After a rollercoaster 12 months, the iron ore industry is again showing signs of the rapid growth that made it the powerhouse of the state’s economy before the global financial meltdown.
ACCORDING to WA Business News' annual major projects survey, there remains about $19 billion in new projects and expansions currently under way, while billions more in new projects are being revisited as conditions have recovered.
Looking back, the 2008-09 financial year was one of extremes, as the hot winds of fortune suddenly blew cold a year ago.
Mount Gibson Iron was an early victim, as several Chinese customers reneged on supply contracts, threatening to send the company into administration before a life-saving capital injection from its chief Chinese shareholders, Apac Resources and Shougang Steel.
Rio Tinto was also forced to suspend several expansion initiatives in the Pilbara as it shed more than 16,000 of its global workforce and trimmed its Pilbara production by 10 per cent.
Similarly, Fortescue Metals Group mothballed its own plans to double production from its Cloudbreak operations to instead focus on the ramp-up of its $3.7 billion stage one development.
At the same time, Australasian Resources' $2.7 billion Balmoral South magnetite project near Cape Preston was shelved when Shougang suspended a project funding agreement.
Even Gindalbie Metals' $1.8 billion Karara magnetite project was left in limbo by environmental concerns and delays in securing Foreign Investment Review Board approval of a $162 million equity deal with Chinese partner AnSteel.
Yet even at the depths of the downturn, there were signs of life.
BHP, which refused to defer either shipments or expansions, pushed on with its Rapid Growth Projects 4 and 5 jointly worth $9.4 billion to boost its annual Pilbara output to 205 million tonnes by the end of 2011.
Junior miner Atlas Iron also joined the ranks of producers by shipping first ore from its $10 million Pardoo mine near Port Hedland in December, and pushed on with plans to expand output to 6mt a year by 2010 with development of a second mine at Abydos, south of Port Hedland.
In the state's Mid West, Premier Colin Barnett threw his government's backing behind the proposed $4 billion Oakajee deepwater port and railway, declaring it the state's most important project for the next 50 years.
Mr Barnett then pledged $340 million to co-fund common-user infrastructure at the port, which was subsequently matched by the federal government, and awarded port developer Oakajee Port & Rail exclusive rights to develop an integrated heavy haulage railway linking Oakajee with the interior.
OPR responded with a formal commitment to spend $160 million on final technical studies, and now expects to approve construction by mid 2010 and commission the project in 2013.
Development of the Oakajee port and rail is critical for a number of projects in the region, including the $1 billion expansion of Mitsubishi/Murchison Metals' Jack Hills mine near Cue and Sinosteel's $580 million Weld Range operation.
Oakajee is also vital for the stage 2 expansion of Gindalbie's Karara mine to 30mtpa and a proposed expansion of Asia Iron's Extension Hill magnetite project.
Construction at Karara is itself poised to commence following belated environmental approval of the project last month, and FIRB approval of the AnSteel funding deal in the June quarter.
Significantly, Chinese demand for iron ore has recovered substantially since the end of the March quarter and contract prices have fallen by only around a third, far less than many analysts had feared.
Consequently, activity has steadily gained pace both at both ends of the sector.
The most significant development is the proposed $140 billion joint venture over BHP and Rio Tinto's Pilbara iron ore operations. The deal remains subject to clearance by international regulators, the FIRB and the state government, but it's expected the joint venture will be implemented by mid 2010.
The joint venture is expected to generate $10 billion in savings by allowing optimum use and expansion of the two companies' existing port and rail facilities.
Meanwhile, Chinese-owned Citic Pacific Mining remains on track to produce first concentrate and pellets from its $5.2 billion Sino Iron project near Cape Preston in the next year.
FMG, too, has revived its expansion plans after striking a new pricing deal with its Chinese customers last month. As a condition of agreeing to a 35 per cent cut in iron ore prices for 2010, FMG is seeking up to $6 billion in fresh funding from Chinese banks that will be used to double its production capacity.
Elsewhere in the Pilbara, Gina Rinehart's Hancock Prospecting continues to target a 2011 start for its $1.5 billion Roy Hill mine, while Tony Poli's Aquila Resources is stepping up work on its $4.5 billion West Pilbara iron ore and infrastructure development.
Aquila took a key step forward last week with a $286 million deal to sell a 15 per cent equity stake to China's Baosteel, which will then partner Aquila in its Australian iron ore and coal projects.
Yet analysts remain cautious about the future, especially for new entrants, and say the boom conditions of 2007 will not return.
"The pre-2008 boom is unlikely to be repeated, and the window of opportunity for establishing an infrastructure and resource foothold in the Pilbara to the scale that FMG has achieved is now closed," Credit Suisse analyst Nathan Littlewood said in a client note last week.
Regardless, a number of aspiring iron ore miners move forward in recent weeks, such as BC Iron, which is poised to commit to the $43 million development of its Nullagine project in the Pilbara after striking a joint venture and infrastructure deal with FMG.
Similarly, Pilbara juniors Moly Mines and Iron Ore Holdings each plans to start production within 12 months via $10 million "starter" operations at their Spinifex Ridge and Phil's Creek projects respectively.
The success or failure of such new entrants over the next year will provide a key measure of just how deep rooted the recovery in iron ore really is.
