royalties for the next 5 years, and then $2.5m (3.5%) per year up until the resource expires.

[jimmy_2486]

All facts and hype seems to suggest that SA is merely a sleepy giant.

We are like a bomb waiting to go off!

[Wayno]

All facts and hype seems to suggest that SA is merely a sleepy giant.

We are like a bomb waiting to go off!

There is discussion in the media about Australia needing to limit the amount of mining activity occurring in our country. One of the big reasons for high interest rates at the moment is the HUGE amount of mining occurring in WA, NSW & QLD. Economists state that mortgage payments for "working families" (couldn't resist using a rudd-ism ) would reduce if our volume of mining activity & exports was reduced. Wage pressures would also ease a bit.

I doubt mining activity will ever be limited by the Govt, but it's certainly being discussed - and IF it eventuated then it would mainly impact SA.

[UrbanSG]

A coal to liquids project in the far north of South Australia (Arckaringa) is a big one that I hadn't heard much about, had a small article in today's paper about it, stating it has been estimated to cost $3.7 billion, so I did a bit of google searching. It looks like it is still a fair way off but it sounds promising (7.8 billion tonnes of coal seems very significant). Found this on mineweb:

Altona Resources releases interim results
Monday , 31 Mar 2008

Completion of technical pre-feasibility study for development of 10m barrel pa Coal to Liquid plant with a 560 MW co-generation power facility

Field study analysis expected to be competed early Q2 2008

Imminent commencement of bankable feasibility study

Strong regional support - likely elevation to "Major Project" status with Australian government.

Share subscription agreement with Hong Kong based investment company Tongjiang International Energy Co. Ltd, raising £11m subject to shareholder agreement

Project significantly de-risked as a result of field work and advancements over the period

Managing Director Chris Schrape said, "We are now entering a transitional period for the Company following the completion of the key technical field components of the pre-feasibility study for the development of an integrated 10 million barrel per year Coal to Liquid ("CTL") plant with a 560 MW co-generation power facility at our Arckaringa Project ("Arckaringa") in South Australia. With the completion of the pre feasibility study in sight, all the positive factors favouring development at Arckaringa continue to be confirmed. With our investment we are systematically de-risking the project which is shaping up to be highly exciting. The Arckaringa coal basin contains an estimated 7.8 billion tonnes of coal. The CTL process is ideal for the resource, and the demand economics from local and international markets will underpin the potential of the project."

Chairman's Statement

This has been one of the most exciting periods since the Company's inception, during which we have achieved a number of significant steps towards our goal of becoming a leading energy supplier, through the use of the Coal to Liquid ("CTL") process. With coal resources at our Arckaringa Project in South Australia estimated to be in excess of 7.5 billion tonnes, we believe we are on the cusp of bringing a project to fruition that will harness what is potentially one of the world's largest undeveloped energy banks.

Completion of a pre-feasibility study for the development of our planned 10 million barrel per year integrated CTL plant with a 560 MW co-generation power facility at Arckaringa is imminent, bringing us to a point where we can commence the final stage of the Bankable Feasibility Study ("BFS"). Importantly, finance for a significant portion of the BFS has been arranged with the share subscription agreement with a Hong Kong based investment company, Tongjiang International Energy Co. Ltd ("Tongjiang"), to raise £11,618,000 subject to shareholder approval, as announced on 26 February 2008.

Field Technical Programme

The Company's drilling programme has been developed with a view to identifying the optimum area for opencast coal extraction for the purposes of fuelling the proposed CTL plant. Drilling has focussed on the Wintinna coal deposit within the Arckaringa Project and aims to redefine at least 700 million tonnes of coal to be classified as Measured or Indicated, according to the current JORC code for reporting coal resources.

In November 2007 we announced the completion of the large diameter (200mm) bulk sampling core drilling programme; five boreholes located at representative sites evenly spread throughout the area of resource definition produced approximately five tonnes of coal. In addition, 1,031.23m of large diameter pre-collaring and coring was undertaken and all holes were geophysically logged successfully. Analysis from the results of this drilling will enable us to validate and upgrade the previously defined coal resource and identify specifications for the preparation and mining of Wintinna coal for use in the CTL process.

