WA’s Mid West is poised to become a thriving iron ore region: potentially one of the biggest in Australia and second only to the Pilbara. With more than 100 mineral, infrastructure and tourism projects driving this growth, the region is gradually becoming a major economic hub, as local employment figures rise and communities develop.
Mining in the Mid West has already boosted the region’s economy by delivering major employment and business opportunities, yet the area is still undergoing significant development, confirming its undeniable value. Due to the Mid West’s ample mineral resources, mining will continue to play an important role in its economy.
The Mid West’s estimated Gross Regional Product was about $6.1 billion for the 2010-2011 financial year, representing about 2.8 per cent of the State Gross Product. Mined resources included gold, talc, nickel, cobalt, copper, lead, zinc, iron ore, heavy mineral sands and chromite. In December, the Mid West Development Commission (MWDC) released an updated
Major Project Summary (MPS) outlining development activity in the region, which included detailed information on more than 100 projects with a combined construction value of more than $27 billion. With the expansion of iron ore to complement the extraction of other mined resources, the MWDC reported that it anticipated the region would experience another large growth spurt.
Production is forecast to begin at many large iron ore projects in the coming year, including Gindalbie Metals’ $2.57 billion Karara iron ore project, which is currently under construction. Integral to the success of these projects is the completion of the
multi-billion dollar Oakejee Port and Rail (OPR) project, which is still in the planning stages. The proposed iron ore mines will provide the tonnages necessary to underpin the development of the project. Without the necessary infrastructure that the Oakajee project will bring, many of resource projects will be put on the backbench, unable to function at full capacity with only the limited infrastructure currently available.
The $4 billion OPR project is the key infrastructure development in the Mid West that will deliver the necessary integrated transport to underpin the expansion of the region.
Due to be completed in 2015, the port and rail project, which includes the development of a heavy freight rail, deepwater port and industrial estate (at extra costs), has already delivered thousands of new jobs during the construction stage and will
secure long-term economic prosperity for Geraldton and the Mid West. The heavy gauge railway will potentially connect proposed major northern iron ore mines in the Murchison region (such as Sinosteel Midwest Corporation’s Weld Range project and Crossland Resources’ Jack Hills project) to the proposed Oakajee Port.
The WA and Federal Governments have jointly committed $678 million to fund the common user infrastructure of the import/export deep-water port, designed to handle an initial 45 million tonnes of bulk exports every year and accommodate 180,000t cape-size vessels. Landcorp (the WA State Government’s land development arm) is the proponent of the industrial estate, which comprises about 6500 hectares of WA State Government-owned land, currently farmed and awaiting power, water and gas servicing.
In 2009, after the signing of a State Development Agreement (SDA), OPR was given permission to build the multi-billion dollar deep-water port at Oakajee, 445km north of Perth, and an integrated rail link to the Mid West’s mineral resources. Major
engineering studies and environmental impact assessments are well advanced and OPR submitted its bankable feasibility study update in July 2011. In December, the State Government confirmed its support for the SDA beyond 2011. According to the Mid West MPS, construction of the Oakajee port and rail was expected to start after the acceptance of the BFS.
However, continual setbacks at Oakajee have caused construction or production delays at many mine sites relying on using the proposed infrastructure. Construction at both the Jack Hills magnetite project and the Weld Range hematite operations
have been put on hold until OPR has been given the green light. Production at Golden West Resources’ Wiluna West hematite project is due to begin this year but is also subject to successful negotiation of the infrastructure agreement.
“What is required is for every miner to reassess how they are going forward,” Geraldton Iron Ore Alliance (GIOA) chief executive officer Rob Jefferies said. “Projects haven’t dropped off, but [the delay of Oakajee] has meant that those projects, particularly those ones that that will drive the port, have had to relook at the way they are going forward. “The Murchison projects have probably been the most affected by Oakajee because they have planned to get that rail connection.
“Everyone supports and needs Oakajee to move ahead. If we don’t get it, the industry will be only a shadow of what it truly could be and the benefits for this region will only be a shadow of what it could truly be.
“But I don’t believe that there is one single miner amongst Alliance members that actually believe Oakajee won’t goahead. The issue is when and how.”
MWDC chairman Murray Criddle believed the recent move by Mitsubishi to purchase Murchison Metals’ share in the Oakajee project and the potential for Chinese investment in the project were positive steps towards a successful outcome.
“It is recognised that Oakajee is very important to the development of the Mid West iron ore industry as Geraldton Port is limited in terms of capacity and ship size,” Mr Criddle said.
“Delays in the development of Oakajee can obviously limit or delay the development of the industry in the Mid West. “It is therefore important that all parties work together to find a common, workable solution to the development of Oakajee.”
A significant, multi-billion dollar project that could potentially be jeopardised if the Oakajee project continues to be delayed is Gindalbie’s Karara project.
In 2009, construction began at Karara, a 50:50 joint venture project between Gindalbie and Chinese steel producer AnSteel. It incorporates numerous direct shipping ore (DSO) hematite deposits; the first shipment of Karara DSO was made at the end of March 2011, and production isexpected to ramp up to 2 million tonnes per annum in 2012. According to the MWDC summary, the initial projected annual output of high-grade magnetite production was 8mtpa.
Karara’s iron ore exports bound for China are currently leaving the Geraldton Port and, after facility upgrades, it is expected the port will provide the capacity to export up to 16mtpa.
