Transforming the copper state

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 21 Jan 2016   Posted by admin


By Samantha James

THE resources industry in South Australia is supported by government initiatives that are helping the state remain one of Australia’s top mineral exporters.

Once known as the ‘copper kingdom’ thanks to large discoveries made in the seventeenth century, South Australia also lays claim to the first commercial metalliferous mine in Australia, producing silver-lead ore from 1841.

In the years since, exploration and development of additional commodities including uranium, iron ore, gold, silver, zinc, mineral sands, zircon and graphite have put South Australia on the world’s resources map.

The state is the largest producer of uranium in Australia, hosting 80 per cent of the country’s reserves and 25 per cent of the world’s known uranium, and is home to the world’s largest uranium deposit, Olympic Dam.

BHP Billiton’s Olympic Dam mine is also the world’s fourth largest remaining copper deposit and fifth largest gold deposit.
South Australia is the sixth biggest copper producer in Australia, hosting 68 per cent of the country’s copper; it is the nation’s second highest mineral sands producer and boasts Australia’s largest magnetite deposit.

BHP Billiton is planning multi-million dollar expansions at its Olympic Dam polymetallic mine in 2016.

BHP Billiton is planning multi-million dollar expansions at its Olympic Dam polymetallic mine in 2016.

In 2004 the South Australian Government recognised the role that resources had in the state’s economy by launching the Plan for Accelerating Exploration (PACE), injecting more than $30 million into the industry.

This was extended in 2010 to assist exploration and development to 2020, and in November 2015 the PACE Copper program was introduced to devote a further $20 million to copper exploration.

PACE championed the copper initiative as refocusing South Australian exploration on its most abundant resource and pioneering the “transformation” of the industry.

A prolific history

Exploration, development and production has increased across South Australia in the past 10 years, thanks largely to proactive polices by current and recent state governments.

Since the introduction of the PACE program, exploration for minerals increased from $41 million annual expenditure in 2004 to $87 million in private investment in 2015.

South Australia’s copper, iron ore, base metals, uranium, gold and mineral sands exploration has delineated major mineral provinces across the Eyre Peninsula, Yorke Peninsula and Adelaide Hills regions encompassing the abundant Grawler Craton and Middleback Ranges geological formations.

BHP’s Olympic Dam uranium mine has been producing since 1986. Since then, uranium exploration and development – stalled by government policies and public opinion– has resulted in the long-producing Beverley and Beverley North uranium mines (operated by Heathgate Resources) and the Honeymoon mine (now owned by Boss Resources and currently on care and maintenance).

The Prominent Hill copper-gold mine has been in operation since 2009. Image: Oz Minerals.

The Prominent Hill copper-gold mine. Image: Oz Minerals.

Oz Minerals’ 100,000 tonne per annum Prominent Hill copper mine is another of the state’s long-term producers, in operation since 2009.

In 2011 the historical Kanmantoo copper mine in the Adelaide Hills joined the copper producing ranks, reopened by Hillgrove Resources to produce 137,000t of copper metal and 128,000oz of gold across its life.

Iron ore has also undergone a transformation in the state since 2000, with exploration expenditure increasing from around $1 million to between $50 million and $70 million in 2015. The production of iron ore also rose sharply during this time, from 3 million tonnes per annum to 11mtpa.

New developments in the Eyre Peninsula in central South Australia – such as Iron Road’s 20mtpa Central Eyre development and the Eyre Iron Joint Venture between Centrex Metals and Chinese steel major Wuhan Iron and Steel Group – are proving the potentially multi-billion tonne province has yet to be fully exploited.

Economic impact

South Australia was not immune to price drops across its major commodities in 2015, including iron ore which fell almost US$30 per tonne.

The South Australian Government aimed to increase investment in mineral and energy resources annual exploration expenditure from $648 million in 2013-2014 to $750 million in 2014-2015.

However, decreased exploration spending resulted in a total expenditure of $487 million for 2014-2015 – more than $160 million less than the target – and the vast majority of this was devoted to petroleum exploration, not minerals.

In the year to June 2015, mineral and petroleum exploration production was worth $6 billion – $1.1 billion less than in December 2013.

South Australia Chamber of Mines and Energy (SACOME) chief executive Jason Kuchel said that while the sector had been impacted by the global price decline, the industry outlook in the state was not dire.

