Category: Mines and Quarry

The world’s biggest iron ore producer, Vale, has announced its intention to expand production despite a falling price. This follows similar announcements by Rio Tinto and BHP.

This expansion in production by the three largest iron ore exporters in the world, accounting for over 60% of the market, is puzzling and it may not be in the best interests of the resource owners in Western Australia and Australian taxpayers generally.

Why would firms pursue such a strategy? Western Australian Premier Colin Barnett has suggested the big miners may be flooding the market to reduce the price and drive higher-cost suppliers from the market.

Indeed, Vale’s CEO has indicated the objective is to displace competitors’ quantities. This is plausible as there are many producers that are marginally profitable at current world prices. They will likely exit the market if prices are reduced further.

Given the big miners’ market share, it stands to reason that higher production volume will have a negative impact on iron ore prices. Perhaps the big miners hope that once higher cost producers exit the market, prices may rise again.

However, there many reasons to suggest such a view is too simplistic and this strategy will not work.

Crucially, iron ore production is by and large a mining and extraction activity. This means underground resources do not disappear if a high-cost miner exits the market. Equally, once resources are mined, extracted and sold at a potentially low price, the resources are gone and its owners will not be able to enjoy future higher prices.

It may make sense for the big miners to ramp up production now, despite causing a reduction in prices, if there are particular reasons to believe the demand for iron ore will decrease in the future. If this were the case, then it might be better to sell now, even if at reduced prices, vis-à-vis selling in the future at even lower prices. But this is unlikely given that many countries in Asia, Africa and South America will still need steel to catch up to the level of development of richer countries.

Is this just supply and demand at work? Is it a case of lower-cost producers vying for larger market shares even if this happens at the expenses of these companies’ shareholders? Unfortunately this ignores the interests of those who own the resources.

Iron ore resources are owned by the state (that is, by the people). The economic rents – the income derived from the ownership of a resource that exists in fixed supply – are captured in two different ways in Australia.

The Western Australian government charges (ad valorem) royalties on the value of iron ore sales. By increasing production, causing prices to fall, the big miners’ action will affect the value of the royalties captured by the government. Even if the big miner’s revenue rises due to quantities rather than prices, royalties may still fall if other Western Australian producers exit the market.

Similarly, Australians at large benefit from the tax revenue collected by the federal government. As the corporate tax is levied on accounting profits, lower iron ore prices may mean lower tax revenue as well.

Again, even if prices increase in the future, Australian governments will not be able to fully capture additional revenue as many high-cost producers are located in other jurisdictions.

Mining companies own capital that can be driven harder, as well as owning the mining rights. Managers may be tempted to increase production and enjoy a higher return on capital even at the expense of not maximising the value of the resource over the life of the mine.

The public, however, captures the value of the resources through ad valorem royalties and the corporate tax system. This means the public would benefit from actions that maximise the value of the resources over the life of the mine.

The challenge for the big miners is how to overcome this temptation of any short-term gains from increasing production to capture market share, at the expense of reducing prices further, resulting in a reduced value for the resources over the life of the mine. The challenge for governments, on behalf of the resource owners, is to continue to challenge the big miners’ thinking as Premier Barnett has done.

The Conversation

Flavio Menezes does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Iron ore prices have been forecast to continue their decline, with expectations of a slump to as little as 70 US dollars per tonne, following falls to $77 this week.

A Western Australian parliamentary inquiry into the mental health impacts of Fly in fly out rosters has heard that workers avoid using antidepressants to pass pre-employment and random drug tests.

And Chevron has made plans to house up to 1200 workers on a new floating accommodation facility, which has been dubbed the ‘floatel’.

Austin Engineering is a leading designer and manufacturer of customised dump truck bodies, buckets and ancillary products used in the mining industry. We are also a complete service provider, offering on and off-site repair and maintenance and heavy equipment lifting services to customers including miners, mining contractors and original equipment manufacturers.

Austin Engineering has developed to new JEC bucket designs for Letourneau wheel loaders.

According to the manufacturer these buckets, the JEC L1850-2 and the JEC L2350-2, can hold approximately 28.3 and 38.2 cubic metres respectively.

The buckets are fully OEM compatible and designed with OEM specifications and bucket design limitations, cutting the potential for warranty implications for operators’ machines.

“Wear and fatigue life are improved through a heavy duty main shell plate,” Austin stated, “and the reinforced headboard provides high impact resistance”.

“Superior strength and resistance to deflection is achieved through a flat base design which provides a uniform bucket floor for grounding leveling and clean-up operations.

“Increased operator protection is achieved through a spillguard extension, along with improved visibility due to the numerous cut-outs in the headboard and the spillguard infill plate.”

The buckets also have increased performance and penetration due to a spade lip design, with a 15 degree edge angle in-lieu of standard 10 degree units.

Both buckets are fully customisable, with their structure having been optimsed by FEA analysis.

