SOUTH Australia is emerging as one of the world’s most significant mining regions, with many large-scale copper, gold, iron ore and uranium operations being realised.
In the early 2000s, there were only four operating mines in SA; there are now 20 mines operating and 25 mining projects set to begin by the end of 2030.
The resources sector is a significant contributor to the state’s economy, with mining accounting for about 5 per cent of SA’s gross state product.With current mineral output valued at about $5.9 billion, the state’s mining industry contributed $4.2 billion (or 38 per cent) to SA’s $11.2 billion export total during the 2010-2011 financial year.
The State Government has played a major role in the growth of the mining industry and the discovery of some of the biggest mineral deposits in SA.
For example, OZ Minerals’ Carrapateena copper-gold project was discovered in 2005 under the State Government’s Plan for Accelerating
Exploration (PACE) incentive program: a $30.9 million initiative designed to promote SA as a premier destination for mineral and energy
Due to its success, the State Government has contributed another $10.2 million to expand the PACE program. Known as PACE 2020, the
additional funding grant is intended to help mining companies move from exploration to mine development status.
According to SA Chamber of Mines and Energy (SACOME) corporate social responsibility director Dr Nigel Long, about 900 exploration licences had been granted for tenements throughout the state.
Exploration expenditure has significantly increased since the GFC battered the industry and it is anticipated that more than $300 million will be spent on exploration this year.
“The industry as a whole is pretty confident at the moment,” Dr Long said.
“We understand that global issues can cause anything to happen, but there is a good deal of confidence that we have a sustainable industry and a developing industry.”
Keeping PACE with industry The SA Government has invested a significant amount of money into the state’s resources sector to help fund exploration, developing the SA Exploration Initiative (SAEI) in the early 1990s.
The PACE program, established in 2004, resulted from an Economic Development Board recommendation that, in order to develop a significant mineral and energy sector, the Government needed to further invest in the industry to accelerate the rate of exploration leading to discovery.
The program was designed to promote SA as a world-class exploration area and boost private exploration expenditure in the minerals, petroleum and geothermal sectors.
Between 2004 and 2009, PACE invested a total of $22.5 million in the mining sector, including $10 million towards drilling programs for 168 projects in SA.
Dr Long said that the Government recognised the need for further funding because the mineral resources within the state were deeper in the ground than those in other mining states such as WA and Queensland.
“The resources are not as close to the surface as you might think, like with some of the coal or iron ore in the other states,” he said.
“It takes a lot longer for projects to develop because of the extra costs involved with removing that overburden.
“So for projects like Olympic Dam and Carrapateena, there will be significant costs before they actually develop a resource.”
PACE drilling contributed to a major step out deep drill test at Kingsgate Consolidated’s Challenger gold mine in 2006, and funded exploration for water through the Mt Woods groundwater program, which led to the establishment of a water supply for the Prominent Hill mine.
“PACE has been a significant contributor to the resource sector in a lot of ways, not just for the physical development of resources
but the money has also gone into [the] engagement with Aboriginal communities,” Dr Long said.
“There has been continued support for PACE over the next few years through the State Budget.”
Along with the extra $10.2 million for the PACE 2020 program, the SA Government has committed another $2 million to fund a geoscientific program to support expansion into the Woomera Prohibited Area (WPA) which contains an abundance of mineral resources.
The WPA, which covers 127,000 square kilometres about 450km northwest of Adelaide, has an estimated $35 billion worth of potential development in the pipeline including iron ore, gold and uranium prospects.
“The Government is really keen for companies to expand exploration in that area and [this funding] will be a significant contributor to increase the attractiveness for investors,” Dr Long said.
“That’s the idea behind [this funding]: to get international investment certainty despite the sensitivity of the area.”
As part of the 2012-2013 State Budget, the SA Government has also announced it will invest $38.3 million to establish the Mining and
Engineering Industry Training Centre. Due to open in June 2014, it will help train South Australians in mining, engineering, defence and
“We will be working quite closely with TAFE to ensure that they do target programs to meet what the industry is looking for,” Dr Long said.
“And the industry is very keen to help build the capacity and capabilities within TAFE to be able to implement those required programs.”
However, Dr Long added that despite these Government initiatives, the mining industry was now facing increased financial pressure from
the new Minerals Resource Rent Tax (MRRT) and Carbon Tax.
The MRRT, which was introduced on July 1, levies 30 per cent of the ‘super profits’ from the mining of iron ore and coal in Australia.
Dr Long said that when implementing this tax, there hadn’t been much consideration given to SA, which contained different commodities to other mining states.
