focus on albany

December 2002–February 2003 $3 (inc GST)

WESTERN AUSTRALIA’S INTERNATIONAL RESOURCES DEVELOPMENT MAGAZINEP

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Gas-to-liquidsNew game-breaker

Strand lumberFocus on Albany

EExxpplloorraattiioonnNeed for actionNeed for action

WESTERN AUSTRALIAN OFFICESDepartment of Mineral & Petroleum ResourcesMineral House • 100 Plain Street • EAST PERTH WA 6004Tel: +618 9222 3333 • Fax: +618 9222 3430 www.mpr.wa.gov.au

Office of Major Projects168–170 St Georges Terrace • PERTH Western Australia 6000Postal address: Box 7606 • Cloisters Square PERTH Western Australia 6850 Tel: +618 9327 5555 • Fax: +618 9327 5500www.mpr.wa.gov.au

INTERNATIONAL OFFICESEuropeGovernment of Western AustraliaEuropean Office • 5th floor, Australia CentreCorner of Strand and Melbourne PlaceLONDON WC2B 4LG • UNITED KINGDOMTel: +44 20 7240 2881 • Fax: +44 20 7240 6637Email: [email protected]

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Indonesia — JakartaWestern Australia Trade Office c/- Australian Trade Commission • Australian Embassy JI H R Rasuna Said Kav C15 - 16, Kuningan Jakarta 12940 • INDONESIA Tel: +62 21 2550 5331 • Fax: +62 21 522 7103E-mail: [email protected]

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MalaysiaWestern Australian Trade Office4th floor, UBN Tower • 10 Jalan P RamleeKUALA LUMPUR 50250 MALAYSIATel: +60 3 2031 8175/6 • Fax: +60 3 2031 8177Email: [email protected]

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People’s Republic of China — ShanghaiWestern Australian Trade & Investment PromotionShanghai Representative Office • Room 2208, CITIC Square1168 Nanjing Road West • Shanghai 200041THE PEOPLE'S REPUBLIC OF CHINATel: +86 21 5292 5899 • Fax: +86 21 5292 5889Email: [email protected]

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F R O M T H E D I R E C T O R G E N E R A L

F R O M T H E M I N I S T E R

Anniversary edition

Reaching 25 years in print is quite an achievement, and I’dlike to congratulate all those involved in making Prospectone of the world’s leading publications on major resources

investment opportunities.Prospect continues to be an important source of information for

its national and international audience. It is also a great avenuethrough which we can promote the many successes the industryand the Western Australian Government have achievedover the past 25 years.

And what an impressive period of development it hasbeen over the last quarter of a century. During that time,the value of mineral and petroleum output in WesternAustralia has risen from A$1.6 billion to more than A$26billion now.

In 1978, iron ore was the State’s number onecommodity, followed by alumina and nickel. Today,petroleum heads the list, followed by iron ore, alumina andgold.

What hasn’t changed is the critical role the resourcessector plays in the Western Australian economy. Todaymore than ever, a healthy diversified minerals andpetroleum sector is the cornerstone of our prosperity —and the nation’s prosperity as well.

In the past 25 years, Western Australia has grown to become the nation’s leading producerof mineral and petroleum products. Now, we also lead the nation in minerals and petroleumtechnology and expertise exports. And the future looks positive with several importantprojects reaching significant milestones and others waiting in the wings. Some of those arefeatured in this 25th anniversary edition.

I would also like to take this opportunity to wish all Prospect readers a happy and safeChristmas and new year.

Clive Brown, MLAMinister for StateDevelopment

In 1978, Prospect started as a 12-page newsletter. Since then, it hasgrown in stature as well as size. Prospect has always sought to provide information about key

aspects of the Western Australian resources industry. And not justminerals and petroleum products. Prospect also covers agriculture,wood processing, engineering, new technologies, communityrelations and environment as part of its brief.

In this milestone edition, you’ll also read a comprehensivefeature on exploration in Western Australia and the steps beingtaken to reinvigorate the industry.

The core aim of Prospect has always been to encourageinvestment in Western Australia — to create jobs and a betterstandard of living for Western Australians, in line with the State’ssustainable development policies.

Prospect now reaches about 10 000 subscribers each quarterlyedition, and with almost 8000 hits each quarter on the onlineedition, it continues to strengthen and expand.

As we move into our 26th year, you can be assured that Prospect will continue to provideyou with up-to-date information on opportunities and projects in the Western Australianresources industry.

May I also wish you a safe and enjoyable Christmas, and a prosperous new year.

Jim LimerickDirector GeneralDepartment of Mineral andPetroleum Resources

Prospect December 2002–February 2003 1

Prospect ISSN 1037-4590

Western Australian Prospect magazine is published quarterly by the Western Australian Government’s Department of Mineral andPetroleum Resources (MPR) and Aspermont Ltd. Editorial management: John Terrell, MPR Investment Attraction Division. Tel: (08) 9327 5555 • Fax: (08) 9327 5500. Advertising management: Aspermont Ltd, PO Box 78, Leederville, Western Australia, 6902. Tel: (08) 9489 9100 • Fax: (08) 9381 1848. Prospect has been compiled in good faith by the Department of Mineral and Petroleum Resources from information and data gatheredin the course of the magazine’s production. Opinions expressed in Prospect are those of the authors and not necessarily those of theDepartment of Mineral and Petroleum Resources. No person or organisation should act onthe basis of any matter contained in this publication without considering, and if necessarytaking, appropriate professional advice from other sources. The Department of Mineral andPetroleum Resources, its employees and contracted personnel undertake no responsibility toany person or organisation in respect of this publication.

Front cover: Exploration drilling at

Consolidated MineralsLtd’s Woodie Woodie

manganese project in theEast Pilbara.

Photo courtesy Consolidated Minerals Ltd.

ABN: 69 410 335 356

i n t h i s i s s u e �

Department ofMineral and Petroleum Resources

www.mpr.wa.gov.au

In this edition, Prospect looks atexploration, the all-important firstlink in the resources developmentchain. While things have beenrelatively quiet lately on theexploration front in WesternAustralia, a turn-around in thefortunes of the industry may not betoo far away. Turn to pages 7-21 formore details.

2 GAS-TO-LIQUIDSNew technology from Texas could allow small and largegas producers in Western Australia to turn uncommittedgas reserves into worthwhile gas-to-liquids projects.

3 NICKEL JUNIORSDespite mergers by several resource majors in recenttimes, junior nickel companies in Western Australia areproving that many opportunities still exist at the lower endof the food chain.

4 PLATINUMThe Panton Sill project in far north Western Australia isshaping up to become Australia’s first commercialplatinum–palladium operation.

22 STRAND LUMBERPerth-based company, Lignor Pty Ltd, has its sights set onAlbany as a location for a A$150 million engineered strandlumber plant.

23 ANNIVERSARYProspect has come a long way since being launched 25 years ago.

24 ALUMINAWestern Australia has plenty to boast about when it comes toefficiency with alumina production. Four of its refineries areamong the top ten lowest-cost producers in the world.

24 WATER STUDYResults of an exhaustive study to find a long-term solution forwater needs for the Eastern Goldfields–Esperance region.

26 FINANCIAL MODELLINGAn insight into how the experts evaluate the worth of resourceprojects.

RESOURCES MAP— INSIDE BACK COVERA subscription form appears on page 36

EEXXPPLLOORRAATTIIOONN

2 Prospect December 2002–February 2003

Gas-to-liquids

New technology a potential game-breaker

Western Australia’s vast gas reservescould be used to significantlyincrease Australia’s supply of

synthetic transport fuels, as well as otherpetrochemical products, employing a newgas-to-liquids technology.

Described by its promoters as a “game-breaker”, it has the potential to spearhead amarked swing from oil to gas-based fuels,delivering significant environmentalbenefits to the global transport industry aswell.

Vast reserves of natural gas exist offWestern Australia’s northwest coast, some ofwhich is unlikely to be developed in theforeseeable future using conventionaltechnology.

Texas-based Synfuels International willsoon present a business plan to interestedcompanies which it claims will make evensmall gasfields attractive for the productionof petroleum.

Perth-based Clough Ltd, one of Australia’smost experienced companies in the oil andgas industry, has formed an alliance with theHouston engineering firm S&B Engineeringand Constructors Ltd that could lead to thetechnology being employed on Australianfields.

Synfuels is successfully operating a pilotplant in Texas and a number of companieshave indicated that they are interested inbuilding commercial operations.

Initially the company envisages buildingplants that will process 10, 20 and 50 millioncubic feet of gas a day, scaling eventually upto 500 million cubic feet a day (similar to thevolume piped from the North West Shelf toWestern Australian markets) to producearound 100 000 barrels of hydrocarbonliquids a day, equivalent to a significantproportion of current Australian production.

