The state government is seeking to coordinate an ambitious plan for the Kimberley region that would link a proposed $1 billion expansion of the Argyle diamond mine with $100 million worth of investments in the nearby Ord River irrigation area.
The state government is seeking to coordinate an ambitious plan for the Kimberley region that would link a proposed $1 billion expansion of the Argyle diamond mine with $100 million worth of investments in the nearby Ord River irrigation area.
It is hoping the go-ahead for the diamond project will underpin the construction of a new co-generation power station fuelled by sugar cane waste, which in turn would support the expansion of the Ord sugar mill.
The close link between the proposed mining and agriculture projects was revealed last month when Argyle Diamonds general manager commercial, Bruce Cox, joined a state government investment mission to South Korea to meet food company Cheil Jedang, which owns the Ord sugar mill.
The mission was led by one of the government’s top advisers, Department of Industry and Resources deputy director general Gary Stokes, and included Kimberley Development Commission chairman Geoff Gooding and Ord Cane Growers’ Association chairman Robert Boshammer.
The aim of the investment mission was to ensure that Argyle, Cheil Jedang and the sugar growers were aware of each other’s plans and would proceed in a coordinated manner.
The Argyle diamond mine is the region’s biggest employer and its long-term future will be determined next month when Argyle’s parent company Rio Tinto decides whether or not to proceed with a $1 billion underground extension.
Argyle is seeking royalty concessions from the state government, which it says are necessary to ensure the underground extension is commercially viable. In return it is seeking to boost its economic return to the region.
This includes an agreement to fund a feasibility study into the construction of a $62 million co-generation power station, which would supply the extra power needed for its underground mine.
Crucially, the co-gen plant would also improve the odds of Cheil Jedang proceeding with a $30 million to $40 million expansion of its sugar mill, which would more than double capacity to 1.2 million tonnes per annum.
From the state government’s perspective, the future of the east Kimberley region is at stake.
If Argyle does not proceed with the underground mine extension, the current open pit mine would close down in 2008 and the region would lose nearly 350 jobs, including many jobs for the local Indigenous community, and $30 million in services spending.
This makes it almost certain that State Development Minister Alan Carpenter will thrash out a royalties deal with Argyle to ensure the underground mine proceeds.
Equally, if the sugar industry does not expand and become more efficient, it could also close down.
The sugar industry has been adversely affected by low world sugar prices in recent years, but a recovery in the price this year has instilled some confidence.
The industry has also been constrained by the limited supply of irrigated land in the Ord, however, a recent Native Title settlement means the government is now able to release extra land for sugar farming.
CJ Ord Sugar logistics manager Wayne Paul said Cheil Jedang was currently spending $5 million to improve the efficiency of its mill, and had commenced a feasibility study on expanding the mill’s capacity.
Mr Paul said the efficiency gains flowing from the co-gen plant would be crucial when the company assessed the sugar mill expansion.
The ownership of the proposed co-gen power station is one aspect that is unresolved.
Argyle and Cheil Jedang are possible investors but a more likely outcome is that the cane growers would form a cooperative to develop the power station.
Mr Boshammer said a cooperative would qualify for government support and it would also give the cane growers extra revenue from sales of bagass to the sugar mill.
Sitting on the sidelines is power producer Pacific Hydro, which has a competing proposal for a new hydro electricity power station.
Pacific Hydro currently operates a 30-megawatt hydro station at Lake Argyle, which supplies power to both the diamond mine and the surrounding community, and has been discussing with Argyle the construction of a 10MW station at nearby Lake Kununurra.
The Bandicoot Bar power plant would cost about $25 million, making it a lot cheaper than the co-gen power station, but it would not deliver the same flow-on benefits to the region.