Northparkes is a copper and gold mine located 27 kilometres north west of Parkes in the Central West of New South Wales, Australia. Northparkes is a joint venture between China Molybdenum Co., Ltd (CMOC) (80%) and the Sumitomo Groups (20%).

The majority of our employees and their families live in the Parkes Shire, a diverse municipality centered in the town of Parkes, a thriving country town of about 12,000 residents. Parkes’ primary industry is agriculture but growth over recent decades from industrial, transport and mining sectors now means there is a diverse economic base in the town.

Northparkes operates underground block cave mines on its mining leases. Northparkes was the first in the country to use a variation of the cost-effective block cave mining technique in its underground operations. Underground block cave operations include the E26 Lift 2 and Lift 2 North (Lift 2N) block caves as well as the E48 block cave project. Open cut mining campaigns have been undertaken in the E26, E22 and E27 pits

Northparkes’ ore is processed on site to produce a high-grade copper concentrate which is then transported by road train to the Goonumbla rail siding approximately 13 kilometres from the mine. The containers are then placed on to a train and transported to Port Kembla, south of Wollongong, where the concentrate is then shipped to customers primarily in Japan, China and India.

Northparkes Mines owns 6000 hectares of land around the mine, of which the mining lease covers 1630 hectares. The remaining land is actively farmed using best practice farming methods developed and adopted to maximise productivity and quality while conserving water and soils.

As of 1 December 2013 the majority owner of Northparkes Mines is CMOC. Northparkes is CMOC’s first international asset. For more information on CMOC please read the factsheet below.

CMOC-Factsheet-(2)

注：该矿山与Sandvik Mining & Construction已合作20年。

I love this video made by ABC.

Our operations are currently underpinned by our new Narrabri underground operation which commenced longwall production in October 2012, and our three existing open cut mines – all situated in NSW’s Gunnedah Basin.

Construction has commenced at our Maules Creek project and and approval is being sought for our Vickery project, also located in the Gunnedah Basin. These projects are expected to provide significant and exciting career opportunities across a wide range of mining-related professions.

Maules Creek is one of the last major undeveloped and significant multi-seam coal deposits in New South Wales and is expected to sustain a potential project life in excess of 30 years, with average saleable coal production of 11.0 Mtpa.

The Narrabri mine is a modern, technologically-advanced underground operation with its new longwall already exceeding initial design production rates after only one year of operation. The mine will produce over 6.0 Mtpa with an expected life in excess of 25 years.

The company also operates a Coal Handling and Preparation Plant (CHPP) and rail loader near Gunnedah.

Whitehaven has an 11% interest in the Newcastle Coal Infrastructure Group (NCIG) which recently completed the construction of the final stage of a new coal export terminal at the Port of Newcastle. This is in addition to its port allocation at Port Waratah Coal Services.

Mount Gibson is a leading independent player in the Australian iron ore industry.

Established in Perth in 1996 and listed on the Australian Stock Exchange (ASX) in 2002, the Company owns and operates:

• Tallering Peak – a 3-million tonnes per annum iron ore mine in the Midwest region of Western Australia, approximately 175 kilometres east of the port city of Geraldton, which commenced production in late 2003.
• Koolan Island – a 3-million tonnes-plus per annum iron ore mine off the Kimberley coast of Western Australia, acquired through Mount Gibson’s successful takeover of Aztec Resources in 2007 and commissioned the same year.
• Extension Hill DSO (Direct Shipping Ore) – a 3-million tonnes per annum iron ore mine in the Mt Gibson Range, 260km southeast of Geraldton, where production commenced in late 2011.
• Geraldton Port – Mount Gibson’s established export base at Geraldton Port in Western Australia is a key asset, which gives the Company a significant competitive advantage, and a highly strategic role in the long-term development of the Mid West iron ore industry. Mount Gibson has long-term user and access agreements in place with the Geraldton Port Authority, including 50-year leases, and owns two storage facilities with a combined ore storage capacity of 360,000-tonnes. Mount Gibson also has long standing rail access agreements in place under which it transports ore from its Mid West mines to Geraldton for export. In May 2012, a major upgrade of the rail unloading facilities was completed at the port, which effectively doubled the Company’s export capacity from Geraldton Port to approximately 6-million tonnes per annum.

Tasmania will see the development of its first bauxite mine in over 30 years after approving Australian Bauxite Limited’s Bald Hill project in the state’s north.

Minster for Resources Paul Harriss said the new mine was an “exciting project” that would create jobs and economic activity.

The project is expected to create around 45 jobs, with operations expected to begin later this year.

More than 1.6 million tonnes of bauxite is expected to be mined for domestic and international markets from three pits on the site.

The ore will be shipped through Bell Bay.

ABX chief Leon Hawker said the mine will introduce a new bauxite supply to the seaborne market.

“We look forward to continuing and further developing the relationships that have been  built in Tasmania. I particularly wish to acknowledge the work undertaken and the  support of the Mineral Resources Tasmania, a division of the Department of State Growth  and the EPA and recognise the strong community support we enjoy.”