Synfuels’ business developmentrepresentative for Australia, John Read, saysa soon-to-be released business plan isexpected to confirm that a 10 million cubicfeet per day processing plant, capable ofproducing 1200 barrels of light gasolineproduct per day, will cost in the order ofUS$30-35 million. The overall productioncost will be significantly less than US$20 perbarrel.

Mr Read points out that Australian oilproduction is expected to decline rapidly inthe next decade, and the use of Australia’smuch more plentiful gas reserves could helpfill the gap.

For small fields, a flow rate of a fewmillion cubic feet a day would be sufficientto justify its use.

The technology, developed by universityresearchers in Texas (after stumbling on itwhile working on an unrelated project),involves passing gas very quickly throughextremely high temperatures, the separationof hydrogen in the gas, a catalytic reactorand product separation.

The only waste product is steam, which ifcondensed and put through filters could beused as potable water — a valuablecommodity if the plant was established inarid areas.

A major advantage is that the transportfuel that is produced has the same benigncharacteristic as natural gas; it has muchlower levels of emissions than petroleumrefined directly from crude oil.

The plant is entirely self sufficient — theraw material, natural gas, is burnt in itsturbines to produce electricity and steam.

John Read says that Australian companieshave shown a keen interest in the technologyand he hopes Western Australia will be oneof the first places in the world where it isemployed on a large scale.

Beyond the test phase: Both small and large gasfields and downstream processing industries in Western Australia could benefit from a new gas-to-liquids technology that has been successfully tested in this plant in Texas.

For more details, contact John Read Management Services, Perth, on +618 9227 3221or [email protected]


Nickel juniors flourish

Emerging opportunities: Junior nickel producers in the Kambaldaarea, like Mincor at Miitel, are proving there are good rewards inre-working ground previously owned by major mining companies.

Get big or get out.That’s been the catch-

cry of some of the world’sleading resource com-panies in recent years.

While it may suit thelikes of BHP Billiton, RioTinto and WMC Resourcesto deal only in world-scalemining projects, it haspresented many excitingopportunities for smallerresource companies at thebottom end of the foodchain.

China LNG contract officially signed

Important signing: In Canberra recently, representatives from China and Australia put theirsignatures on paper, cementing a A$25 billion LNG sale and purchase agreement between thetwo countries. From left to right (foreground) are Jiang Longsheng, the Vice President of ChinaNational Offshore Oil Corporation; Rod Duke, Vice President Australia LNG; and John Akehurst,Woodside Managing Director.

The contract binding China and Australia LNG to a A$25 billion liquefied natural gasdeal announced in August 2002 has now been formally signed.

Partners in the North West Shelf project and representatives from the Chinese buyersexecuted a series of sale and purchase agreements in Canberra on 18 October 2002.The nine buyers are participants in a Chinese joint venture company that will import LNGinto China’s first LNG receival facility to be constructed at Cheng Tou Jiao, nearShenzhen, in Guangdong Province.The buyers include China National Offshore Oil Company (CNOOC), BP Global InvestmentCorporation and seven other companies that will use the gas in power stations and fordistribution through city gas networks to industrial and residential consumers.Commencing in 2005–06, Western Australia’s North West Shelf project will supply morethan three million tonnes of LNG per year to China for 25 years.In an associated development, an agreement was signed in Perth on 21 October 2002that will see CNOOC acquire an interest in the North West Shelf petroleum titles. CNOOCwill also secure rights to use North West Shelf Venture infrastructure to process gasowned by CNOOC for sale to the Guangdong LNG project.To give effect to these arrangements, a new “China LNG” unincorporated joint venturewill be established and CNOOC Limited will participate at a level of 25%, with each of theexisting North West Shelf Venture participants holding a 12.5% stake.The deal represents the first Chinese-equity investment in Western Australia’s A$9 billionper year petroleum industry.

The China LNG contract is expected to result in the construction of a fifth LNG processingtrain on the Burrup Peninsula.

This has been good for theresources sector in WesternAustralia where a new breed ofjunior nickel sulphide producerhas emerged. They are enjoyingsuccess by revitalising maturemining operations with lower coststructures, by applying selectivemining methods and through aninnovative approach toexploration.

Juniors such as MincorResources NL and IndependenceGold NL, which each acquirednear worked-out nickel minesfrom WMC Resources, are twoexcellent examples of small-scale

miners currently doing well.A senior resources analyst for stockbroker

Hartleys, Kevin Tomlinson, told the 2002Australian Nickel Conference that six juniorWestern Australian companies were nowamong the top 20 nickel sulphide producersin the world. They are Black Swan operatorMPI, which is positioned 7th in worldrankings; Mincor (12th with its Miitel andWannaway operations; Jubilee Mines (13thwith its Cosmos operation); LionOre Nickel(14th with its Emily Ann operation);Independence Gold (17th with itsLong/Victor project) and Fox Resources (19thwith its Radio Hill operation).

Mr Tomlinson said various commoditycommentators had forecast a 7–10% growthin world nickel consumption in 2003 and anaverage 3–4% rise per annum for the decade.

He said a supply deficit was likely in2003–04, mainly because no new nickeloperations were planned to come on streamanywhere in the world before 2005.

Mr Tomlinson said most of the success ofjunior nickel sulphide operators had come asa result of lower cost structures comparedwith majors. They also proved themselves tobe more flexible and able to adopt selectivemining techniques to narrower ore zones.Also, many ready-made exploration drillingtargets were lurking in existing geologicalfiles. This meant extensions to existingorebodies were a distinct possibility.

Some junior explorers are using down-hole and hand-held sensing equipment at themine face to detect new high-grade sulphidedeposits.

Importantly, they were proving themselvesto be internationally competitive. Majors likeWMC were more than willing to furtherprocess the ore from junior miners andmarket the upgraded (nickel, cobalt andPGM) products overseas.


It is now almost certain that Panton Sill,about 60 km north of Halls Creek in theKimberley region of Western Australia,

will host Australia’s first platinum–palladium mine.

Just over a year ago, Platinum AustraliaLimited with its Panton project and HelixResources NL with its Munni Munniprospect, were vying to become thenation’s inaugural platinum group metal(PGM) producer.

At the time, Lonmin, the world’s thirdbiggest platinum producer, was funding

feasibility studies for both the Panton Silland Munni Munni projects.

However, follow-up exploration atMunni Munni proved disappointing, to anextent that drilling at the site wassuspended in August 2002. Helix thenordered a complete review of explorationdata gathered in the vicinity of the oncehighly promising Ferguson Reef. Thereview is due to be completed by the endof 2002.

At 30 September 2002 Helix Resourcesreported that a high-grade thicker portion

of the Ferguson Reef contained 2.6 Mt at3.5g/t of palladium, platinum and gold.

Unlike most PGM operations around theworld, the Munni Munni resource isdominant in palladium, having a 6:1 ratio ofpalladium to platinum, which is unfortunategiven recent soft prices for palladium.

On the other hand, since acquiringownership of the Panton Sill leases in 2000,Platinum Australia has increased theproject’s identified resource from 387 000ounces to 4.5 million ounces of PGM plusgold credits.

P a n t o n S i l lDevelopment of Australia’s first platinum mine looms


Geologist’s delight: Platinum Australia’s senior project geologist, TonyGreenaway, alongside an outcrop of platinum–palladium ore at Panton Sill.

The new resource includes the high-grade Top Reef, which contains10.6 Mt at an average grade of 5.8 g/t PGM + gold, and the Middle Reefresource of 5.7 Mt which averages 3.4 g/t PGM + gold.

The high-grade chromitite PGM system within the Top Reef has anaverage overall width of more than one metre along a mainlycontinuous strike length of about 4 km, including an average of 1.9metres in the pre-eminent A Block.

This adds up to a significant resource, given that PGMs are amongthe least abundant of the Earth’s elements, with fewer than 10significant PGM mining companies in the world. Russia and SouthAfrica, two politically unstable countries, dominate PGM productionwith Canada’s Sudbury Basin producing much of the balance of worldsupply in the form of by-product material from nickel processing.

The emergence of a new platinum–palladium mine in Australia willbe strategically important for the nation, and further enhance WesternAustralia’s reputation as one of the world’s premier mineral provinces.

As part of its bankable feasibility study into the development of amine at Panton Sill, Platinum Australia sunk a 300-metre long, 73-metre deep decline so that a 650 tonne bulk ore sample could be takenfrom the high-grade Top Reef. Other bulk ore samples have beengathered from surface reefs around the Panton mining leases and sentto South Africa for pilot plant testing.

The metallurgical testwork and other aspects of the bankablefeasibility study are due to be completed in the first quarter of 2003.

Hills afar: The hilly countryside at Panton Sillin the far north of Western Australia that hosts

what appears to be a significantplatinum–palladium deposit.

continued overleaf �


This, according to Platinum Australiaexecutive director, John Lewins, should pavethe way for a construction start-up later inthe year, with production following about 12months later.

