2009 was an eventful year for the Australian mining industry, with issues like Chinese foreign investment, uranium mining, climate change and the global recession all leaving their mark at some stage. In this final issue for 2009, MINING DAILY will list and explore the top five stories that have impacted the industry during the year.
5 — Ravensthorpe shelved and sold
Falling global nickel prices forced BHP Billion to suspend operations at its Ravensthorpe mine in Western Australia in January, less than one year after it was initially opened.
More than 1800 jobs were cut as a result of the closure, including 800 employees and 1000 contractors.
The nearby township of Hopetoun, which was developed around the mine, was also devastated.
The project, which cost $2.1 billion to develop, attracted criticism from analysts when it was announced four years prior and many expected the diminishing nickel prices to affect the day to day running of the mine.
BHP chief executive Marius Kloppers later conceded the decision to build the mine was not one of the company’s best.
However, the Hopetoun community received some good news at the start of this month, with the announcement that the mine had been sold to Canadian copper miner First Quantum Minerals.
BHP agreed to a sell for US$340 million, much less than its reported asking price of US$500 million.
First Quantum hoped to have the mine up and running in 18 months, albeit with a reduced workforce of 600 jobs.
4 — BHP Billiton-Rio Tinto iron ore joint venture
Rio Tinto and BHP Billiton announced a plan to combine their iron ore assets in Western Australia’s Pilbara region in the middle of the year, barely six months after BHP abandoned its hostile bid for Rio.
The companies reached an agreement for the US$116 billion joint venture earlier this month, which would see them join their total resources of 260 million tonnes of iron ore and share port and rail infrastructure.
They also hope to have a single entity company up and running in the second half of 2010.
BHP and Rio have said combining their assets will ultimately save them up to US$10 billion in production and development costs.
The deal raised the ire of China, whose steel makers said the union would give the two companies too much power in the market.
Together, the companies are responsible for up to one-third of the world’s seaborne iron ore exports.
3 — Rio Tinto-Chinalco merger collapses
Just before the above joint venture was proposed, Rio Tinto announced it had pulled out of a US$19.5 billion deal with Chinese state-owned resources giant Chinalco.
The agreement had drawn heavy opposition from both Rio shareholders many Federal politicians, including the then Opposition Leader Malcolm Turnbull, who said it was not in Australia’s interests.
The company was looking to remove a chunk of the massive debt it incurred when it purchased Canadian aluminium producer Alcan for $38.1 billion at the height of the market in 2007.
Had the deal gone ahead, Chinalco would have owned a 15% stake in Rio and had the right to appoint two non-executive directors.
The company announced it would pay off some of the debt through a US$15 billion capital raising to existing shareholders.
Rio has since had some difficulty divesting its Alcan assets to repay the debt.
The company recently announced the sale of Alcan Composites to Swiss machinery group Schweiter Technologies for US$349 million.
Since February 2008, Rio Tinto has announced asset sales of US$8.3 billion.
2 — Emissions Trading Scheme voted down
Australia’s response to climate change was without doubt one of the most contentious policy issues of the year.
The Rudd Government’s Carbon Pollution Reduction Scheme (CPRS) and particularly its Emissions Trading System (ETS) were subject to heated conjecture in Parliament throughout the year.
The CPRS was heavily criticised by mining lobby groups, because it initially offered only $750 million in compensation to mines, despite costing them around $9 billion.
The industry representatives were also unhappy that mining was not deemed an ‘emissions exposed trade intensive’ industry, which would have entitled it to less stringent conditions.
After initially blocking the legislation in the Senate in the middle of the year, the Opposition negotiated several amendments to the CPRS, including a doubling of the mining compensation to $1.5 billion.
The CPRS looked certain to be approved by the Senate earlier this month with the support of the Opposition, until the anti-ETS right wing of the Liberal Party successfully staged a coup to oust Malcolm Turnbull.
He was replaced with Tony Abbott and the legislation was duly defeated in the Senate.
1 — Stern Hu arrested
The tense relationship between Australia and China was put under further strain on the 5 July, when Chinese authorities arrested four Rio Tinto executives for alleged espionage.
Among the detainees was Stern Hu, a Chinese-born Australian citizen who was the company’s lead negotiator with the steel producers.
There was speculation the arrest was a retaliation by the Chinese Government for the collapsed Rio-Chinalco agreement and the failure to obtain the 40% discount to iron ore prices.
As stated above, China was also not pleased by the joint venture between BHP and Rio.
The 2009-10 financial year is the first time in more than 40 years there has been no agreed benchmark price with Chinese steel producers.
An official Chinese Government website later alleged that Rio had been undertaking corporate espionage in that country for six years.
Hu and his colleagues were finally charged after 38 days in detention with stealing trade secrets and bribery.
The incident placed future deals with Chinese state-owned corporations under a cloud and caused a great degree of diplomatic tension between both countries.
The four employees are still awaiting trial.