In the 16 months since exuberant Mineral Resources Minister Tom Koutsantonis’s “elephant and the herd” speech at a major mining conference, the air has gone out of South Australia’s mining balloon.
Yesterday’s double blow of a major project being scaled back and official figures showing a $100 million fall in exploration expenditure continues the run of bad news that’s dogged the mining industry since the “elephant” speech.
Koutsantonis raised many eyebrows in May 2012 when he told the 11th South Australian Resources and Energy Investment Conference that “South Australia is poised to take its place among the Titans of mining – not just in Australia but in the world.
“I often say that while with Olympic Dam we have tracked down an elephant, we are still in the hunt for the rest of the herd.”
Since that time, the elephant has stampeded into the distance and there’s no sign of any herd.
The Titan became the Titanic when BHP axed its $30 billion Olympic Dam expansion project in August 2012, taking with it the much-touted economic transformation of the State.
The nearby copper and gold mine at Prominent Hill has had a troubled time since, despite claims that the release of pressure from the axing of Olympic Dam would reduce mining costs across the sector.
Mine owner OZ Minerals announced in June it will cut staff from its South Australian operations in a review of operating costs. The company’s holdings value and share price have slumped in recent months.
Market sentiment around Oz Minerals has been hit by a weak copper price and rising mining costs.
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Similar factors have been a problem at the Hillgrove copper mine at Kanmantoo: its share price has slumped from its 2010 high of 40 cents to around 8 cents today.
Price falls and cost increases are the key reasons why mineral exploration in South Australia dropped by $100 million in the past financial year. Australian Bureau of Statistics figures released Monday show exploration expenditure at $229.2 in the 2013 financial year down from $329.2 million.
Less than half of last year’s figure – $102.4 million – was spent looking for new deposits.
Opposition mineral resources spokesman Martin Hamilton-Smith raised the prospect of the Federal Government’s mineral resources rent tax (MRRT) as another negative factor, adding to the concerns raised by Koutsantonis’s departmental head Geoff Knight who told a mining forum in February this year that the MRRT increased our sovereign risk and knocked investor confidence.
The decision announced yesterday by Centrex and its Chinese partner Wuhan Iron and Steel Company (WISCO), however, points to a wider range of problems.
The $2.5 billion Fusion iron ore project near Tumby Bay on the Eyre Peninsula is being “re-scoped and rescheduled to take into account recent changes in iron ore market conditions”.
The company also expressed concerns about land approvals.
Centrex’s proposed deep water port facility has already received major project status from the State Government, but there are still many questions about the notion that this region can support the infrastructure being proposed.
Two years after it gave Centrex’s deep sea port the green light, the South Australian Government granted major development status to the multi-billion-dollar Cape Hardy port being planned by Iron Road for its iron ore exports.
The Cape Hardy port project is just 10 kilometres north of the proposed Centrex port.
In between the two approvals, a third deep water development at Port Bonython was granted major project status.
Last month Greens MP Mark Parnell said there needed to be some coordination of the projects.
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“What doesn’t make sense is the Government allowing all of these separate port proposals to be advanced at the same time with no one having a look at what the impact might be if they were all to be successful,” Parnell told ABC’s Country Hour.
Koutsantonis defended the multi-project approvals.
“Being declared a major development gives the ability for these people who are perpetrating these mines to go forward and get more finance and gives them the approvals that they need to proceed and offer their investors a certainty to invest.
“Ultimately, what is going to get these minerals out of the ground and invested is certainty to the market and that is what the Government is offering all the major players on the Eyre Peninsula.”
Today the State Government’s mining policies came under fire from junior explorer Minotaur’s managing director Andrew Woskett at a Business SA Event.
“I’m going to argue the case that South Australia depends on small business for its future minerals prosperity,” Woskett told the forum.
“We hear lots about the locally active gorillas of the mining sector – think BHP and Arrium – but not much profile attaches to the role of junior minerals explorers and mine developers in the State’s future prosperity.”
Woskett’s view of the industry’s potential appeared to align with the Koutsantonis view of elephants and herds.
“It’s fair to say that SA as a whole has been flying under the radar as a State with an expanding mining sector,” he said.
“Even though SA gave birth to Australia’s iron ore industry and hosts over 30 per cent of the world’s known reserves of uranium, its potential to reveal the new mines of the near and distant future is not well appreciated.
“SA has, arguably, the most prospective rocks anywhere for Olympic Dam style copper-gold deposits plus amazingly extensive iron formations from Port Lincoln to Coober Pedy and eastwards to Broken Hill – plus graphite, uranium, mineral sands … and the list goes on.”
That, however, is where the similarity of views end.
Woskett repeated his previous attacks on government polices that he believes hinder mining.
“Like every other small business sector, however, we decry the creeping cloak of government regulation, compliance, taxation and interventionist politics.
“In the exploration business, at least 30 per cent of project expenditure is directed towards red tape compliance and negotiating regulatory hurdles.
“Its high time governments acknowledge that business does not exist to serve the bureaucracy.
“Were governments to make good on their endless promises to cut green and red tape it would provide immediate stimulus to economic activity in all small business sectors.”
Yesterday’s Centrex announcement suggested that the industry’s problems are not only a matter of bureaucratic polices, but the reality of global demand and reduced investment.
The Titans, the elephants and it seems, most of the circus, have left town – for the time being.
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