Metallurgical testwork being undertakenon the Panton Sill project has identified anew process capable of producing a high-grade PGM + gold concentrate suitable fordirect feed into a refinery. This would bypassthe need for a smelter, and effectively savePlatinum Australia about A$10 million eachyear in transportation costs.

Being able to produce highlyconcentrated base metal and PGM productson site will effectively eliminate the need forsmelting, and reduce export volumes fromabout 50 000 tonnes per year to 5000 tonnesper year. The base metals are likely to betrucked to Wyndham and shipped tomarkets overseas while the low-volume,precious PGMs will be flown under tightsecurity to Perth and then to specialistrefineries overseas.

The process uses standard flotation toproduce high-recovery, low-gradeconcentrate, which is then subjected to low-temperature calcination, followed byleaching to achieve more than 80% recoveryof PGM + gold. A precipitation recoveryroute is currently being tested that wouldproduce a high-grade PGM + goldconcentrate and a base metal concentrate.

The process also uses off-the-shelfequipment currently used in the Australiangold industry. In fact, it is similar to that setup at the Kanowna Belle gold mine, butemploys a subtle variation in temperatureduring the calcination process to separatethe PGMs and gold from the base metals.

The Panton Sill operation is expected toproduce between 100 000 and 130 000ounces of PGM and gold per year worthA$80–100 million, plus 1000–1500 tonnes ofnickel, 500–800 tonnes of copper and 50–100tonnes of cobalt worth another A$20–30million. The mine is expected to operate forat least 10 years and provide full-timeemployment for about 200 people, most ofwhom will be recruited from within theKimberley region. Capital costs inestablishing the Panton operation will be inthe order of A$80–100 million.

One of the interesting aspects of theproject will be the provision of power.Options include extending the hydro-electricity power grid south of Argyle, usingpower from a proposed tidal power stationat Derby (some 400 km away), usingliquefied natural gas from the North WestShelf or establishing stand-alone dieselgeneration on site.

from page 5


EExxpplloorraattiioonn::uurrggeenntt rreebboouunndd nneeeeddeedd

Peaks and troughs are synonymous with theminerals industry.

Disappointingly for Western Australia, theState’s highly valued mineral explorationindustry is currently in a trough.

A combination of factors, including native titleand low commodity prices, has caused mineralexploration spending in Western Australia toshrink 46% from A$704 million in 1996–97 tojust A$376 million in 2001–02.

There are concerns that, at this level ofexploration, the minerals industry may not besustainable in the longer term.

BackgroundIn April 2002, State

Development Minister CliveBrown established the Bowlerinquiry to investigate reducedlevels of private investment ingreenfields exploration inWestern Australia.

During the following sixmonths, the Member for Eyre,John Bowler MLA (pictured),spoke to a lot of people and examined anumber of potential strategies to achieve asustainable future for the State’s all-important minerals industry.

It was clear that the downturn ingreenfields exploration in Western Australiawas not peculiar to the State. It was aworldwide trend.

While Western Australia had a well-developed tenement management system, aglaring weakness lurked close by. It was inthe form of a legislative mismatch betweenthe Mining Act and the Native Title Act interms of the ability of mineral explorers toaccess land.

Mr Bowler said the State Governmentneeded to move urgently to allow the landaccess process to be like its much-vauntedtenement management system — in therealm of world’s best practice.

The way aheadMr Bowler’s vision for mineral and

petroleum exploration in Western Australiais to:■ Restore exploration so that the minerals

industry is sustainable in the long term;■ Establish a viable and significant

petroleum industry in onshore basins;and

■ Improve Western Australia’s position inthe world market for explorationinvestment.

There are currently around 12 000unprocessed exploration, prospecting andmining tenement applications in WesternAustralia, and the No. 1 priority of the StateGovernment should be to remove thebacklog as quickly as possible.

Only then will explorers and drilling rigsreturn to the field in numbers reminiscent ofbuoyant times of the past, according to MrBowler.

He said clearing the logjam ofunprocessed tenements, along with a minorupturn in the minerals industryinternationally, could inject more than A$50

The Bowler Inquirymillion per year into the searchfor minerals in Western Australia.

“Every effort, both of anadministrative and legislativekind, should be made to expeditethe granting of pendingtenements that, collectively,contain exploration expenditurecommitments totalling aroundA$460 million,” he said.

Another priority, among 33 keyrecommendations made by Mr Bowler, is tointroduce processes that guarantee thatheritage issues are dealt with in a timelymanner.

He also recommended the availability ofpre-competitive geoscientific data andanalysis in order to improve WesternAustralia’s competitiveness and sustaininterest in the prospectivity of the State.

To achieve this, funding to the GeologicalSurvey of Western Australia (GSWA) shouldbe maintained at least A$17 million per year.In addition, the capture of geophysical data,especially in greenfields areas, should beexpanded with a special allocation of A$24million over six years, as recommended bythe 2001 Fardon Review of Funding forGSWA. Such funding would be countercyclical to the level of activity within theexploration industry and, in effect, counterthe boom-and-bust nature of theexploration industry and retain geologicalskills within the State.

A significant fiscal incentive should alsobe given, in consultation with theCommonwealth and exploration industry,for investment in the search for minerals ingreenfields areas. Mr Bowler believes thatspecial conditions should apply to recognisethe greater risk and difficulty of exploring inless understood, remote parts of WesternAustralia.

Mr Bowler endorsed the concept of aflow-through share scheme, similar to thatoperating in Canada, which provides taxdeductions above 100% for expenditure onmineral exploration in greenfields areas.

Other recommendations made by MrBowler include:■ Providing information and guidance to

prospectors and small companies,assisting them through the Native Titleand Aboriginal Heritage processes togain access to mineral-prospectiveland, similar to the business supportprovided by the Small Business

The bare factsMineralsMineral and petroleum output in WesternAustralia account for 23% of gross Stateproducts and employment (directly andindirectly) for 20% of the State’s workforce.

■ Mineral exploration in Western Australiahas fallen every year since 1997.

■ Mineral exploration activity in 2001–02was 14% lower than in the previous yearand 46% lower than the peak of aroundA$700 million in 1996–97.

■ Exploration in greenfields areas (definedas more than 5 km from existing mines)has fallen 63% over the last five years.

■ Prices for most major commodities havefallen in recent years.

■ Currently, A$460 million of potentialexploration activity is associated withstalled tenement applications. Even ifonly 25% of this is converted to actualexploration expenditure, it wouldgenerate about 1000 new jobs, 400 ofthem in regional areas.

PetroleumDuring 2001–02 spending for petroleumexploration in Western Australia fell by 30%(A$207 million) from A$687 million in2000–01 to A$480 million.

The proportion of Australian petroleumexploration expenditure in Western Australiadeclined from 66% in 2000–01 to 54% in2001–02.

Mineral exploration expenditure (excludingpetroleum) in Western AustraliaTrend series versus seasonally adjusted data

19

94

Dec

Seasonally adjusted Trend

Exp

enditure

per

quart

er

($ m

illion)

19

95

Jun

1995 D

ec

19

96

Jun

1996 D

ec

19

97

Jun

19

97

Dec

19

98

Jun

19

98

Dec

19

99

Jun

19

99

Dec

20

00

Dec

75

100

125

150

175

200

20

01

Jun

20

01

Dec

20

02

Jun

20

00

Jun

Petroleum exploration expenditure,WA versus Australia(Adjusted to June 2002 dollars)

91–9

2

92–9

3

93–9

4

94–9

5

95–9

6

96–9

7

97–9

8

98–9

9

99–0

0

00–0

1

01–0

2

WA

EX

PEN

DIT

UR

E (

$ M

)

WA

% O

F T

OTA

L A

USTR

ALIA

NEX

PEN

DIT

UR

E

0

100

200

300

400

500

600

700

800

0%

10%

20%

30%

40%

50%

60%

70%


Source: ABS

Source: ABS


e x p l o r a t i o n �

Development Corporation andBusiness Enterprise Centres.

■ Pressing the CommonwealthGovernment to ensure adequatefunding in the 2003–04 Federal Budgetfor Native Title Review Boards and thefuture role and operation of “prescribedbodies corporate”.

■ Monitoring the effectiveness ofadditional resources with Native TitleReview Boards to deal with themismatch between the Mining Act andthe Native Title Act.

■ Introducing legislation to extend theterm of an Exploration Licence beyondfive years, if substantial spending onexploration in the fifth year warrants anextension.

■ Avoiding multiple heritage surveys overthe same ground.

■ An audited expenditure statement forannual Form-5 returns.

■ Introducing a bond system to avoidfrivolous plaints in the Wardens Court.

■ Expanding online tenement lodgementprocedures for mineral tenementapplications.

■ Increasing levels of State and Federalfunding for cooperative geoscientificresearch in Western Australia.

■ Removing the right of veto toexploration on private land.

■ Ensuring that land should not beconverted to a “conservation zone”without the Minister for StateDevelopment approving land-usechanges under Section 16 of the MiningAct.