November also saw the conclusion of the hydrogeological field work required to test groundwater conditions through the construction of three production wells and three piezometers (devices used to measure water pressures in layers of porous rock). Analysis of the retrieved data from this work will enable us to underpin a groundwater management plan for the open pit mining process. Having completed the large diameter drilling programme we proceeded to the HQ 61mm slimcore drilling programme required to provide further detailed data for resource definition and quality evaluation. The complete field programme, consisting of 21 boreholes, including four to assess the geotechnical parameters for the site, was completed on schedule in February 2008 and we are now waiting for results.

We anticipate that it will take up to two months to analyse and report on the results from the field programme and bring the pre-feasibility programme to an end. We expect the results to be returned early in the second quarter of 2008, slightly later than our initial estimation of the first quarter of 2008. A positive outcome in these reports will enable Altona to move onto the BFS.

Given the Project's key strengths that have already been identified during the pre-feasibility stage at the Arckaringa Project, it is likely that progression to the final stage of the BFS will result in its promotion to "major project" status in South Australia. With the aid of a streamlined state approval and evaluation process, we expect the final feasibility and government approvals stage to take approximately 24 months. Following this, the construction and operational commencement of two modules comprising the 10 million barrel per year CTL plant and associated power facility could come to fruition in as little as 36 to 54 months.

We believe the Australian investment community, which has a strong understanding of the power deficit forecast for South Australia and the growing transport fuels supply gap in Australia, could play an integral role in the development of the Arckaringa Project in the future. In line with this, in November 2007 the Company appointed a leading Australian stockbroker and financial advisory firm, Bell Potter Securities Limited, as its Australian financial adviser, to advise Altona in respect to the institutional and retail investor markets in Australia.

Outlook

Our findings so far have served to reinforce all of the positive reasons for embarking on the Arckaringa Project. We firmly believe that given its excellent location, significant coal resources, growing demand for liquid fuel products both on the domestic and export markets, and provision of a tangible solution to energy deficit in the region, this project has a very exciting future. Furthermore, upon completion of the placement to Tongjiang, the Company will have excellent funding and will be in an enviable position to achieve a number of its major strategic goals.

Chris Lambert

Chairman

[Wayno]

A coal to liquids project in the far north of South Australia (Arckaringa) is a big one that I hadn't heard much about, had a small article in today's paper about it, stating it has been estimated to cost $3.7 billion, so I did a bit of google searching. It looks like it is still a fair way off but it sounds promising (7.8 billion tonnes of coal seems very significant). Found this on mineweb:

Altona Resources releases interim results
Monday , 31 Mar 2008
<snip>

sounds very promising - although 5+years from going live...

[UrbanSG]

More on Olympic Dam. We know most of it already. Interesting to see they have given up trying to find its boundaries it is that massive. October will be a big month for SA. From the Australian today:

BHP to set out Olympic Dam costs
Matt Chambers | June 06, 2008

BHP Billiton has confirmed that its Olympic Dam expansion, which has been the subject of much scepticism, will play a key role in its $160 billion takeover of Rio Tinto.

It intends to outline detailed development plans for the copper and uranium deposit before the bid is likely to be settled.

BHP chief Marius Kloppers said plans for the expansion, expected to boost copper production from 180,000 to 730,000 tonnes a year, would be outlined at a detailed briefing in October.

That is expected to be well before its 3.4-for-1 scrip bid for Rio clears the regulators, possibly in November.

If BHP, which did not confirm it would give a cost update, can put to bed suggestions that it is delaying revelation of the full extent of inflation and complications, its bid could be strengthened.

"We've sort of given up on finding the true extent of the deposit because Graeme Hunt, the executive in charge of the project, kept asking for more money and we've sunk a couple of hundred million dollars in drilling costs," Mr Kloppers told the Melbourne Mining Club.

BHP would give "a very complete update of where we stand on that investment decision and exactly what we want to do", Mr Kloppers said, after describing the deposit as possibly "one of the greatest ore bodies ever discovered".

It has been more than two years since BHP made a $5 billion estimate of the costs of expanding production on the complicated ore body, which it acquired with WMC.

There is now speculation that costs may come in at up to $20 billion due to the complexity of the ore body and industry inflation driven by labour and equipment shortages.

BHP is looking to develop the expansion in stages and does not want to produce end products at the site, saying 97 per cent of the value adding is done by the concentrate stage. Its reluctance to build a bigger smelter has been an issue for the South Australian Government.

The development of Olympic Dam will test Mr Kloppers' contention that one of BHP's strengths is being able to identify tier-one assets.

While not mentioning Rio directly, Mr Kloppers stressed that BHP was focused on brownfield developments -- those near current mines. This is in contrast to Rio's recent highlighting of the potential of its greenfield developments -- in new areas.

