Projects plan power back-up

Limited energy supplies in Western Australia are starting to have a significant impact on new resource projects, with at least two projects battling to secure their preferred supply arrangements.

Aspiring iron ore miner Grange Resources Ltd is considering a staged development of its Southdown project near Albany because of limited power infrastructure in the area.

Gindalbie Metals Ltd, which is planning an iron ore mine in the Mid West, may have to resort to contingency plans to meet its initial power supply needs.

Precious Metals Australia Ltd has secured gas supplies for its Windimurra vanadium project in the Mid West, but for a term of only three years.

These examples are symptomatic of the infrastructure issues arising across the state, with pressure on ports, railways, water supplies and most other infrastructure.

Energy supplies have been affected by the limited capacity of the electricity transmission network and the reduced availability of gas as a fuel source.

Western Power has increased its capital works spending to about $660 million this year and is planning further big increases over the next five years.

However it is still battling to keep up with fast growing capacity demands on the electricity transmission network.

Major projects coordinator Ian Buchanan said Western Power was subject to the same constraints as other project developers.

“Our view is that you need to allow at least two years for community consultation and environmental approvals,” Mr Buchanan said.

It would then take another two years to build a 200-kilometre transmission line.

“Its not straightforward with something like this, there is no quick fix,” Mr Buchanan said.

He said mining project developers did not always appreciate the length of time involved.

“There is a misconception that as soon as people make a commitment, then they can start construction,” Mr Buchanan told WA Business News.

Grange Resources will decide in July whether it will have to proceed with a staged development of its iron ore project.

By limiting its initial output to 3.5 million tonnes of iron ore concentrate, Grange would be able to obtain sufficient power from the existing transmission network.

It would look to increase output to 6.6mt by 2012, when Western Power is due to complete an upgrade of its transmission network to Albany.

In the Mid West, Gindalbie Metals leads at least four companies planning to develop large iron ore projects.

Chief executive Garrett Dixon said the company had already done a lot of work to secure energy supplies for its project, which was scheduled to start production in late 2009.

It has been conducting floral surveys, which is a precondition for environmental approval, and is working with Balfour Beatty United Group Infrastructure, one of only two groups that builds power lines in WA.

Despite this work, Mr Dixon said the company may have to utilise contingency plans for its initial power supplies.

“We will have to do some short-term measures, possibly, and it will cost us some dollars,” he said.

Regarding power generation, Mr Dixon said Gindalbie had opted for coal-fired power because it was not possible to lock in long-term gas supplies to meet its 100-megawatt power needs.

In contrast, Precious Metals, which needs to generate only about 18MW of power at Windimurra, has opted for gas for its Windimurra project, which is serviced by a dedicated gas pipeline.

It announced this week it has negotiated a $35 million three-year contract with an unnamed gas supplier, with an option for a three-year extension.

Chief executive Roderick Smith said PMA was probably the last customer to secure gas supplies until the next big gas project comes on stream.

“At the moment there is virtually no gas available,” he said.