Minerals — why are they so important?Minerals. Where would we bewithout them?

Every day we rely on them tomake our lives easier, fromtoothpaste that we use in themorning, from the motor car wedrive to work, through to thelight globe that glows in ourbedroom at night.

The sustainable developmentof Australia’s mineralresources is in the nationalinterest, because:

■ Mineral and petroleumproduction make up 35%of Australia’s goods andservices exports;

■ Capital investment in theresources sector accountsfor 12% of annual privatecapital investment inAustralia;

■ Australia’s balance ofpayments is criticallydependent on asuccessful resources sector.

Western Australia’s resources sector is very significant in terms of the nationaleconomy. It currently accounts for:

■ More than 48% of the nation’s mining and petroleum production.■ More than 60% of the nation’s mineral exploration investment.■ More than half of the nation’s petroleum exploration investment.■ Nearly 80% of the nation’s oil and condensate production.■ 100% of the nation’s LNG production.

■ Ensuring that the Departments ofMineral and Petroleum Resources andConservation and Land Managementare more pro-active in reviewing theconservation estate in terms ofproductivity for minerals andpetroleum.

■ Lobbying for joint venture agreementsto be free of the Goods and Services Tax.

■ Exempting the transfer of explorationtenements from WA stamp duty.

Mr Bowler’s recommendations weredelivered to State Development MinisterClive Brown in November 2002. The StateGovernment will soon decide onappropriate forms of action.

Quiet times: Diamond drilling at Western Area’s New Morning prospect at the Forrestania nickelproject — one of the few busy areas for exploration in the Goldfields area.

White knights: These are among a few day-to-dayitems that are derived from minerals andpetroleum.


New officers to speed up native title processing

The State Governmentis to invest more thanA$2.8 million to

speed up the processing ofmineral tenement applic-ations on land under nativetitle claim.

Deputy Premier EricRipper, who is the Ministerresponsible for native title,said the funding would beused to recruit 11 specialistofficers who would dedicatetheir time to resolving landaccess issues.

Mr Ripper said thesuccessful negotiation ofnative title issues was vital to stimulatemining, exploration and prospecting, andit was in the State's best economicinterests to assist native title representativebodies.

“Respect for native title rights and theencouragement of economic developmentare not conflicting aims,” he said.

“Everyone recognises that these issuescan often be resolved through negotiation.

“But, the success of negotiationdepends on how well the parties areresourced.”

Four of the officers will be employed bythe Department of Mineral and PetroleumResources (MPR), while the balance will berecruited by indigenous land councils:Goldfields Land and Sea Council (two),Yamatji Land and Sea Council (two), SouthWest Aboriginal Land and Sea Council(one), Kimberley Land Council (one), andthe Ngaanyatjarra Land Council (one).

“Land councils have heavy statutoryresponsibilities under the Native Title Actand it is the Commonwealth Govern-ment's job to properly fund them,” MrRipper said.

What worried Mr Ripper most was thatFederal funding to land councils hadremained static since 1995–96. This meantland councils were increasingly unable tokeep up with the workload.

This initiative by the State Governmentwas in line with recommendations of atechnical taskforce on mineral tenements,chaired by National Native Title Tribunalmember Bardy McFarlane and includingmining industry, indigenous andGovernment representatives.

The chief executive officer of theWestern Australian Chamber of Mineralsand Energy, Tim Shanahan, and the CEO of

the Association of Mining and ExplorationCompanies, George Savell, both welcomedthe latest government initiative to addressthe native title issue.

Mr Shanahan said the extra money wouldgo some of the way towards addressing theissue, while Mr Savell described it as apositive first step.

“I still have reservations about the level ofresources that will eventually be needed tocope with the day-to-day inflow of mineraltitle applications on top of the 12 000unresolved titles currently in the backlog.”

Mr Savell suggested that many morepeople would be needed to help processthese claims within a reasonable time.

Help on the way: Senior Case Manager Phil Mirabella andcolleague Karen Pye will soon be welcoming another four officersinto the Mineral Titles Division of MPR to assist in the oneroustask of clearing a backlog of some 12 000 unresolved mineraltenement applications in Western Australia.

Endorsement of a flow-through sharescheme by the Australia Government,similar to that adopted in Canada,

could be the trigger that Australia needs toreverse a worrying slump in mineralexploration.Mining company chairman and formerstockbroker, David Reed, told the 2002Australian Nickel Conference that a circuit-breaking initiative like this was needed toproduce a sustainable upsurge inexploration expenditure, particularly inWestern Australia, the target of mostmineral exploration in Australia.He said flow-through share incentives wereinstrumental in the discovery of diamondsin the Northwest Territories, theLoouvicourt base metal mine in Quebec,and two high-grade precious and basemetal mines elsewhere in Canada — atEskay Creek in British Columbia andLindsley in Ontario.Those discoveries have caused a majorupgrade of the perceived prospectivity ofCanada.The basic concept of flow-through is that aperson subscribes for shares in acorporation, and the corporation uses thesubscription proceeds to incur certainresource expenditures. These expensesare then renounced back to the subscriberwho claims the expense for taxationpurposes.In October 2000, the Canadian FederalGovernment introduced a 15% non-refundable tax credit. This credit is inaddition to the existing 100% deduction foreligible exploration expenditures from thefederal portion of one’s taxes. Todistinguish it from the fully deductibleregular flow-through, investors are calling

this new credit-enhancedversion “superflow-through”.In addition tothe super flow-through benefit,the OntarioProvincialGovernment hasgiven a 30%bonus taxdeduction formineralexplorationinvestment, while the Quebec ProvincialGovernment has extended its maximumdeduction to 175% for exploration in certainlocations. In the Yukon, the refundable taxcredit to companies has been increasedfrom 22% to 25% for eligible mineralexploration expenditures.Mr Reed said Australia relied on miningmore than most countries, especially as ameans of generating export earnings.“It is clear that exploration levels are at acrisis point and, if neglected, the positioncould become crippling both to the industryand the nation,” he said.“There is a need to reverse the currenttrend with commercially driven, tax effectiveincentives that are proven internationally inCanada.“Flow-though shares could be the answer inAustralia.”Mr Reed understands that the FederalMinister for Industry, Tourism andResources, Ian MacFarlane will be sendinga government officer to Canada to gatherbackground on its flow-through sharescheme.

Plea for flow-though tax incentives

David Reed


Brownfields vs GreenfieldsRecent Federal and State

inquiries into shrinking mineralexploration in Australia raised a

few interesting questions, not least ofall the difference between brownfieldsand greenfields exploration.

Does greenfields exploration meanthe search for minerals in a frontierarea, as opposed to that in a maturemining area? Does it meanexploration within an ExplorationLicence as opposed to a Mining Lease?And at what distance (from anestablished mining location) shouldthe transition from brownfields togreenfields occur?

These issues were closelyscrutinised after staff at theDepartment of Mineral andPetroleum Resources (MPR) noticedglaring differences in figurespublished by the Australian Bureau ofStatistics (ABS) with industry trendsand anecdotal evidence.

What exploration companies,drillers, government departments,politicians and people in regionalcommunities all know for certain isthat there has been a major slump inexploration spending in Western Australiaover the last five years.

The following graph shows thatexploration spending more than 5 km frommine sites (nominally greenfields) hasdeclined from 40% of the total in 1997 to just28% of the total in 2001.

(Based on +/- 5 km from mine sites)

0%

10%

20%

30%

40%

50%

60%

70%

80%

1996 1997 1998 1999 2000 2001

Per

cent

age

of t

otal

est

imat

ed e

xplo

rati

on

<5 km (brownfield)>5 km (greenfield)

Greenfields versus brownfields trends (1996–2001)

Other points from the MPR analysis include:■ The number of granted tenements greater

than 40 km from mine sites(unquestionably greenfields tenements)has dropped from 1407 in 1997 to 802 in2001, a decline of 43% over four years. Suchgreenfields tenements represent only 7% ofthe granted tenements. This supports the

concept of the shrinking area ofgreenfields exploration (seeillustration in centre column).

■ The exploration expenditure ongreenfields tenements has droppedfrom A$76 million (1997) to $A45million (2001), a decline of 41% overfour years.

■ That exploration expenditure inundisputed greenfields areas ( morethan 40 km from mine sites) hasdropped from 2.0% (1997) to 1.2%(2001) of reported expenditure ongranted tenements (includingmining and all other costs). Thishighlights how little of industry’stotal costs are directed to high-riskgreenfields exploration.

In the final analysis, MPR resourceexperts found that the real future lies ingreenfields exploration, if world-scalemining projects in Western Australia areto be sustained in the long term.

While brownfields developments(those that generally involve exploitingsmall, low-cost pockets of ore close toexisting mines and infrastructure) tend tomaximise shareholder returns in theshort term, the people of WesternAustralia are less likely to reap benefits inthe longer term.

