#Official Mining Thread

[Wayno]

Mere speculation.

A more positive clue exists in the share market. A couple of big industry investment firms recently sold off (went underweight) on their BHP holdings. The reason - the ODX expansion will be a mid-term drain on BHPs profitability. These sorts of folk don't make such decisions lightly.

[danimations]

I have absolutely no science to backup this claim, but I believe that the Woomera area is going to yield an absolute motherload of minerals yet to be discovered. Why else would giants Rio and Fortescue be interested in exploring the area, and so close to the colossal mineral deposits of Olympic Dam. Only a matter of time before another massive discovery.

Well, actually there are some major turnoffs to explorers working in the WPA, at least for the time being. The rocket range is still used for a variety of tests by a variety of nations and their defence departments, and they're not going to want to give up the range anytime soon. The area is divided into zones with different degrees of accessibility to mining interests, and the notion of shared use with defense testing arsenal, and the lingering legacy of decades of various weapons tests, including the fallout from Emu Field make it an 'interesting' proposition.

Then there are the major problems accessing water, and power. The Great Artesian Basin's stressed, and desal plants in Spencer Gulf will lead to accellerated increases in salinity, threatening the health of those systems, and all who depend on them, including our lucrative commercial fisheries.

I'd like to see SA develop mining activities at a measured pace which is geared towards sustainability, and minimises collateral damage... economic, environmental, social et al.

[Wayno]

BHP is buying exploration licenses around ODX, and maybe even some in the Woomera Protected Area.

I'm unsure how long a mining company can 'sit on' a tenement without developing it. They obviously must pay licensing fees, but that seems to be a trivial amount.

http://blogs.wsj.com/dealjournalaustral ... ambitions/

BHP Billiton is a fully paid-up believer in the mining theory of ‘nearology’ if its latest Australian land grab is anything to go by.

The Anglo-Australian miner has tabled applications for exploration licenses covering more than 10,000 square kilometers in arid regions surrounding the huge Olympic Dam copper-gold–uranium mine in South Australia state.

The applications are a signal that BHP won’t sit back and watch interlopers such as Rio Tinto and Fortescue Metals build big land positions nearby. They also underscore how the best exploration prospects are often found close by existing discoveries–known as nearology–rather than bold and expensive bets on largely untapped regions overseas.

BHP is expected to make a decision this year on whether to proceed with an expansion at Olympic Dam, a project analysts estimate could cost close to US$30 billion.

In the meantime, the world’s biggest mining company by market value has been busy shoring up its land position around the project and further afield in the South Australian desert.

Monday, mineral prospector Minotaur Exploration said it has reached an agreement to sell five exploration tenements near Olympic Dam to BHP for 10 million Australian dollars (US$10.3 million).

In addition, since the start of this year BHP has quietly been applying for new exploration licenses to the east and south of the mine, including areas in the Woomera, Marree, Leigh Creek and Port August regions.

Together the applications amount to 10,590 square kilometers, according to South Australian Government records.

BHP said the move is the first step in securing rights to “ground we believe to be prospective for future discoveries.”

“The exploration process that ultimately leads to the development of a new mine could be many years,” the company said in a statement. “By taking this initial step of securing the exploration rights, we are making a relatively low-cost investment in potential future options.”

South Australia has attracted increased interest from major mining companies in recent times as they eye new deposits with similar qualities to Olympic Dam.

Last year, Fortescue applied for 10 exploration licenses covering 4,654 square kilometers in South Australia, signaling a significant diversion from the company’s core iron ore business.

Also last year, Rio Tinto agreed to a farm-in deal with prospector Tasman Resources at its Vulcan prospect, immediately north of Olympic Dam.

The recent interest comes despite weaker metal prices and worries that China’s demand growth for commodities is tapering off.

BHP has for many years been working on plans to develop an open-pit mine alongside existing underground operations at Olympic Dam to increase production of copper and uranium sharply over the next three decades.

[rhino]

From ABC News online:

Vast weapons test site set for mining
Updated May 04, 2012 09:02:20

The Defence Department is changing access rules for mining companies in the potentially-lucrative Woomera weapons testing area.