However, resources at Karara are sufficient to sustain production of 30mtpa for more than 30 years, an amount Geraldton Port is unlikely to be able to support. The proposed Oakajee Port remains the planned export point for future production, but Gindalbie and AnSteel have had to rethink whether or not their future shipments will also go through Geraldton, considering the Oakajee Port may not be operating.
“Geraldton Port is currently pushing through 6 or 7 million tonnes per annum, but I don’t think anyone believes that Geraldton port will sustain 40 plus million tonnes per annum as an iron ore port,” Mr Jefferies said. Other iron ore projects In January, Crosslands Resources received environmental approval from the State Government for its flagship Jack Hills Expansion Project (JHEP), 350km northeast of Geraldton, which will increase current operations from nearly 2mtpa to in excess of 35mtpa, with an extended mine life of 25 years. The $3.9 billion project will consist of a large-scale, long-life iron ore mine and processing facility producing high-purity iron concentrate and DSO products for export to China, Korea and Japan. The
project will employ more than 2000 workers in the construction phase and around 1250 once operation commences, but construction will only begin once the Oakajee infrastructure is confirmed. “The JHEP is a potential game-changer for the Mid West because its size and scale will help underwrite the development of a new deepwater port at Oakajee and associated rail infrastructure,” Crosslands chief executive officer Andrew Caruso said in a recent statement.
Construction at Sinosteel’s phase two iron ore development, the Weld Range project, expected to produce 15mtpa of DSO for at least 15 years, is also on hold pending an agreement on OPR’s project. Phase one comprised the Koolanooka and Blue Hills projects, which commenced operations in 2010 and are currently producing 1.5mtpa.
Due to stringent state and federal health, safety and environmental requirements, uranium mining has not yet begun in WA, but there are a number of Mid Westprojects currently in the works. Mega Uranium, Toro Energy and BHP Billiton are all in various stages of completing the requirements necessary to begin uranium production.
Mega Uranium’s Lake Maitland site, due to begin construction in 2013, is targeting first production in 2014. Toro Energy’s Wiluna uranium project is currently in the advanced approvals stage for mining of the Centipede and Lake Way
Subject to a bilateral agreement due later this year between the State and Federal Governments, Toro predicts its first uranium production will occur in late 2013, with first sales the following year. BHP’s Yeelirrie project, the biggest out of the three at $500 million, is expected to begin production in 2014, producing initially about 2000 to 2500 tonnes per annum but increasing to 5000tpa of uranium oxide concentrate annually.
Other resources Regardless of the Oakajee project outcome and pending iron ore operations, other minerals also have development potential in the Mid West. A host of copper mines are due to begin production this year, including Sandfire Resources’ DeGrussa copper-gold project 150km north of Meekatharra and Minmetal Resource’s Golden Grove project expansion near Yalgoo, which is expected to produce 100,000tpa of copper concentrate. Vanadium is also expected to play a significant role in the growth of the Mid West. In January, Atlantic’s Windimurra project achieved its first ferrovanadium production and Reed Resources’ Barrambie project is expected to start producing vanadium in 2015. Lead, mineral sands and other resource projects are also advancing.
Thousands of jobs have already been created in the Mid West due to the construction and production of some projects and thousands more employment positions are expected to become availableonce production commences at the neweroperations. More than half of the $27 billion construction price tag consisted of 23 major resource ventures with an estimated development cost totalling more than $15.7 billion, creating about 13,000 jobs during construction and 6000 during operation. According to Mr Jefferies, iron ore in particular would contribute to the Mid West’s economy, producing jobs and education facilities that are needed in order for the industry to thrive. He said GIOA’s main goal was to maximise local employment on iron ore mines sites in the Mid West and that thousands of jobs would be offered in the region if the industry developed to anywhere near its potential.
“[Our goal] in the next five years is to have 4000 people working on iron ore mine sites in the Mid West,” he said. “Small companies and new companies are being established and are developing their projects, which will mean putting on more people in the region at those mines.” Other infrastructure projects The MPS also included information relating to various transport, telecommunications, private sector land development and community infrastructure projects. The completion of the Indian Ocean Drive in 2010 has enabled better and faster access to the region, and will become a major tourism and recreation route by reducing travel between Perth and the Mid West, while also facilitating regional growth. The national broadband network and various other communication projects are in the planning stages, and will provide greater mobile phone and internet coverage throughout regional towns. Electricity, water and gas projects (including solar and wind farms) are planned to cater for ongoing development in the region. Mr Criddle said in a recent statement the MPS indicated significant growth in construction projects across the region. “It is pleasing to see a number of projects relating to education, water infrastructure and power, as well as a lot of investment by the private sector and local governments,”
Mr Criddle said. “Sustainable growth of the Mid West requires balanced development of industry, public and community infrastructure, which hopefully triggers private sector investment in the region.
“This latest edition of the MPS shows that this is clearly occurring.” Future Once the future of the OPR project is determined – and the general industry consensus is positive – mining will continue to transform the Mid West, generating significant jobs and growth opportunities. The MWDC Mid West Investment Plan, which outlines the Commission’s key infrastructure priorities, is collectively valued at more than $3 billion and comprises more than 300 projects including economic, social and community infrastructure. On top of the $678 million State and Federal Government port funding, the MWDC has also secured $220 million to support additional infrastructure development. Mr Jefferies said the Mid West remained a very exciting region to be part of, with the first major projects being initiated and an increase in new companies looking at being part of the region’s development. “We’ve got a huge increase in exploration in the Mid West,” he said. “It’s an exciting year. There is some confusion at the moment with Oakajee, but we are confident we will get through that.”
By Helena Bogle