Consequently, every effort should bemade to encourage explorationexpenditure in areas away fromestablished mining operations.



P r o s s e r I n q u i r yMore recognition — and money — needed for mineral exploration

The Western Australian Governmenthas put forward a strong case to itsFederal counterpart for a more

coherent and realistic fiscal regime to helpstimulate greater investment in mineralexploration across Australia.

The State’s submission to the House ofRepresentatives’ Prosser Inquiry intoimpediments to exploration asserts thatWestern Australia’s mineral and petroleumresources endowment is of strategicimportance to the growth of the nation’seconomy. The Western AustralianGovernment believes greater recognitionshould be given to exploration as theessential first phase in the development ofthese resources.

Being the nation’s most prospectivemineral State — more than 60% of allmineral exploration in Australia is carriedout in Western Australia — there is plenty atstake for WA. Disappointingly, the amountoutlaid on mineral exploration in Australiahas fallen by almost half, from A$1166million in 1997 to A$664 million in 2001. Inreal terms, mineral exploration in WesternAustralia is now at lower levels than duringthe recession years of the early 1990s and thelowest since at least the mid-1980s.

This has had a detrimental impact onemployment in the exploration and drillingsectors of the resources industry, not tomention the adverse economic impact onkey mining towns in Western Australia suchas Kalgoorlie–Boulder, Leonora, Lavertonand Norseman.

The State Government’s submissionrecommends the development of a nationalmineral and energy policy. Remarkably, nosuch policy exists. That is despite the factthat tens of billions of dollars worth of coal,oil, gas, gold, nickel, diamonds and otherminerals in the ground are strategic assetsfor Australia.

It believes the provision of state-of-the-art geoscientific data is a key mechanism forraising investor perceptions about themineral prospectivity of Australia. TheDepartment of Mineral and PetroleumResources in Western Australia is alreadymarketing the State’s mineral prospectivityto the broader investment world. However,for Australia to remain globally competitive,a national approach is required to firstacknowledge the importance of explorationfor economic growth.

In total, the State Governmentsubmission contains 24 differentrecommendations — all aimed at removingperceived impediments that are slowingdown exploration spending.

In particular, the Western AustralianGovernment believes that special attentionshould be given to increasing greenfieldsexploration. It asserts that theCommonwealth should acknowledge thatdeclines in greenfields exploration are morethan just cyclical and related to commodityprice cycles. A worrying trend is that manybig companies are opting to acquire knownresources rather than pursue the challengeof finding the “grand prize” via the higherrisk greenfields exploration route. It is timeto recognise that company growth throughacquisitions, rather than discoveries, may begood for company share values in the shortterm, but is not a sustainable policy forAustralia in the medium to long term.

The State Government submission alsocalls for:■ 150% tax write-offs on exploration to

companies with a taxable income, ordollar-for-dollar subsidies forcompanies that do not have a taxableincome.

■ The introduction of a “flow-throughshare scheme” for greenfieldsexploration in designated regions of

Australia. Basically, that means taxbenefits should be transferred back toshareholders in situations wherecompanies do not make a profit fromexploration.

■ An increase in Commonwealth fundingto the National Native Title Tribunal tospeed up the back log of mineral andpetroleum titles required by WesternAustralia to ensure sustainability of itsresources industry.

■ A cooperative effort between the Stateand Commonwealth to streamlineenvironmental approvals for bothexploration and development projects.

■ Increased Commonwealth funding forgeoscientific research in universitiesand cooperative research centres.

■ Increased Commonwealth funding formodern airborne and ground-basedgeophysical surveys and high-technology laboratory-based studies ingreenfields and frontier areas in orderto kick-start new explorationinvestment.

■ The building of seamless geoscienceand mineral deposit databases — to beavailable free of charge to investors viathe internet.

■ Higher levels of State assistancethrough revenue or expendituremeasures to sustain Western Australia’salready substantial contribution to theFederation.

■ A review of the zone allowance rebatesystem so that it more effectivelycompensates for the disadvantages ofliving in areas remote from major cities.

■ An increase in funding under theRegional Mineral Study Program.

Next stepsA series of hearings will take place around

Australia before the end of March 2003 togain wider input from industry and thecommunity.

Then, the House of RepresentativesStanding Committee on ResourcesExploration Impediments will report toparliament with a series ofrecommendations in a bid to reshape theFederal Government’s resources policy —and hopefully come up with strategicmeasures that will stimulate greaterinvestment in exploration, especiallygreenfields exploration.

Stating our case: Federal politician GeoffProsser with Western Australia’s submissionthat seeks greater recognition of theimportance of mineral exploration.


Perth will be the base for exploration inregions with half the world’spopulation as Anglo American plc

intensifies its global search for minerals.Anglo’s Perth hub will control the search

for a wide variety of resources in places asdiverse as the Philippines and India, with aspecial emphasis on China.

The Perth office, covering what thecompany defines as Asia/Australasia, willreport to Anglo’s world headquarters inLondon. It will be separate from three othercompanies in Australia in the corporatefamily — Anglo Gold, Anglo Coal and DeBeers, which manages the diamondbusiness. The group as a whole is one of theworld’s biggest mining houses.

Ian Willis, vice president explorationAsia/Australia, says the decision to run asprawling exploration program from Perthindicates Anglo American’s recognition ofthe great potential for exploration in WesternAustralia, but more importantly, itsattributes as a service centre.

As a city that serves one of the biggestresource industries in the world, Perth hasan almost unique combination of expertise,infrastructure and stability.

The other three hubs are in Vancouver(for North America), Santiago (SouthAmerica), and Johannesburg (Africa).

Mr Willis points out that the regioncovered from Perth has half the world’spopulation, significant industrial capacity,and a striking range of cultures.

The local office is responsible for copperexploration in India, the proving of a majorcopper discovery in Mindanao in thePhilippines and a number of projects inAustralia.

These include base metals explorationnear Halls Creek (in a joint venture) anotherin Queensland, and a third on the GawlerCraton in South Australia.

The Perth office will be responsible fornew exploration the company hopes to carryout in China, which is seen as havingimmense significance both as a source andconsumer of metals.

The then chief executive officer of AngloAmerican’s exploration division, Dr BobbyDachin, in Perth for the launching of thehub, said the regional hub’s headquarters at

Western Australia is home base for another big mineral explorer

Technology Park, Bentley,“provided an excellentenvironment of entrepren-eurial, active multi-discip-linary businesses that fitperfectly with our explor-ation style and focus.”

The decision to set up anexploration hub in Perth alsorecognised Western Australiawas still highly prospectivefor minerals.

F e d e r a l i n i t i a t i v e

Action agenda to boostexploration expenditureA Federal action agenda aimed atstimulating mineral explorationacross Australia will have strongrepresentation from WesternAustralia.

The President of the Chamber ofMinerals and Energy in WesternAustralia, Peter Lalor, will chairthe all-important StrategicLeaders Group. He will besupported by the Director Generalof the Department of Mineral andPetroleum Resources, Dr JimLimerick, and up to 10government and industry leadersfrom throughout Australia.

They and specific working groupswill address many of the tough issues facing the mineral exploration industry, among themincentives for investment, native title, land access and environmental legislation. The aimwill be to come up with clearly defined strategies to lead a revival of interest and investmentin exploration in Australia.

Creation of the Mineral Exploration Action Agenda was an initiative of the Federal Ministerfor Industry, Tourism and Resources, Ian Macfarlane, who says he is extremely concernedthat mineral exploration spending in Australia has slumped over the past five years.

Exploration is seen to be the cornerstone of the broader resources sector, which accountsfor more than a third of Australia’s total exports. The challenge is to ensure that mineralexploration is encouraged and given every chance to flourish.

The various working groups are due to report their findings to Mr Macfarlane by mid-2003.

Meanwhile, people interested in this topic are urged to access the website of the MineralExploration Action Agenda at www.industry.gov.au/minexpagenda or e-mail their comments to the action agenda secretariat at [email protected].

Total Australian Exports for 2001-02$A150.5 billion

Manufacturing 23.6%

Resources36.7%

Other1.5%

Service20.0%

Rural18.2%

Major new player: The head of Anglo American's new explorationbase in Perth, Ian Willis.


The Government of Western Australiatakes seriously its commitment toenhance the mineral prospectivity of

the State by disseminating geoscientificinformation at minimal cost to the consumer.

That’s why the Department of Mineral andPetroleum Resources (MPR) launchedGeoVIEW.WA, a web application that providescustomers with timely access to geoscientificdata online, and an ability to produce adownloadable customised map. It’s online, it’sfree and it’s of the highest quality.

GeoVIEW.WA allows you to:■ choose your own area of interest within

Western Australia, ■ decide which themes you wish to display

(geology, structure, mines and mineraldeposits, mineral and petroleumtenements, geophysical data etc.),

■ choose a scale, and■ print a published-quality map at your

chosen size (A4 to A0).


