12/09/2006 - 22:00

New projects to add commodity diversity

12/09/2006 - 22:00

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While the iron ore and oil and gas sectors dominate the outlook for project investment, Western Australia is in line to host a diverse range of projects in other sectors worth more than $5 billion.

While the iron ore and oil and gas sectors dominate the outlook for project investment, Western Australia is in line to host a diverse range of projects in other sectors worth more than $5 billion.

In the resources sector, potential projects range from Precious Metals Australia’s Windimurra vanadium mine, Gunson Resources’ Coburn mineral sands project, Moly Mines’ Spinifex Ridge molybdenum project and Straits Resources’ Yanarrie salt project.

In the manufacturing sector, Len Buckeridge’s BGC Group is likely to proceed with a $100 million brickworks at Perth Airport after gaining federal government approval recently.

Other potential projects include Lignor’s engineered strand lumber project, earmarked for Mirambeena industrial estate north of Albany.

The $250 million project has won substantial backing from the federal government and would provide an alternative market for plantation timber grown in the region.

However, there is no guarantee any of the projects listed in the table below will proceed. The inherent uncertainty facing all project proponents has been illustrated by the alumina and petrochemical sectors.

Alcoa and BHP Billiton have long been planning major expansion projects at their Wagerup and Worsley refineries, and both had been hoping to proceed this year.

But the BHP project remains in the feasibility stage after it was adversely affected by a marked increase in construction labour, equipment and operating costs.

BHP is hoping to improve the project through changes in design, new process technology and new mining plans.

The Alcoa expansion is on hold pending a decision by state Environment Minister Mark McGowan on whether to approve the project. Even if the project gets the green light, there has been speculation it may be deferred because of the increased costs.

The petrochemical sector tells a much sorrier tale.

Numerous projects based on the processing of WA’s abundant gas into value-added products have been put forward, but only one has proceeded.

Burrup Fertilisers completed construction of its $700 million ammonia plant earlier this year.

India’s Oswal Group, which is the major owner of Burrup, had considered a second plant but, like many other project proponents, was deterred by the high construction costs in the Pilbara and the rising cost of gas.

Instead, it has selected Papua New Guinea as the preferred site for its next project.

Several companies seeking to finalise their projects are currently working hard to deal with the rise in costs.

Precious Metals, for instance, is looking to implement an innovative contracting strategy to drive down costs at its Windimurra vanadium mine.

“A traditional EPCM style approach where one contractor or engineer oversees all of the development of the project may not be the most appropriate way to redevelop the mine,” the company said.

The feasibility study prepared by Hatch Associates, which estimated a total budget of $175 million, included an EPCM fee of $25.7 million.

Precious Metals’ alternative is to break up the work into a series of smaller packages.

“Smaller, second tier contractors and engineers may provide better options for PMA in the construction of Windimurra,” it said.

Moly Mines is trying to cut 25 per cent off the estimated $622 million capital cost of its Spinidex Ridge molybdenum project.

The cost review is part of its bankable feasibility study, which is due to be completed in the first quarter of 2007. Its review includes a hydrological survey to try and find an alternative water source closer to the mine site, in order to cut the estimated $100 million cost of developing its water supply.

Moly is also reviewing the necessity of having a secondary crushing facility, which was estimated to cost $25 million.

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