The vast region in outback South Australia is used for sophisticated and secret weapons testing, but is also estimated to have tens of billions of dollars of uranium, copper, gold, iron ore and coal.

A temporary agreement is being negotiated, while legislation for the longer term is set to go before Federal Parliament.

SA Resources Minister Tom Koutsantonis says the Woomera region has huge potential.

"We think it is one of the largest unlocked areas of mineral wealth in the nation. Its land mass is the size of England," he said.

A federal study has concluded $35 billion worth of minerals are beneath the Woomera Prohibited Area (WPA), a region which accounts for 13 per cent of South Australia.

It is about one third of a geological area known as the Gawler Craton, which is rich in minerals and includes the huge Olympic Dam deposit being mined by BHP Billiton.

"The Gawler Craton is a geological anomaly that we think holds vast reserves of uranium, copper and gold. In terms of copper, about 70 per cent of Australia's copper reserves are in the WPA, about 40 per cent of world's uranium reserves are in Olympic Dam. We think there is more in WPA," Mr Koutsantonis said.

"It is just crazy to have this place excluded [from mining]."

Rising prices
Only in the past decade or so have higher commodity prices made it viable to consider mining at the depths of the deposits in the Woomera area.

At the same time, the Defence Force had stepped up its use of the area as Australia's military commitments increased.

Mining companies are now going through the paperwork on planned access changes and have a few weeks to lodge submissions.

But one company has recently sold its tenement in the area because of what it says had been an increasingly unworkable relationship with the Defence Force.

Tony Belerio from Minotaur Exploration explained his company's decision.

"We didn't have much trouble at all over the years until about 2007/2008 when Department of Defence started getting a lot more pushy and officious about access," he said.

"That culminated in Minotaur actually being held to ransom and eventually evicted from our tenements."

He said it was not due to Minotaur having overseas partners.

"No, no it was something that happened to all the explorers at about that time," he said.

"It appears as if the Department of Defence got a bit worried about too many companies coming on and exploring."

The Federal Government is taking submissions on the mining plan until the middle of June.

[Reb-L]

Minister Kutz is so right: "It is just crazy to have this place (the WPA) excluded [from mining]."
I think SA is getting a raw deal in the Federation; we are not allowed to dig up our mineral resources, our water is taken out of the river before it reaches our border, most of our head offices have been relocated interstate, our gas has been piped to Sydney for 40 years with not much to show for it here. In return we get our welfare money and a few defense projects to keep us quiet. Other places with natural resources like ours have infrastructure and booming economies. We're being screwed, having to pay more for power, stamp duty and a lot of other things than in most other states. It seems to me that when SA invokes federal statutes (e.g. to make sure we get enough water) nobody pays much attention but that the east coast pollies are happy to use these rules when they benefit their own economies - and unfortunately people here are not making much noise about it.
So good on you Tony for speaking out (even if your own party is partly responsible for the situation we are in).

[Wayno]

BIG Tonka Toys for ODX

From AdelaideNow

984693-olympic-dam-trucks.jpg (75.27 KiB) Viewed 2917 times

THE first trucks - in what will be the world's biggest single order for mining vehicles - have arrived at Outer Harbor.

Destined for the Olympic Dam expansion project, the Caterpillar trucks arrived from the US in pieces and will be trucked to Whyalla for assembly.

At Berth One to greet the arrival today, Mineral Resources and Energy Minister Tom Koutsantonis said the trucks were concrete evidence of the mining boom transforming the state.

"These monster trucks and other heavy equipment are undeniable evidence of how the mining boom is delivering jobs and opportunities for South Australians," he said.

"The first consignment of Caterpillar equipment to arrive at Outer Harbor from the US also comprises motor graders and other types of construction equipment destined for mining and construction sites throughout South Australia."

The trucks have been bought by BHP Billiton as part of its $US1.2 billion spending allocation made ahead of a final investment decision on expanding the Olympic Dam copper-uranium mine.

That decision is expected later this year but the pre-commitment spending has allowed the company to buy equipment such as the Caterpillar trucks, which have long lead times as well as to hire local contractors to prepare the mine site and begin building the workers' accommodation.