GeoVIEW.WA generates the map to yourspecifications, and sends you an emailmessage with a link to your map in AdobePDF format. This allows the map to bedownloaded at an appropriate time to thecustomer.

The service is available from MPR’s homepage at www.mpr.wa.gov.au, under the“Interactive Computer Systems” tab. A quickvisit will convince you of its quality,useability and usefulness.

GeoVIEW.WA is the latest offering fromthe Geological Survey of WA (GSWA), MPR’sgeoscientific arm, which for more than onehundred years, has provided high-qualitymapping and resource information servicesat zero, or nominal cost.

“We believe that GSWA is todayrecognised as a technological innovator inthe field of geoscience information delivery,”said Stephen Bandy, GSWA’s Manager ofGeoscience Information Products.

“With GeoVIEW.WA we have takenadvantage of new technologies andcontemporary information-managementpractices to provide management of, andaccess to, geoscientific data. The system hasan easy-to-use web interface that providesinteractive querying and analysis in aresponsive manner. The service isgenerating a lot of interest and is available toanyone who has an Internet connection.”

Customised maps from GeoVIEW.WAexhibit full-colour, high-resolution imagesand carry supplementary and referenceinformation provided on traditional, mass-produced geological maps.

Traditionally, map users have beenfrustrated by a lack of flexibility withpublished maps. Areas that span mapboundaries require multiple maps. Thisproblem is often compounded when usersneed to access multiple themes. On theother hand, maps that address general-purpose requirements can become very

Design your own map online — free

On the web...

...from your printer


cluttered with data and legends that are notrelevant to particular users. GeoVIEW.WAovercomes these difficulties by includingcustomisation that allows users to definegeographic areas and choose themes such astopography, mineral occurrence, geologyetc. The intelligent software builds acustomised legend so the map is notcluttered with irrelevant detail.

Mr Bandy said that GeoVIEW.WA hadbeen designed with the non-specialist userin mind.

“While large exploration companies havesophisticated geographic informationsystems and expert personnel to operatethem, smaller companies, geologicalconsultants, prospectors and the generalcommunity generally lack such facilities,” hesaid.

“Users now have access to a growingnumber of geoscience datasets, includingvarious scales, mineral resources, titles,seismic data and geochronology, as well astopographical and administrative data.

“GeoVIEW.WA utilises freely availablesoftware such as PDF reader, ArcIMS mapreader, e-mail and ZIP etc. All you have topay for is the paper and ink.”

Eight good reasons...Here are eight good reasons whyexplorers and resource developersshould choose Western Australia as aninvestmentdestination.The State has:• World-class mineral

and petroleumresources.

• A wealth ofinformation forexplorers.

• Unrivalled potentialfor new discoveries.

• A proven trackrecord in successful resource development projects.

• Proximity to expanding markets in Asia.

• Low sovereign risk and pro-development governmentpolicies.

• Government assistance for developers.

• World-competitive environment for developers.

n international risk survey has placedAustralia ahead of the rest of the world

in terms of investment in exploration andmining projects.

Conducted by the Australian resourcespublication Resourcestocks and theAmerican Investment Group (AIG), the2002 survey rated Australia ahead ofCanada and the United States as the leastrisky places to invest in the search anddevelopment of mineral projects. Then

followed Chile, South Africa, Ghana,Tanzania, Brazil, Mexico and Malaysia whichwas listed as tenth as a low-risk investmentdestination. At the bottom of the list inplaces 18th, 19th and 20th positions wereIndonesia, Papua/New Guinea andZimbabwe.

Survey respondents gave Australia its bestlow-risk marks in areas of sovereign risk,social risk, natural disasters andinfrastructure.

Low-risk AustraliaA


ExxonMobil recentlycommenced appraisaldrilling on the recentlydiscovered Jansz gasfieldusing the Jack Ryan deep-water drill ship. The appraisalof the potentially hugereserves in the Jansz–Io andother fields west of theGorgon field is of greatinterest.

Following the success of itsNorfolk and Exeter oildiscoveries in the Mutineerarea, Santos has commenceddevelopment studies for theproject and intends to drill afurther four exploration andappraisal wells in theCarnarvon Basin in 2002, plusfour exploration wells in2003.

Woodside participated inthe drilling of 11 offshoreexploration wells in WesternAustralian waters lastfinancial year. The companyis planning a similar activitylevel for 2002–03, and isexpected to drill additionalappraisal wells in theVincent–Enfield area.

While most of the offshoredrilling activity has been inthe Carnarvon and BrowseBasins, the Perth Basin hasalso become a centre ofattention, with a significant oil discoverywith the Cliff Head wells drilled by ROC Oil,only 8 km offshore. Of particular note hasbeen the success of onshore explorationwells in the Perth Basin, especially BeharraSprings North 1 and Hovea 1. The Hoveafield is currently undergoing extendedproduction testing, prior to development byOrigin Energy and its partners. The recentdiscovery of a 30-metre oil column by OriginEnergy at the Jindamia-1 exploration wellhas further fanned the interest in theonshore Perth Basin.

In 2002–03, Origin plans to participate inup to eight exploration, appraisal anddevelopment wells in the Perth Basin, half of


Rigs, rigs, rigs

The number of drilling rigs operatingoffshore in Western Australiaincreased to the highest level for

many years with the movement of three newmobile offshore drilling units (MODUs) intothe region in late 2002.

The MODUs include Glomar’s deep-water drillship Jack Ryan, (picture) which iscapable of drilling in water depths up to2500 metres (8000 ft). It will operate in thedeeper waters of the State’s northwest.

Other MODUs heading for WesternAustralia are the Atwood Falcon which willbe drilling for Woodside, and the Ensco 53which will be drilling for ROC Oil near therecent Cliff Head discovery site in the PerthBasin.

These will join the Ensco 56, on long-term contract with prolific local explorerApache Energy, and the Sedco 703 rig, whichhas been drilling for Santos.

This sudden increase in drilling activityfollows a downturn in exploration drillingduring the 2001–2002 financial year.

Most of the current drilling activity isbeing focused on appraisal drilling ofnumerous recent discoveries. This is aninevitable flow-on effect from the high (30%)success rate of exploration drilling inWestern Australia in recent years

Of the 67 wells drilled in WesternAustralia during 2001–02, 37 were new fieldwildcats, with an overall potentialcommercial discovery rate of 27%. Twosignificant gas and eight oil discoveries weremade.

Apache’s very active drilling programincludes approximately 25 exploration,appraisal and development wells in thisfinancial year. From late 2000, Apache hasbeen developing its “String of Pearls”discoveries with the Simpson mini-platforms in 2001, the Gibson/South Platodevelopment in 2002, and the VictoriaPlatform currently under construction.

BHP Billiton is actively exploring forsignificant oil resources in the frontier deepwaters of the Browse Basin.

Kerr-McGee, with Agip Australia in a JVpartnership for WA-295-P, undertook anextensive 2-D program in the deepwaterouter Canning Basin in preparation for twowells to be drilled by August 2003.

these as operator. Further appraisal ofdiscoveries at Hovea 1 is expected as well asexploration for gas in the Hovea-2, BeharraSprings and/or Hibbertia 3D areas.

Untapped potentialDespite some onshore success in the

Perth Basin, there continues to be little newexploration activity in other onshore basins.This is thought to be largely due to the sizeand remoteness of these basins.Unfortunately, this is a Catch-22 situationwhere unless there is initial explorationactivity and success (as recently observed inthe Perth Basin) there will not be greatinterest. Although these basins are frontierexploration areas, there is the real potential

Hello Jack: Glomar’s deep-water drillship Jack Ryan (foreground)is one of several exploration vessels to arrive in WesternAustralian waters recently to probe a number of exciting targetsbelow the seabed off the State’s northwest coast.

Building on a 30% success rate for exploration drilling


Drill core mapping made easy

Quick scan: This new device developed by CSIRO can automatically scan and map drill cores at arate of 500–600 metres per day, improving geologists’ understanding of ore forming processes.

for major rewards. The onshore CanningBasin is substantially underexplored withfew wells. The potential oil and gasstructures of the Officer Basin have beencompared to those of Oman, Russia, andthe Amadeus Basin. The few explorationwells to date have encountered minorhydrocarbons. A major player with thecourage, commitment and resources toadequately appraise the true potential ofthese areas is, however, urgently needed.

Western Australia continues to be oneof the most successful places to conductoil and gas exploration, and has theadvantage of significantly reducedpolitical risk compared with othergreenfields areas in the world. It istherefore expected that the currentincrease in drilling activity will continueinto the future.

Australian scientists have developed what is believed to be the world's first automaticsystem for mapping minerals in drill cores, with potential to save the mining industrymillions of dollars.

The new rapid core logging system developed by CSIRO in collaboration with the miningindustry through AMIRA International, applies satellite-based mineral-mapping knowhow tosignificantly increase the geological knowledge gained from drill cores, chips and powders.

