The Mining Blog

I am sure that you have seen the news about mining companies having to scale back coal production due to infrastructure problems.

Rio Tinto’s Coal & Allied Division announced a 20 percent cut in coal production due to bottlenecks in rail infrastructure and Newcastle Port. As a result, 250 miners will lose their jobs this month.

Other mining companies in the NSW Hunter Valley have also had to scale back production due to these same issues. The Austar mine last month announced that it would cut 79 jobs because it could not get enough port access.

Mining companies have tried to reduce the impact of the port problems by re-introducing a quota system for port access.

A consortium led by BHP Billiton has recently been granted approval to build a third coal export terminal. However, this will not open until 2009.

There has been a lot of people jumping up and down about this issue with the port infrastructure.

However, as an engineer, I understand that infrastructure and equipment has operating capacities. When designing systems to handle coal throughput, you only design the system for the required throughput.

Why?

We know that extra capacity or throughput costs more money. Therefore, predictions are made about requirements and the system is designed to meet those requirements. Any bigger, and it costs more - sometimes a lot more.

Recently, I was in charge of a coal handling system upgrade, and we were faced with the same issue. Many people wanted to know why we didn’t install larger conveyors, etc.

Another issue lies in accuracy of predicting coal output requirements. Some people were saying that the mining boom was going to continue; others were predicting an end.

Lastly, there is the issue of handling peaks in capacity. Sydney’s hospitality industry faced this issue during the 2000 Olympics. What happened after the Games finished? There were a whole lot of vacant motel rooms.

If you have sufficient capacity to handle any possible requirement, most of the time there will be idle capacity. Again, this costs money.

Sometimes, it is hard to make decisions about required capacity, and we are seeing the results of reaching capacity limits with our infrastructure due to the mining boom - just like we did with motels during the Sydney Olympics.

Calvin Close
Managing Director
Australia’s Mining Reference

You may have read about the Western Australian Environmental Protection Authority stopping Rio Tinto from expanding its Pilbarra iron ore project because it failed to protect five species of Troglobite.

Robe River Mining Company, a subsidiary of Rio Tinto, had proposed the $12.5 billion Mesa A project as an expansion of the Pilbarra iron ore project.

The Troglobite is a small invertebrate that is only 4mm long, has no eyes or pigment and lives 5 - 30 metres below ground. It cannot survive above ground.

During its investigation of the Mesa A Project, Robe River discovered 11 of these troglobotic fauna, and committed to setting aside a mining exclusion zone to protect them. However, the EPA said that five of the species live in the area to be mined, and do not occur in the mining exclusion zone.

This news has sent shock waves through the mining industry, with many people raising questions about balancing environmental concerns with the need to foster WA’s biggest ever mining boom.

As expected, Rio Tinto has said that it would appeal the decision.

This is not the first time that the EPA has rejected proposals for mining projects. Recently, they knocked back the Gorgon gas plant on Barrow Island due to the impact on the island’s rare turtle. The WA Environment Minister at the time, Mark McGowan, approved the project with a list of environmental conditions imposed on it.

There are other similar cases.

I do not want to write a long story about this news, because there are many news items that have been published about this already.

Instead, I want to open this up to people to comment about it.

What is your opinion about saving rare species of fauna at the expense of bringing great financial benefits to the WA economy?

Do you think the decision is justified?

Post a comment and let the minng industry know what you think…

Calvin Close
Managing Director
Australia’s Mining Reference

Who thinks that the Australian mining boom is over? Not me! I have reviewed the latest Mineral Exploration figures that have just been released by the Australian Bureau of Statistics.

In the December 2006 quarter alone, mineral exploration (excluding petroleum) rose yet another $36 million (9.5%) to $424 million.

This represents an increase of over 40% on the December 2005 quarter. The biggest gains were made in Western Australia (up $21.7 million) and Victoria (up $3.8 million).

Another major indicator is the number of metres drilled. In the December 2006 quarter, a total of 2,183,000 metres were drilled (up 7%).

All the figures above are seasonally adjusted.

Gold and Coal exploration expenditure had the largest increases, with both recording increases of almost 20%. In fact, not one mineral category experienced a decrease in exploration expenditure in the December 2006 quarter

We know that exploration expenditure precedes the actual mining. Although exploration alone doesn’t ensure that the actual mining takes place, it is one of the best predictors of future mining levels.

My prediction is for some pretty strong growth for some time yet.

Calvin Close
Managing Director
miningreference.com - Australia’s Premier Mining Reference

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A Parliamentary Committee has given the green light to the sale of Australian uranium to China. The committee has concluded that the sale would be in the national interest of Australia. IT was convinced that there are suitable measures in place to ensure that Australia’s uranium would only be used for peaceful processes.

Committee chairman Andrew Southcott said, “Both Government and opposition members of the committee have concluded that the sale of uranium to China, protected by these safeguards, is in the national interest”.

One of the so-called “measures” in place include China’s membership of the International Atomic Energy Agency (IAEA).

Australian Democrats Deputy Leader, Andrew Bartlett has said, “Australia’s bilateral safeguards are inadequate because they rely on the monitoring of the International Atomic Energy Agency, which the agency’s own director says is flawed.”

Even the Committee Deputy Chairman Kim Wilkie admitted that there were legitimate concerns about the effectiveness of the IAEA to monitor nuclear activity.

It is well known that China is increasing its nuclear capability. I cannot believe that we can adequately monitor what happens with the uranium once it leaves the Australian shores.

Don’t take my word for it, though.

Each year, the US Department of Defense releases a report on the military power of the People’s Republic of China. I will quote a few statements in their latest annual report to Congress, “Military Power of the People’s Republic of China 2006″:

Estimates place Chinese defense expenditure at two to three times officially disclosed figures. The outside world has little knowledge of Chinese motivations and decision-making or of key capabilities supporting PLA modernization.

DIA estimates that China’s total military-related spending will amount to between $70 billion and $105 billion in 2006—two to three times the announced budget.

If the Chinese government will not even be transparent about how much it spends on military-related spending, how can they be trusted about what they will use the uranium for?

I do not think that the estimated $250 million per year from uranium sales is worth the risk of Australia’s uranium powering China’s nuclear weapons.

What are your thoughts?

Calvin Close
Managing Director
Australia’s Mining Reference