He said he believed that magnetite should have been excluded from the tax.
“We are disappointed because we have predominately magnetite mines,” he said.
“Magnetite requires additional processing; it is not like hematite, where you can almost export it as is. “We only have one coal mine, but we
do have potential reserves of coal that could be exploited for unconventional gas fuel liquids and there may well be implications for those [coal projects].
“It just means that under this tax regime there will be additional layers of reporting and red tape for very little gain.
“We think that with the MRRT it is more about revenue raising than creating any sort of long-term benefits to the industry or to Australians in general.”
BHP Billiton’s Olympic Dam mine, about 560km north of Adelaide in the Gawler Craton region, is probably SA’s most well-known mining operation.
The Gawler Craton covers 440,000sqkm of crystalline basement in central SA, and contains prospective commodities including copper, gold, silver, uranium, iron ore and rare earth elements.
Olympic Dam is Australia’s biggest underground mine. It comprises not only the world’s largest known uranium deposit but also the fourth-largest copper deposit and large deposits of silver and gold.
In recent years, annual production has averaged about 180,000t of copper, 4000t of uranium, 80,000 ounces of gold and 800,000oz of silver.
These figures are likely to increase should BHP go ahead with its proposed$30 billion expansion project, which will involve construction of the world’s largest open cut mine.
BHP has received all necessary approvals for the expansion from the Federal, SA and Northern Territory Governments, but the company has not yet made a final decision.
Dr Long said that if the Olympic Dam expansion project went ahead, it would inject billions of dollars into the state economy and pave the way for future operations.
“The benefits will go beyond Olympic Dam: [the expansion] will be a real initiator for a lot of other projects as well because it will bring investment into the industry as a whole and will build up the activity here,” he said.
“There are obviously great positives if the project does go ahead, which I think it will.”
The expansion is centred on a new open pit mine that would operate simultaneously with the existing underground mine.
BHP has reported that by 2050, it expects the size of the pit would grow to 4.1km long, 3.5km wide and 1km deep, and anticipates that it would produce 60 million tonnes per annum of ore: equivalent to an additional annual production rate of 515,000t of refined copper.
Dr Long said that there was a lot resting on the Olympic Dam expansion project and if it didn’t happen there would be reduced confidence within the SA community.
“There has been a lot of build up surrounding this project in a lot of ways by different stakeholders; the public might have the expectation that it’s going to happen so, [if it doesn’t] their confidence might be hit,” he said.
“But it will still be a sustainable industry without the expansion.
“There are a lot of other projects in South Australia, obviously not of the same magnitude, so I think the industry will continue to grow even if this project doesn’t happen.
“We are hopeful that [BHP] will make a positive decision this year, but the reality is that the company will make a decision based on a range of factors.”
The Prominent Hill copper-gold project is 650km northwest of the Olympic Dam mine. In its first full year of production (2010), 112,171t of contained copper and 196,400oz of gold were produced.
This year, it is expected that copper production will remain between 100,000t and 110,000t: similar to production results in 2011. Gold
production for 2012 is expected to be between 130,000oz and 150,000oz. In 2001, OZ Minerals approved construction of the Prominent Hill Ankata underground project, which contains a high-grade copper-gold resource.
Production began there in March and it is anticipated that the underground pit will contribute an average 25,000t of copper and 12,000oz of gold annually for five years.
Throughout 2012, the underground operation will be ramped up and production is expected to reach 1.2mtpa by the end of the third quarter.
The average grade of the Ankata ore to be mined in 2012 is expected to be between 2.3 and 2.8 per cent copper. OZ has committed $70 million towards exploration at Prominent Hill in 2012, with $41 million earmarked for near-mine exploration and the remainder for regional exploration. Cairn Hill and Mt Woods Another significant SA project is the Cairn Hill mine: a joint venture between IMX Resources (51 per cent) and China’s Taifeng Yuangchuang International Development Company (49 per cent).
IMX’s wholly-owned subsidiary Termite Resources operates the mine, which is 55km southeast of Coober Pedy.
Cairn Hill, which began production in December 2010, produces 1.7mtpa of quality magnetite-copper direct shipping ore and has about four years of mine life remaining.
The operation has a current in-pit resource of 7.9mt grading 50.5 per cent iron ore and 0.39 per cent copper. IMX also owns the Mt Woods
exploration project, 12km southwest of Cairn Hill, which is believed to be prospective for magnetite and base metals mineralisation.
IMX entered into a JV with OZ, which is spending a minimum of $20 million on exploration on the Mt Woods project area for a 51 per cent
interest in the non-iron ore minerals. OZ is currently exploring for copper and gold at Mt Woods, which is close to its Prominent Hill mine.
