03/06/2010 - 00:00

Major players share common interest in coordinated strategy for the Mid West

03/06/2010 - 00:00

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The development of iron ore resources in the Mid West will require incredible cooperation between government, the private sector and local communities.

Major players share common interest in coordinated strategy for the Mid West

IN the distance, a fully laden iron ore train emerges from a gap in the surrounding ranges, which are dotted with slowly turning wind turbines.

Meanwhile, out to sea, a dozen bulk carriers lie at anchor, waiting for their turn to dock and fill their holds with more of the rich black iron concentrate and pellets needed to keep China’s voracious steel mills fed.

At the same time, a second train departs the nearby container facility, weighed down with consumer goods for the 100,000 residents of the bustling metropolis just 25 kilometres to the south, as well as the booming state capital four hours further down the line.

In the background is the hum of the massive desalination plant, while the sun flashes off the thousands of panels at the neighbouring solar farm.

Welcome to Oakajee, gateway to Western Australia, 2020.

Incredible maybe today, but it is a vision many believe is a realistic possibility for the Mid West.

The vision includes development of the $4 billion Oakajee port and rail network as the catalyst for a fundamental transformation of the site into the single most important import-export hub in the western half of the continent.

While Oakajee will be the gateway, initially for iron ore and later all manner of commodities and products, Geraldton will become the state’s second biggest city and the base for thousands of workers drawn to the region’s mines, infrastructure projects and new industrial development.

It will also be a landmark in sustainable development, with the nation’s biggest integrated network of renewable energy generators providing enough electricity to power all industry in the region.

With the development of the $2.5 billion Square Kilometre Array radio-astronomy project, Geraldton will also become a major science and technology base.

But as a group of senior Mid West industry and community leaders told a WA Business News forum, achieving the dream is only possible if governments, industry and communities work together to implement a coordinated development strategy for the region.

The next Kwinana?

Former state under-treasurer John Langoulant, who is now driving the $4 billion Oakajee project as chief executive of Oakajee Port & Rail, said the scale of the opportunity that would be created by developing Oakajee was staggering.

“This infrastructure project, I think, will be in the immediate time the most significant catalyst for the development of both the region and Geraldton in particular,” he said.

Mr Langoulant said Oakajee would “unleash a whole new iron ore precinct”, giving WA a more diverse iron ore production base and greater stability in terms of market access around the world.

“It then gives real life to the industrial estate so that it can mature into what could well be the next Kwinana of Western Australia. I think that’s well within this generation’s reach,” Mr Langoulant told the forum.

“The big challenge is ensuring we have the critical inputs to enable us to work, being labour, power and water, in a timely way.”

Fundamentally, the region’s success hinges on its emerging iron ore industry, which will effectively underwrite more than 570km of heavy rail and an initial 45 million tonnes a year port at Oakajee from early 2014.

But for OPR the hurdles remain momentous and require almost unparalleled synchronicity between its own planning activities, those of its foundation customers and of state and federal governments.

A delay or breakdown of any one link in the chain could be costly.

The Kingstream millstone

As a prime mover of the bold 2020 vision for the region, City of Geraldton-Greenough chief executive Tony Brun recognises more than most the scale of the challenge.

That is because Geraldton has been in a similar position before, more than a decade ago when Oakajee was last proposed as part of Kingstream Steel’s plan to establish heavy industry in the region.

Kingstream’s ultimate collapse due to the Asian financial crisis had both scarred the community and hardened its resolve to grasp the opportunity this time around by throwing its weight behind port-based development, Mr Brun said.

“The community is extremely receptive,” he told the forum. “Kingstream hurt the community so much – it went into a spiral of depression – that they don’t ever want to go back there.

“I think Geraldton, probably more than any other community, recognises that the port is the principal economic driver. Whether its Oakajee or Geraldton port, I don’t think they care, but they know that it creates so many jobs and prosperity that they’ll take it.”

According to Sinosteel Midwest chief executive Giulio Casello, that resolve was abundantly evident in the 143 community submissions lodged in support of the company after the Environmental Protection Authority’s surprising rejection of its plans to re-open a previously mined deposit near Koolanooka last year.

The 1.5mtpa Koolanooka mine is seen as a vital trial run for Sinosteel’s flagship $2 billion Weld Range project near Cue.

The result was the overturning of the EPA’s decision late last year, enabling Koolanooka to get under way.

Though the mine employs only 110 people, Mr Casello said the community recognised its importance as a precursor to more significant developments down the track.

“Koolanooka for us is a training ground,” he said. “The key thing is you have to build up capability, and as a company that is going to have 1,000 people during construction, 500 thereafter and will spend $2 billion, it’s great to have a place where you can develop people, and get your systems in place.”

People the key

With iron ore development in the region forecast to directly create more than 4,000 jobs annually for the next 25 years, people and skills shape as a key challenge for Geraldton, which currently has a population of around 37,000 but the potential to top 100,000 within a decade.

