There are not many mining projects on the cards for WA, but there are still opportunities in the sector for engineers and contractors.
There are not many mining projects on the cards for WA, but there are still opportunities in the sector for engineers and contractors.
New Zealand’s Todd Corporation and China’s Baosteel are shaping up as two of the most important investors in Western Australia’s mining sector in 2015.
While most investors have been shying away from mining projects, Todd and Baosteel have been putting money into the sector.
Family owned Todd Corp has been bankrolling Rutila Resources and Flinders Mines, which are working on closely related mining and infrastructure projects collectively worth about $2.7 billion.
On a larger scale, Baosteel is the biggest stakeholder in the West Pilbara iron ore project, likely to cost more than $7 billion.
The Rutila and West Pilbara projects are among just a handful of major ‘greenfields’ mining projects in WA that may proceed in the next couple of years.
The dearth of new mining projects in WA became apparent in 2014, when MZI Resources was one of the few companies to sanction a new project.
Its main contractor, GR Engineering Services, started work last month on the $70 million Keysbrook mineral sands project near Pinjarra.
In 2015, Sirius Resources’ Nova nickel project may be the only major ‘greenfields’ development to get under way.
Sirius announced last week it had locked in debt funding for the $473 million project, with work due to start early in 2015.
It has already selected the preferred contractors for Nova, with RJ Vincent, Barminco, Watpac Civil & Mining and Kerman Contracting named last month.
The shortage of new mining projects coincides with a sharp reduction in spending by the established miners; there is, nonetheless, substantial new investment still happening.
CITIC Pacific Mining is working to complete its trouble-plagued Sino Iron magnetite project, where the first two production lines are in operation and a further four are under construction.
CITIC awarded about $500 million in construction contracts this year, with Kerman Contracting, Monadelphous Group, Southern Cross Electrical Engineering and ECM securing the main packages.
About 1,600 workers will be on site during the peak of construction activity in 2015, with completion targeted by the end of 2016.
The major iron producers have largely completed their biggest growth projects but are continuing to invest in ‘brownfields’ expansions.
Rio Tinto’s annualised production capacity is currently 290 million tonnes and it is aiming for 350mt by 2017, and ultimately 360mt.
In a similar vein, BHP is aiming to lift production from 245mt this year to as much as 290mt by 2017.
Last week, Kerman won a $70 million contract to develop non-process infrastructure at Rio’s Nammuldi mine – a clear illustration of the ongoing opportunities presented by the majors.
Breaking through
With iron ore prices trading around $US70 per tonne there is no guarantee that any new projects will proceed, but that isn’t stopping Todd or Baosteel.
Todd, which is one of New Zealand’s largest businesses, advanced a further $5 million this month to Rutila, which is proceeding with front-end engineering and design for its Balla Balla project.
It has appointed AECOM to work on its 160-kilometre railway and BAM Clough to work on the causeway and jetty at its transhipment harbour.
Rutila managing director Nick Curtis insists the project is financially viable at current iron ore prices.
“It’s not worrying us, we are proceeding at full pace,” Mr Curtis told Business News.
Mr Curtis said the $2 billion project would be near the bottom of the cost curve because it had a relatively short rail line and did not need a deepwater port.
The foundation customer for Balla Balla will be Flinders, which is planning a 25mtpa Pilbara iron ore mine.
Todd recently invested a further $4.5 million in Flinders, which has engaged WorleyParsons to complete a bankable feasibility study.
Managing director Ian Gordon is cautious about what will happen after the BFS is completed in June next year.
“If the market is still really bad and there’s no appetite for iron ore developments, we will need to look at that at the time,” Mr Gordon said.
“But it’s really important for Flinders to complete the feasibility study because if the market improves, then we’ll be ready to go.”
Baosteel and its partners in the API joint venture – including rail company Aurizon and South Korean steel giant POSCO – are taking a similar approach.
Aurizon managing director Lance Hockridge said last month the joint venture partners were “collectively working at full speed” on the West Pilbara project, which is based on annual exports of 40mt.
Asked about the current weakness in iron ore prices, he said they were taking a “10, 20, 30-year time horizon” on the project.
Outside the iron ore sector, one of the most promising projects in WA is Sheffield Resources’ Thunderbird mineral sands mine near Derby.
Recent drilling results have enhanced the project, budgeted to cost nearly $300 million.
Sheffield’s broking house Hartleys issued a bullish research note this month, saying the project was “thundering towards development”.
Hartleys said there was potential for Sheffield to downsize the project to reduce start-up capital.
Longer-term opportunities in WA include uranium mines planned by Toro Energy and Cameco.