During the March quarter, OZ completed significant drilling, with anomalies representing similar intersections to those discovered at
OZ also owns 100 per cent of the advanced Carrapateena copper-gold exploration project, which it purchased last year.
Comprising four exploration licences, the operation lies on the eastern margin of the Gawler Craton, 130km from Port Augusta and 100km
southeast of Olympic Dam.
The second hole funded by PACE at Carrapateena intersected 178.2m grading 1.83 per cent copper and 0.64 grams per tonne of gold.The SA Government believes this result attracted a number of mining companies to Adelaide. For example, Canadian miner Teck purchased 34
per cent of Carrapateena in 2005, and proceeded to drill more than 80 holes at the prospect.
The operation is currently in the exploration phase but has the potential to be in production by 2017-2018, should exploration and analysis prove successful.
Iluka Resources’ Jacinth-Ambrosia project, about 800km from Adelaide in the Eucla Basin, is the world’s largest highest assemblage zircon
The mine is capable of supplying about 20 per cent of global zircon demand and in its initial years of production produced about 300,000t
Mining is undertaken sequentially on two contiguous deposits using mining units that have a 1400t per hour feed rate.
Processing of the heavy mineral concentrate occurs at the Narngulu separation plant in WA and in 2011, the Jacinth-Ambrosia and Narngulu operations together achieved total zircon production of 323,000t.
A combination of exploration success plus updated operating and economic parameters resulted in Iluka recently increasing its reserves
by 13 per cent, its resources by 6 per cent and its mine life by 12 years.
Dr Long said that there were about 30 projects in advanced exploration stages, particularly on SA’s Eyre and Yorke Peninsulas.
Exploration and development company Rex Minerals has large-scale
copper-gold tenements on the Yorke
Since Rex discovered the Hillside copper-gold project in 2008, it has completed numerous mineral resource estimates and released a mine development plan estimating an output of 70,000tpa and a total mine life of 12 years.
Throughout the remainder of 2012, Rex plans to complete drilling at Hillside to expand on the existing resource, targeting a range of 1.6mt
The company also plans to test its highest-priority targets on the Yorke Peninsula, which it hopes will change the company’s status from an explorer to a producer.
So far, Rex has discovered 1.5mt of copper and 1.4moz of gold. “Rex Minerals is looking to start mining within the next five years and [the Hillside project] will be very significant,” Dr Long said.
There are a range of other mines currently under construction in SA, including Arrium’s (formerly
OneSteel) Iron Chieftain iron ore mine near Whyalla and its Peculiar Knob hematite mine 90km south east of Coober Pedy; IronClad Mining’s Wilcherry Hill magnetite project; and Centrex Metals’ Wilgerup hematite project.
Dr Long said the Braemar region was another area to watch, with great potential as a significant iron-ore province in Australia.
But he said that along with an expanding mineral sector came the need for more infrastructure.
He said there were a range of infrastructure issues that the state had to deal with, but added that industry was in continual discussions
with the Government to resolve them. Earlier this year, IronClad received final State Government approval to build a port at Lucky Bay to service its Wilcherry Hill project in the northern region of the Eyre Peninsula.
The new port will provide a multi-user shipping avenue for SA exporters by barging iron-ore out to ships and will include iron ore storage
“Companies such as IronClad are finding novel ways to export their ore in order to get their mines up and running,” Dr Long said.
“But for the industry as a whole, it’s not as efficient as if it were building a bulk commodity port. “So that is a priority in South Australia.”
Dr Long said that the SA Resources and Energy Sector Infrastructure Council recently completed a major study outlining the infrastructure
requirements for the industry based on the current projects in the pipeline.
“That study was quite extensive and we now know what is needed,” Dr Long said.
“It’s now hopefully a driver for government support and also for investors to build that infrastructure. “[This infrastructure] would also be of great benefit to regional communities as well, particularly in terms of electricity and roads, where infrastructure is inadequate.”
The next decade is looking increasingly positive for mineral exploration in SA, with many projects moving toward development.
“We are looking at potentially another $18 billion in minerals revenue in the pipeline, over the next 10 to 20 years, depending on how the
projects progress,” Dr Long said. “We have a lot of exciting iron ore projects coming online in the next few years as well but I think the key decision made this year will be that of Olympic Dam.
“We have a very supportive government in terms of wanting to promote and build the industry, so we are very pleased with that. “We would like the same sort of commitment from the Commonwealth Government to support the industry.”
By Helena Bogle