South Australia Chamber of Mines and Energy (SACOME) chief executive Jason Kuchel.

South Australia Chamber of Mines and Energy (SACOME) chief executive Jason Kuchel.

“The reality is that despite the fact that it’s tough there is still plenty to be positive about,” he said.

“We’re not holding out for commodity price increases. We’re focused on how can the industry make a go of it at today’s prices, and that’s a very important message for investors and industry partners to understand. So often money can be made at those lower prices.

“Although companies have had to get their houses in order, we’re seeing that those companies that have done so are already talking about making additional investments.”

BHP Billiton, after cutting more than 600 jobs in South Australia in June and August 2015 – mostly at Olympic Dam, to ensure the mine was “sustainable” – later pledged hundreds of millions to expand the underground pit and surrounding deposits in 2016, aiming to increase copper output to 450,000t by 2024.

Mr Kuchel said SACOME’s mission was to refocus attention in the industry to the things that could be done, even at low prices.
“The media continues to focus on commodity prices, so that’s what people are seeing every time they turn on the TV or read the financial section of the newspaper,” he said.

“It’s not surprising that there is often talk about that. But as soon as we talk about some of the fundamentals – we put today’s prices into context and we talk about what companies are actually doing to return themselves to profitability – it makes a great deal of sense.”

SACOME collaborates with government, community and industry participants to “influence the public to understand the major benefits that are provided by mining and petroleum within South Australia”.

Government initiatives

PACE 2020 was launched in 2010 following the successful initial PACE program, which invested $30.9 million into exploration and development across seven years.

The program was initially slated to invest $22.5 million across five years, however in 2007 it was extended by two years with additional funding of $8.4 million.

The two-year, $20 million investment in PACE Copper announced late last year was the South Australian Government’s response to the challenges that have faced the industry in the past five years.

It aims to generate more than $400 million in private mineral exploration return for South Australia, create and retain up to 1000 direct and indirect jobs within the minerals industry and services sector, and drive exploration investment and discovery of copper to meet the copper production goal of 1mtpa by 2030.

“The government’s copper strategy talks about trebling our copper output and based on our known resources – let alone the potential resources in South Australia – that’s very achievable,” Mr Kuchel said.

In addition, the South Australian government launched the Nuclear Fuel Cycle Royal Commission in March 2015 to investigate the state’s potential participation in additional parts of the international nuclear fuel cycle.

Upcoming exploration and development projects are proving the Eyre Peninsula and Whyalla provinces in South Australia have yet to be fully exploited.

Upcoming exploration and development projects are proving the Eyre Peninsula and Whyalla provinces in South Australia have yet to be fully exploited.

“We’re hoping to see some very positive outcomes [from the commission], and not just in production,” Mr Kuchel said.

“We’d like to think that the opportunities for enrichment and participation in other parts of the cycle can also be realised for South Australia’s economic benefit.

“Global leaders understand that nuclear power, at least for a few more generations to come, is going to provide the biggest opportunity to reduce our global emissions,” he said.

“South Australia can play a vital role in that process.”

Mr Kuchel said a key hurdle to short term development of upcoming projects was the lack of infrastructure in the state.

“We do need to grow our infrastructure around bulk commodities ports and rail,” he said.

“Some companies want to see that infrastructure in place before they even spend the money to explore, so that’s something we will continue to work on with industry and government.

“The more infrastructure we can generate, the more investment we can generate.”

Outlook

Although some developments were stalled in 2015, Mr Kuchel said mining in South Australia was now moving forward with BHP’s planned Olympic Dam extensions and the reopening of the Cairn Hill iron ore mine by Chinese newcomer Cu-River Mining.

Rex Minerals’ Hillside iron ore-copper-gold project on the Yorke Peninsula was slated to begin producing as an iron ore-focused project; however in 2015, in response to the iron ore price environment, the company recommenced studies into the feasibility of developing an initial copper-gold only project with lower capital investment and higher grades.

In early 2016 it was completing environmental and community reviews with the aim of developing a mine capable of producing 24,000 ounces per annum of gold and 35,000tpa of copper with an initial mine life of more than 13 years.

Mr Kuchel said industry was working hard to remain sustainable in the low price environment.

“We need to be more productive and our potential developers are trying to find ways of mining those deposits in a way that would be financially viable even at low prices,” he said.