Mr Langoulant said although hiring locally was always preferable, the large scale of most projects and their specific skill requirements made a large fly-in, fly-out component inevitable.

For Martin Chapman, director of unlisted iron ore developer Cashmere Iron, part of the problem is the preoccupation with the “acute” labour needs created during project construction, without addressing long-term labour needs.

“Long term these are community building projects, and I think that long-term planning has to be part of the process,” he said. “The long-term training, involvement in the community, and establishment of a skilled workforce is what we’ve got to look forward to and plan for over 25 or 50 years.”

Mr Brun said part of the answer lay in providing the amenities, lifestyle and opportunities needed to encourage workers to relocate their families to Geraldton permanently.

Critically, land availability and relative affordability gave Geraldton a “huge strategic advantage” of established mining regions such as the Pilbara, he said.

There were already 3,000 vacant housing lots in Geraldton, another 3,000 lots with conditional approval, and a further 19,000 that could be released over the next five years.

“So for a worker and their family to come here, they can have a good lifestyle at an affordable rate, which is such a huge advantage,” Mr Brun said.

But for the region to retain its youngsters and attract new families, a key area needing attention is the provision of education and training services, according to Geraldton Universities Centre director Meredith Wills.

The GUC delivers courses from metropolitan universities to tertiary students in the Mid West, enabling them to gain their degree without leaving the region.

In its eight years, 147 students have graduated through the centre, mostly in nursing and teaching.

“Around 98 per cent of those people are working in the Mid West in their profession, so already the GUC has been able to really add value to the region,” Ms Wills said. “This is the sort of thing we’ve got to do so that people will remain in our region, and that they don’t take it for granted that they have to go to Perth to get their qualifications.”

Coordination needed

Despite the obvious logic of such investment, Mr Brun said state authorities remained more supportive of urban developments on the fringe of Perth where there were “no jobs, no water, no power and in the middle of nowhere” than strategic investment in Geraldton.

He also lamented what he called state planning bodies’ obsession with local planning and failure to establish an over-arching strategy to address state and regional level planning issues.

“No-one seems to be working on state regional issues,” Mr Brun said.

“We’ve got the capacity to do that lower level regional and local planning, the state doesn’t need to be in that space. They could reassign those resources to do some proper state planning because that is what is holding us back.”

Emergent Resources managing director Garry Hemming, also believes a more coordinated approach across government is needed. Emergent is planning to develop the remote Beyondie magnetite iron project between Newman and Wiluna.

While individual mining companies were showing a “remarkable level of co-operation”, the same was not always apparent within government, especially when it came to project permits and approvals.

“So coordination of all the government agencies is a critical issue ... and at the top of the list of priorities for me,” he said.

Perhaps the biggest issue, however, is the provision of energy, with demand from new mining projects and the SKA radio-astronomy project set to overwhelm both the region’s local capacity and the existing transmission line to Perth (see page 10).

Furthermore, scores of renewable energy projects are planned to take advantage of the region’s abundant wind, solar, wave and biomass potential, but will only be viable if they can supply power to Perth and South West industry via the main grid. That has made the $550 million construction of a 330-kilovolt line from Perth absolutely critical.

After two years of stalled progress, the state government last month provisionally allocated $318 million for the first stage of the line, from Perth to Eneabba.

But that remains subject to finalisation of a firm business case, and no guidance has yet been given on when the second stage might proceed.

Mr Brun said the significance of the line could not be overstated

“Without it, nothing happens,” he said. “Oakajee as an industry precinct is not a reality, the mines aren’t a reality, but most importantly from our point of view, the development of our region as an energy region is not a reality.”

Critically, it could facilitate sufficient renewable energy development to potentially meet the state’s 20 per cent renewable energy target as early as 2013, Mr Brun said.

Midwest Energy chief executive Richard Harris, who is planning a 200-megawatt solar project at Perenjori, said government had been slow to grasp the full implications of the line.

“Energy is a key component to making this whole region work,” he said.

“We actually have an opportunity to do things better in the Mid West, because it has some excellent natural energy resources. It’s a case of how you match those with the demands of the (mining) projects and the community ... so the government needs to understand how this all hangs together and what are the critical bits it needs to do.”

Similarly, the region’s century old network of narrow gauge rail to transport grain is also desperately in need of significant investment.

WestNet Rail business development manager Paul Hamersley said the emergence of the iron ore sector meant lines in iron ore-rich areas would probably be upgraded. But those in other areas would need government support to be a viable long-term alternative to road transport.

In particular, there needed to be recognition of the fact that heavy government investment in roads meant road users paid only a fraction of the real cost of transport, compared to rail customers.

“So we’d really look to government to invest directly in the network to get that level playing field,” he said.

With so many elements of the opportunities in the Mid West totally interdependent, taking full advantage will require unprecedented co-operation, goodwill, trust and determination.

“The tagline of our city is ‘Climate of Opportunity’,” Mr Brun said.

“The risk is that the tagline becomes ‘place of missed opportunities’.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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