Dr Jon Huntington's team at CSIRO has demonstrated automatic and continuous mappingof the minerals in drill cores at a rate of 500–600 metres per day and a resolution of 1 cmor less, with further scope for improvement.

The technology can also extract new knowledge from the millions of kilometres of corestored in core yards around the world.

“The most exciting thing is the geological information revealed,” says Dr Huntington.“Detailed knowledge of the mineralogy can contribute to grade control, assessment of minestability, optimisation of ore processing and improved understanding of ore formingprocesses.”

The new system has been successfully tested at the Sunrise Gold Mine in WesternAustralia and will be trialled at Mount Isa and sites in South Australia in the near future

“We've brought our airborne and satellite-based mineral mapping expertise into the coreshed,” says Dr Huntington.

He envisions complete 3-D models of ore system mineralogy being easily assembled fromall drill holes, mine faces and benches, and incorporated into existing 3-D minevisualisation and modelling systems.

While current work is focusing on mine-scale applications, it is easy to see the value of thetechnology for improving returns from exploration drilling. Operationally this informationcould be available within just a few hours of completing a drill hole.

At the heart of the system is a sophisticated infrared reflectance spectrometer that rapidlymeasures molecular level absorption characteristics of a suite of important alteration androck-forming minerals.

For more information:

Dr Jon Huntington, CSIRO Exploration and Mining, 0408-221-934

Joe Cucuzza, AMIRA, [email protected]



Eyes on Albany for high-techlumber plant The Albany region has firmed as a

likely site for a A$150 million“engineered strand lumber”

plant, using bluegum plantation timberas a feedstock.

Perth-based Lignor Pty Ltd originallyhad its eye on four potential sites in theSouth West–Great Southern region ofWestern Australia. However, mostrecent evaluations suggest that Albanyis the best location for the proposednew plant.

Using bluegum plantation timber asa feedstock, the operation will beunique to Australia and the SouthernHemisphere. Currently there are twosuch plants operating in North America(with a third under construction) andone due to commence construction inEurope.

Critical factors identified for theproposed Great Southern strandlumber plant include a suitably sizedwood resource, the availability of waterand power at a reasonable cost, suitablehaulage road linkages, a railway line,and access to a port that can preferablyhandle containers.

Lignor has obtained a licence from aGerman manufacturer to use its uniqueconstruction strand lumber (CSL)technology in Australia and New Zealand toproduce a product that will be known asengineered strand lumber (ESL™). Lignorwill be the first company in the world to useCSL technology on eucalyptus hardwoodresources.

Bluegum plantation trees, currently usedfor pulp and paper production, are generallyconsidered unsuitable for use as structuraltimber. However, advanced Germantechnology has opened up significantmarket opportunities for hardwoodplantation resources.

A major component in the ELSmanufacturing process is the use ofisocyanate binder resin. Another criticalaspect of the manufacturing process is thesteam press used to compress the wafer-thin, 200 mm-long strands of bluegum intoblocks of structural timber (or billets).

The proposed plant will produce billetsup to 200 mm thick x 1860 mm wide and 12metres in length. These will be suitable forcutting into a various lumber sizes,depending on clients’ needs.

The world’s first construction strandlumber plant commenced production in theUnited States about a decade ago, utilisingaspen and poplar wood resources. Itproduces a product called “Timberstrand”,which is marketed as a replacement for solidlumber, as well as competing with otherstructural engineered wood products suchas laminated veneer lumber (LVL).

The latter uses pine saw logs, which havea 20–25 year planting–harvest rotation,compared with just 8–10 years for bluegums.

Features of ELS include a consistentquality, high-structural reliability (includinghigher strength ratings than comparableexisting products), the use of a non-toxicpetroleum-based binding resin, inherentlyhigh water resistance and an ability to drill,screw and nail in all areas of the wood.Water, rot, fire and termite resistantproducts can also be added to themanufacturing process.

This makes it very suitable for weight-bearing beams, columns, headers, lintels,joists and rafters in residential construction,including outdoor applications.

Discussions have also beenheld with potential overseasend-users with the idea ofusing ELS as a high-quality,price-effective buildingmaterial and possibly as aflooring alternative in seacontainers and semi-trailers.

Target markets for all of theproducts are Australia, andoverseas (especially NewZealand, Japan, and otherparts of Asia, and the UnitedStates).

The proposed engineeredstrand lumber plant forWestern Australia will requireapproximately 1500 hectaresof wood per annum, which iswell within the capability ofthe South West–GreatSouthern region, given thatmore than 200 000 hectares ofbluegums are currently undercultivation in these areas,much of which is uncom-mitted at this stage.

Project coordinator, JamesAnderson, said the proposed

engineered strand lumber plant would be anenvironmentally friendly project that wouldprovide about 130 direct jobs and potentiallyanother 300 indirectly.

While the key to the project is the abilityto sell the end-product, Lignor is workingwith Austrade, Invest Australia and JaakkoPoyry, leading advisors to the global forestbased industry, to identify strategic partnersand further develop markets for theengineered strand lumber product.

Lignor has also completed initial tests, inconjunction with the State Government andthe Forest Products Commission, on non-plantation marri and karri re-growththinnings from South West forests. Theresults indicate the commercial potential ofmarri and karri resources, now used by theState Government as low-value woodchips.

Following 18 months of product testing,examining marketing options and feasibilitywork regarding eucalypt resource materials,Lignor is currently looking for a strategicpartner to advance the project.

Mr Anderson said if all goes according toplan the engineered strand lumber plantcould be up and running by early 2005.

Strand-by-strand: Lignor’s project coordinator, James Anderson, isconfident that his company’s A$150 million strand lumber project canbe up and running by early 2005.


L o c a l c o n t e n tBig gear underlines our skill capabilityWestern Australia’s reputation as a supplier of world-class services for the resources

sector was reinforced recently when Bassendean-based Hofmann Engineeringsuccessfully completed building Australia’s largest mechanical gear.

Measuring 12.5 metres in diameter and weighing 74 tonnes, the specially hardened metalgirth gear will be used in a semi-autogenous grinding (SAG) mill in a Papua New Guinea goldmine. The supply contract which also included two mating pinions, a girth gear guard, twolubrication systems and two condition monitoring systems was valued at more than A$1million.

Built to United States company Metso Minerals standards, Hofmann Engineering beat stiffinternational competition to win the supply contract.

Hofmanns employ about 220 Western Australians and has been supplying sophisticatedengineering components to the resources sector for some 30 years, but nothing as big asthe monster girth gear it manufactured recently.

Metal in the girth gear and pinion are forged, rather than cast, making the componentsextremely durable. The unit will be driven by two 3500 kilowatt electric motors.

The girth gear was dismantled and packed into five sections prior to being road hauled toCairns on its way to PNG.

This edition of Prospect represents asignificant milestone in the magazine’s

history.It was 25 years ago (January 1978) that

the first issue of the magazine rolled off theprinting presses.

Prepared originally by the Department ofIndustrial Development, the publicationaimed to keep senior people in industry andgovernment postings overseas up-to-datewith business opportunities in WesternAustralia.

The Minister for Industrial Development,Mines, Fuel and Energy, Andrew Mensaros,commented in the magazine’s initial front-page foreword that: “We have some of theworld’s biggest deposits of key minerals, a

major natural gas field and aburgeoning oil search. We are enteringa new period of economic expansionand we need and welcome yourinvestment capital and developmentand marketing skills.”

In fact, the North West Shelf wasundeveloped 25 years ago, with outputfrom the State’s petroleum industrybeing worth just A$95 million in 1978,compared with A$9.5 billion in2001–02.

The table below indicates themassive growth in mineral andpetroleum production in WesternAustralia over the last quarter of acentury.

Commodity 1978 2001–02Value A$ millions Value A$ millions

Iron ore products 959 5099Alumina 277 3584Gold 74 3280Nickel 186 2007Petroleum 95 9532Mineral sands 57 859Coal 28 258Salt 27 251Tin 5 6Total 1647 26 271

The inaugural 12-page edition of Prospectcovered a range of topics including:■ A revival of petroleum exploration and

the granting of an exploration permit toEsso–Western Mining Corporationcovering a highly promising area takingin the Abrolhos Islands, 100 km west ofGeraldton;

■ Possible difficulties associated with theoverlapping of construction of the NorthWest Shelf project and two new aluminarefineries in the South West of the State;

■ A Western Australian Governmentinvestment mission to the UnitedKingdom, Europe and South East Asia;

■ A breakthrough with the Federal LoanCouncil to allow larger semi-governmentauthorities to access independentborrowings (overseas if necessary) tosupport projects of major economicsignificance; and

■ A visit to Perth by the IndustriesAssistance Commission in December1977 to investigate potential support foradditional land and services forshipbuilding facilities at CockburnSound.

The first issue of Prospect featured a Stateresources map, a spread on economicindicators and a page of newspaper clippings.