The trucks were carried by Swedish vessel the MV Aida, and inaugurate a regular service by shipping giant Wallenius Wilhelmsen.

[rhino]

From ABC News Online:

Mining boost as Iron Baron reopens
Posted May 15, 2012 11:15:31

A reopening of OneSteel's Iron Baron mine, near Whyalla in South Australia, has created 120 jobs.

Iron ore production at the site has recommenced after it was shut down for more than 20 years.

Production involves both directly-shipped ore from OneSteel's other mining operations in SA and material converted on site from low-grade ore.

When at full capacity, Iron Baron is expected to produce two million tonnes of ore annually for export.

The company has also begun the next stage of its Whyalla port expansion, building of a new stretch of rail line to connect its new export facilities with the city's existing harbour.

The line will eventually connect with the company's mines near Coober Pedy in the far north and on Eyre Peninsula.

The current rail work is expected to be finished by September.

[Waewick]

http://www.businessspectator.com.au/bs. ... nt&src=hp2

BHP Billiton chairman Jacques Nasser says the global miner will not spend the $80 billion on growth projects that it said it would, stepping back from previous commitments.

hopefully this isn't the sound of drums beating.....

[Wayno]

Yep, BHP has 3 major development projects on their books - A Canadian potash project, an expansion project in WA, and Olympic Dam. The investor community suspect they will invest in 2 of the 3. Fingers crossed.

[Waewick]

yes fingers crossed.

[Waewick]

http://www.businessspectator.com.au/bs. ... t&src=hp11

BHP Billiton Ltd chief executive officer Marius Kloppers says the company has no plans to approve any large-scale projects within he next six months, according to Fairfax Media.

[Wayno]

Yep. 6 months is about right. ODX approval has to occur by mid-December or they must re-start the approvals process. From what i can gather ODX will be approved in December but BHP with throttle back on the speed at which they remove the overburden. So Instead of 4-5 years to clear away the dirt, they'll probably spread that spend over 8+ years.

Apparently the 'window of opportunity' for peak iron ore sales is the next 25 years only (while china continues to urbanise) so BHP simply must ramp up their WA Outer Harbour iron ore project as a priority. The good news is that what ODX offers (copper, gold, zinc, uranium) are required by the ever growing urbanised populations (for all those modern conveniences).

[Ben]

from In Daily:

Wednesday, 6 June 2012

Olympic Dam unlikely: global analyst

Kevin Naughton

GLOBAL financial services giant JPMorgan is the latest company to throw doubts over BHP Billiton’s Olympic Dam copper and gold expansion project.

JPMorgan’s recently recruited and well-connected mining analyst Lyndon Fagan has suggested to investors that the $20-25 billion expansion project could be on the back burner for at least three to four years.

Fagan, a former Royal Bank of Scotland analyst, joined JP Morgan last month as an executive director to cover BHP Billiton, Rio Tinto, Fortescue Metals Group as well as Alumina and OZ Minerals for the investment house which holds more than $2.3 trillion in assets.

The Australian newspaper reported today that Fagan’s latest assessment of BHP’s position ranked the expansion proposal as the least attractive of its major projects.

“Olympic Dam may not happen,” Fagan’s report said.

“Of all the major projects in the growth pipeline for BHP and Rio Tinto, the Olympic Dam expansion has the least attractive risk-return trade-off.”

The Australian says Fagan would “not be surprised if BHP delayed the first stage of Olympic Dam by three to four years to strengthen its balance sheet and focus on returns to shareholders.

“If this decision was communicated to the market, we would view this discipline as a net positive,” he said.

The Fagan report follows similar concerns expressed by Platypus Asset Management portfolio manager Prasad Patkar.

“For the amount of capital that they have to outlay, they will need a very high and stable copper and uranium price for a very long time for the board to have the comfort to be able to sign off on a project of this scale,” Patkar told Bloomberg last month.

Deutsche Bank and Citi have also forecast a delay to the project.

Analysts have interpreted the comments of chief executive Marius Kloppers last month in Miami where he told major investors there would be no substantial spending on new projects until at least June next year.

