Recent spending approvals of $2 billion on the Hope Downs iron ore project and $11 billion on the next phase of the Greater Gorgon gas development have cemented Western Australia’s position as the leading state for major projects.
Recent spending approvals of $2 billion on the Hope Downs iron ore project and $11 billion on the next phase of the Greater Gorgon gas development have cemented Western Australia’s position as the leading state for major projects.
And while construction on these projects won’t start for some time, they will help underpin economic growth in the state, expected to reach 6.5 per cent in the coming financial year, according to latest estimates from the Chamber of Commerce and Industry WA.
In a surprise move late last week, Gina Rinehart’s Hancock Prospecting signed Rio Tinto as an equal partner to develop the Hope Downs deposit, about 70 kilometres from Newman.
It is understood Rio paid $231 million plus an undisclosed amount to buy-out Hancock’s 49 per cent South African partner, Kumba Resources, giving it operational control of the project.
The deal, negotiated in just two days, validates 35 years of work in proving-up 450 million tonnes in reserves at the deposit.
Speculation had earmarked Consolidated Minerals as a possible partner, however ConsMin is understood to have wanted 51 per cent and operational control – an unattractive prospect for Hancock.
Japanese miner Mitsubishi was also believed to be an interested party.
The partnership with Rio will deliver substantial cost savings for Hope Downs, bringing its Pilbara Rail and Dampier Port infrastructure to the table.
But there will need to be some expansion of this infrastructure to accommodate the 30mt the partners hope to mine each year, according to Rio Tinto Iron Ore chief executive Sam Walsh.
Mr Walsh, who took up the chief executive’s role in December last year, said the manpower that Rio brought to the project would also mitigate some of the effects from the mining industry’s current skills shortage.
He told WA Business News he was unconcerned about speculation over concerns surrounding the long-term price of iron ore.
Rio secured a 71.5 per cent price increase with steel mills earlier in the year, but Mr Walsh said this was only 3 per cent higher than 1981 prices in real terms.
Speaking at the Hope Downs deposit at the weekend, Mrs Rinehart said: “Rio Tinto gives our project the greatest certainty of development, and also provides us with the shortest timeframe to reach production.”
The next phase of expansion on the Gorgon development has confirmed that about two thirds of the engineering work on the project will be undertaken in WA, with the front end engineering and design (FEED) phase involving expenditure of $100 million over the next 12 months.
The downstream contract, which includes the liquefied natural gas facility on Barrow Island, has been awarded to the Kellogg Joint Venture’s Gorgon unit, which will establish its project management office in Perth.
The upstream design contract has been awarded to Australian entities JP Kenny and Technip.
This week’s CCIWA’s Economic Compass report said new projects were contributing to the strongest economic growth the state had experienced in 15 years.
But while the resources boom was expected to drive strong economic growth in WA for at least another year, the report noted the key question was how and when this would end, and what adjustments would be necessary to take the economy back to more sustainable growth patterns.
