Minerals plant dumping a $1bn blow for South Australia

Arafura Resources has scrapped plans for a $1bn minerals processing plant in South Australia.

Arafura Resources has scrapped plans for a $1bn minerals processing plant in South Australia in what comes as a further blow for the local economy.

The company secured the site in Whyalla for its rare earths processing plant in 2011 and planned to transport rare earths from its Nolans Bore Mine in NT to the complex for processing before export out of the region.

The company are now exploring options to process the minerals closer to site in the NT.

Arafura said "increasing business costs, lower rare earths prices and continuing depressed capital markets" had led to the decision, adelaidenow reported.

The plant would have created 1000 jobs in the first two years and 300 permanent positions and was estimated to add $100 million a year to the local economy.

Whyalla Mayor Jim Pollock said the community was disappointed by the decision.

Arafura's announcement is disappointing," he said.

"I know our community is resilient, but it is going to be hard to build confidence after major projects get either deferred or scrapped. But we will do it. Whyalla is still around and the major employers like OneSteel, Arrium and Santos are still around. It's not back to the drawing board yet."

The decision is a further blow for the region after BHP last year cancelled its $US20 billion Olympic Dam expansion blaming spiralling costs.

Arafura Resources chairman Ian Kowalick said the decision was a "function of current capital costs".

"The costs are making projects uncompetitive and radical measures need to be taken. While taxes and labour cost do impact, the general cost of doing business is very high because of the perceived resources boom," he said.

"Everyone at Arafura is disappointed. We had progressed the site significantly with approvals and it is a good location with the right infrastructure, but it's just the world we live in," he said.

Opposition Leader Steven Marshall said the state was falling behind economically.

"We have the highest business taxes, highest electrical prices, highest water prices in any capital city and highest workcover rates – double the national average,” he said.

SA premier Jay Weatherill conceded the government needed to be more careful in spruiking large projects, abc reported.

"We did the thing we could do which was to provide speedy approvals, now to the extent to which we jump up and down and say this is going to happen is something we can control and we have to take a bit of care about that,” he said.

"I think this was a bit over-spruiked. It was always a speculative project but at the time it was always one that was a realistic project.”

"We did no more or less than back up what the company was saying about what they proposed to do, but I think we should be a little more cautious about that and obviously cases like this indicate that.

Earlier this year, Weatherill was in Perth in an effort to lure mining companies to the state.

Weatherill said he wanted more resource companies to base their operations in SA.

"We're trying to attract the mining services companies to use South Australia as a base, a hub for providing mining services for around the nation," he said.

"It's beginning to happen but we think that there is an ideal location here in South Australia to service the whole of the mining industry, not just around Australia but around the world."

Acting Minerals and Resources Minister Jack Snelling said with a pipelines of $25 billion worth of projects, the government did not regret being bullish about projects.

"I make no apologies for being optimistic about the South Australian economy," he said.

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