Similar comments by BHP chairman Jacques Nasser in China have sent a chill through the corridors of the South Australian government after last week’s State Budget factored in the expansion in its jobs growth forecasts.

The government’s Mineral Resources Minister Tom Koutsantonis initially took a hard line on extending government approvals for the project, but has since said he would “consider” any requests.

Under the current Indenture agreement legislated by the parliament last year, BHP has until mid-December to start work on the expansion.

[Will]

I've been hearing about this mining boom for the last decade, and how "it's just around the corner". This promised mining boom seems more like a mining mirage....

[Wayno]

yep, mining development timeframes are longer than the patience of most, esp our state govt

http://www.adelaidenow.com.au/business/ ... 6385939592

IN a positive sign for the Olympic Dam project, BHP Billiton chief executive Marius Kloppers said today that long-term views and not short-term price changes in commodity prices determine where and when the world's biggest miner invests.

Addressing the issue of leadership at a Perth business audience, he said it was vitally important to have the discipline "to stay the course in good and bad times".

With very long lead times between mineral discovery to generating revenue, BHP had to be courageous.

"To develop our resources in time to generate superior returns, we must have the financial strength to invest through all business cycles, and the leadership capability and courage to act on anticipated market demand a decade or more out," he said.

"It is quite often the case that an investment decision in a particular commodity will be made in a part of the business cycle that results in a low price environment for that particular commodity, but the investment is made nevertheless in recognition of the expected future demand and prices."

Analysts have been raising questions about BHP's ability to invest in three major projects which are due to go to the BHP board this year - Olympic Dam, expanding the Outer Harbor for iron ore exports from Port Hedland and the Jansen potash project in Canada.

All are multi-billion investments and chairman Jac Nasser has said major projects will need to be staggered. Mr Kloppers acknowledged the world was in the midst of extreme uncertainty because of the European debt crisis which would continue to impinge on short-term commodity prices. While BHP would stick to its strategy, it also would be flexible and without investment if it felt the time was not right.

"We will only trigger development of these options (BHP's pipeline of projects) when our measures of success can be sustainably achieved," he said.

"Where and when these criteria cannot be met we will redirect capital elsewhere or we simply will not invest, preserving these investment options for another time."

To maximise opportunities for Australia in the broader world, it was important for policy makers to ensure there was a competitive environment. That meant caution on changes to royalties and taxes and the creation of a labour market with high flexibility and productivity. Mr Kloppers said BHP viewed commodity demand from developing economies in three tranches.

First, urbanisation demanded steel-making materials iron ore and coal.

Secondly, the urbanised population demanded consumer goods such as electronics, white goods, and cars.

"In this second phase, demand for products like copper continues to increase," he said.

" And against a global backdrop of anticipated grade decline in the mines that set global copper supply, this means that our world class ore bodies in Latin America, the USA and Australia will be very valuable in terms of options for shareholder wealth creation."

While using the word "options" could signal a delay in going ahead immediately with the Olympic Dam expansion, this does re-inforce the mine's importance in the BHP portfolio because its principal revenue earner is copper.

He also said a delay of even one year could upset the financial equation on a project, turning what would have been a profit maker to a loser.

The third demand phase, Mr Kloppers said, was a need for better food and more energy use - again a tick for Olympic Dam and its secondary earner, uranium.

The latest analyst to cast doubt on Olympic Dam is JP Morgan, which said yesterday it could be delayed for several years.

"Of all the major projects in the growth pipeline for BHP and Rio Tinto, the Olympic Dam expansion has the least attractive risk-return trade-off," JP Morgan said in a research note.

They join Deutsche Bank and Citi in saying BHP is under pressure to return more cash to shareholders rather than sinking so much of its revenue into growth initiatives.

However, Mr Kloppers has frequently said BHP invests throughout economic cycles, a strategy which enabled it to be at the forefront of supply as commodity prices boomed - leading to record profits.

In his speech today, he reaffirmed BHP would stick to the charter it had followed for the past 12 years "to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources".

BHP would deliver on this objective through a strategy "of owning and operating large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market".

This, he said, was "central to everything we do".