When asked which of Rio's planned developments were seen as tier-one assets, Mr Kloppers did not mention any, instead highlighting the regulatory, infrastructure and isolation hurdles Rio could face at its Mongolian Oyu Tolgoi copper and gold deposit, despite its being an excellent ore body.

[Wayno]

More on Olympic Dam. We know most of it already. Interesting to see they have given up trying to find its boundaries it is that massive. October will be a big month for SA. From the Australian today:

BHP to set out Olympic Dam costs
Matt Chambers | June 06, 2008
<snip>BHP chief Marius Kloppers said plans for the expansion, expected to boost copper production from 180,000 to 730,000 tonnes a year, would be outlined at a detailed briefing in October.
<snip>

We need an Oct 1 countdown timer on the S-A homepage for the Olympic Dam announcement!

[Wayno]

sign of the times. The online Tiser now has its own dedicated mining section! http://www.news.com.au/adelaidenow/business/mining/

[UrbanSG]

Until BHP hurries up and gets the detail out in October this sort of speculation will continue. From the Australian today:

BHP warns on mine expansion
Jeremy Roberts | June 10, 2008

BHP Billiton's proposed expansion of its Olympic Dam copper and uranium mine will take longer, cost more and produce fewer jobs than originally expected, according to confidential briefings by the company to industry figures in Adelaide.

BHP wants to massively expand its Olympic Dam operation, in the process constructing the world's largest open-cut mine, and is at a delicate stage of negotiations with the South Australian Government, which must decide whether to approve the expansion.

For more than a year, the company has been lobbying for more favourable conditions, as it looks for ways to reduce the cost of the project.

BHP controversially proposed in July last year to export uranium-infused copper concentrate to China to avoid costly smelting at the remote Olympic Dam site, 570km northwest of Adelaide.

Premier Mike Rann warned BHP the "China option" was "not on", because the state would lose hundreds of jobs and industrial investment. But it appears BHP is sticking to its guns, telling business and political figures in Adelaide recently that the project faced rising costs and lengthening timelines, and was unlikely to meet Mr Rann's expectations.

According to sources who have received the briefing, the proposal to export copper concentrate to China remains part of the company's plans. The exports would begin once capacity of BHP's on-site smelter was reached.

And the number of jobs expected to be created by the expansion has shrunk. The company now estimates the expansion will generate about 8000 construction and permanent jobs in the mining sector.

This compares with the 2006 estimate of 23,000 jobs stemming from the project.

The BHP board is not expected to decide on the expansion until after the next state election, in 2010

[Wayno]

i wonder if Olympic Dam is receiving the SA Govts gracious 5year royalty discount of 1.5% (normal rate is 3.5%)?

[Londo Mollari]

SA's mining prospects better than WA

Article from: AAP
June 11, 2008 03:00pm

SOUTH Australia is moving into the mining big league with minerals prospects outstripping those of Western Australia, Premier Mike Rann says.

Mining is poised to overtake wine as the state's dominant industry, Mr Rann told the National Press Club in Canberra today.

"Spending on mining exploration has increased 10-fold in five years, now outstripping every state other than WA,'' Mr Rann said.

"We are now ranked ahead of Western Australia for the first time in terms of mining prospects.''

The planned expansion of Olympic Dam, operated by BHP Billiton, in the state's north, was at the heart of the booming resource sector, he said.

"We are talking about a mine that will be around for 150 years."

"They spent $500 million there in the last year alone."

"What we are seeing in SA is not simply a rush that will burn brightly and then fade away, but an expansion that will be with us for a 100 years or more.''

A blanket of sediment cover across South Australia has historically made mineral discovery more difficult than in other regions, he said.

But Mr Rann says his government's survey work and encouragement of exploration has overcome that disadvantage.

"It has come about not because of natural forces, market forces applying ... no one can say that in South Australia,'' he said.

"It came about because of the strategic program put in place the government in 2004.''

Earlier today, SA's Mineral Resources Development Minister Paul Holloway said $79.3 million was spent looking for mineral deposits in the March 2008 quarter, compared with $66.5 million in the same period last year.

More than a third of that outlay, $31.9 million, was spent on searching for new mineral deposits, he said.

"While this level of spending is more than welcome, the real economic benefits for South Australians of this level of exploration won't be felt until the search for new deposits is translated into new mines,'' Mr Holloway said.