Making history: The first issue of Prospectappeared in January 1978.

Prospect — 25 years on


A l u m i n a c o s t sWestern Australia still a trend-setter

Western Australia continues to host some of the world’s lowest-cost alumina plants.London-based James F. King, a renowned economic adviser to the industrial and raw

materials industries, says Western Australia’s four alumina refineries — Wagerup, Worsley,Pinjarra and Kwinana — are ranked two, three, four and six respectively in terms of operatingcosts per tonne of alumina produced.

Only the Damanjoli plant in India has a lower base operating cost.However, when total costs (operating and capital costs) are taken into consideration,

Alcoa’s Pinjarra alumina refinery is the cheapest operating plant in the world.The following table shows the world’s 10 lowest cost alumina producers.

METALURGICAL ALUMINA PRODUCTION COSTSSECOND QUARTER — 2002

Production costsCountry Company Location Capacity +Operating US$/t *Total US$/tIndia National Damanjoli 1.65 Mt/a 103 149Australia Alcoa Wagerup 2.32 Mt/a 112 153Australia Worsley Worsley 3.25 Mt/a 112 153Australia Alcoa Pinjarra 3.215 Mt/a 114 124Venezuela Interalumina Matanzas 1.85 Mt/a 131 185Australia Alcoa Kwinana 1.485 Mt/a 144 155Australia QAL Gladstone 3.72 Mt/a 148 163Brazil Alumar Sao Luis 1.3 Mt/a 152 198China Pingguo Pingguo 0.525 Mt/a 155 209Suriname Suraloco Pananam 1.85 Mt/a 157 168World total/weighted average cost 175 201

+Operating costs mean cash costs for raw materials, energy, labour and overheads*Total costs are operating costs plus capital charges (interest and depreciation)

Source: James F. King

AluminiumUsing a 10-year time horizon, Mr King forecasts world consumption of primary

aluminium will increase from 24.2 Mt in 2001 to 34.1 Mt in 2012. By that date 2.6 Mt ofprimary smelting capacity will be needed beyond that currently planned. Total Australianproduction was 1.8 Mt in 2001.

For alumina, Mr King’s current forecasts show that world consumption will increase from52.5 Mt in 2001 to 72.7 Mt in 2012 and that by that date 6.6 Mt of alumina capacity will beneeded beyond that currently planned. Total Australian production was 16.3 Mt in 2001.

In both cases “currently planned” includes all committed expansion and greenfieldsprojects and capacity creep at existing plants.

The Nullarbor Plain, best known as one of thedriest and most remote parts of Australia,

has been flagged as a strategic oasis capable ofmeeting the long-term water needs ofKalgoorlie–Boulder and the surrounding miningregion.

A detailed investigation by the Department ofMineral and Petroleum Resources (MPR)indicated that the supply of brackishgroundwater from the Eucla Basin could be thecheapest option for delivering future bulk watersupplies to Kalgoorlie–Boulder and its environs.

However, because of a question mark over thesustainability of this resource and publicfeedback, it seems that sourcing seawater fromEsperance is the simplest option and probablyin the best interest of people in theGoldfields–Esperance region.

In the lead-up to a public consultation processin October 2002, consultants looked at fiveoptions aimed at meeting the long-term waterneeds of the Goldfields–Esperance region.Options included:

■ Upgrading the Mundaring pipeline to meetpotable water needs for the EasternGoldfields, with mining interests usingpalaeochannel groundwater to meet miningand processing requirements;

■ Desalinating seawater at Esperance andpumping it to Kalgoorlie–Boulder;

■ Pumping seawater from Esperance toKalgoorlie–Boulder and desalinating it asrequired.

■ Sourcing water from the Officer Basin anddelivering it to Kalgoorlie–Boulder; and

■ Developing a scheme based on the pipingof brackish groundwater from the EuclaBasin, 450 km east of Kalgoorlie–Boulderand desalinating it at the nation’s goldmining capital.

During the study, the possibility of deliveringwater from the Wheatbelt, Kimberley and minevoids had been considered, but each of theseideas was eliminated for various reasons.

The Minister for Goldfields–Esperance, NickGriffiths, said a single supply option waspreferred.

So why is an alternative water supply for theGoldfields necessary? Basically, it gets down tothe current cost of supplying water via theMundaring pipeline, fears about the long-termsustainability of this supply given that thedemand for water in the Goldfields has been onthe rise for many years and is likely to continue,and the cheaper unit cost of sourcing water fromEsperance or via the Eucla or Officer Basins.

The study found there is sufficient regionalgroundwater available in the Goldfields tosustain current mining demands, plus anadditional 100 gigalitres per year, for at least 40years.

Desert water may becheap but notnecessarily best option

Highly competitive: Alcoa’s Wagerup alumina refinery in southwest Western Australia(pictured) is ranked with the Worsley refinery, near Collie, as equal second lowest-costalumina plant in the world.

LeonoraLaverton

Eucla Basin

OfficerBasin

Esperance

Mundaring-Kalgoorlie pipeline

Optional new water pipelines

Kalgoorlie-Boulder


Quest for cheaperelectricityThe State’sresourcesindustry is set tobenefit fromproposed energyreformsannouncedrecently by theWestern AustraliaGovernment.

An independent study commissioned bythe State Government shows that anaverage cut of 8.5% in the retail price ofelectricity would help create new jobsand boost the Gross State Product byA$300 million a year by 2010.

Deputy Premier and Energy Minister, EricRipper, described high electricity pricesas a handbrake on the State economythat disadvantaged consumers.

President of the Western AustralianChamber of Minerals and Energy, PeterLalor, said the mineral and energyindustries, the largest single user ofelectricity in the State, have been urgingenergy reform for several years.

“Lower electricity prices means moreinvestment in major projects and morejobs for West Australians,” Mr Lalorsaid.

“The lower the energy input costs, themore competitive our minerals andenergy exports are to the rest of theworld.”

In late November, State Cabinetendorsed the breaking up of WesternPower into four separate entities —generation, transmission anddistribution networks, retail and regionalpower — in a bid to further reduceelectricity prices in Western Australia.

E n v i r o n m e n t a l e x c e l l e n c eSilica miner rewarded for savingrare wildflower

Western Australian resource companythat opted to forego development of ahigh-grade silica deposit near Moora,

just to protect a rare plant species, has beenrewarded for its sensitivity.

Simcoa Operations Pty Ltd, together withits environmental consultant, SallyRobinson, were joint winners of a Certificateof Merit at the 2002 Golden Gecko Awardsfor their package of environmentalmeasures in and around the company’sMoora mining leases.

Parts of the Moora mining tenements,which provide vital feedstock for Simcoa’ssilicon smelter at Kemerton, were of highecological significance in the eyes of theEnvironmental Protection Authority, withthe Cairn Hill area in particular beingregarded as “the jewel in the crown”.

A rare plant species, Regaliamegacephala, that thrives on unbrokenquartz along the so-called Noondine Cherthorizon, lay in the path of a planned quarrydevelopment. However, Simcoa chose toleave the Cairn Hill area untouched andsource its quartz from less sensitive areaswithin its overall tenement holdings in theMoora region.

Not only did Simcoa choose not to minethe fragile area in question, it succeeded inre-generating the rare plant on brokensections of rock in rehabilitated quarries inothers parts of the region.

The EnvironmentalProtection Authorityresponded by agreeing touse the “Change toEnvironmental Conditions”process to fast-trackapproval for Simcoa tomine an area known as theWestern Ridge near Moora.

The company alsodemonstratedenvironmental sensitivity atits Kemerton smelteroperations by successfullymanaging potentiallyharmful waste streams.Waste products are nowmarketed as silicon fumeand silicon dross and usedfor the manufacture ofconcrete.

Simcoa is alsodecreasing its use of CALM-supplied jarrahin favour of mill ends, waste and fallentimber. By standing in the market for millends and other waste timber, the companyprovides security and economic benefit to anumber of small timber mills in the SouthWest of Western Australia.

In summary, Simcoa is to becongratulated for its environmentalresponsibility and its flexibility to achieve awin-win outcome for itself and the State.

Other Golden Gecko award recipientsfor 2002 were:Golden Gecko statuettesAlcoa World Alumina Australia — forrestoring the botanical diversity of thejarrah forest after bauxite mining in theSouth West.

LionOre Nickel — for its “get it rightfrom the start” approach to thedevelopment of its Emily Ann miningproject.

The Esperance Port Authority — for itsinnovative environmental controls at theport.

Certificate of MeritWoodside’s Cossack Pioneer team —for reducing flare gas emissions on itsFPSO.

Encouragement CertificateNewmont Golden Grove Operations —for its ongoing commitment to achievingenvironmental excellence.

A

Controlled quarrying: One of Simcoa’s quartz mining sites nearMoora. Inset photo shows the rare plant species Regaliamegacephala.


E c o n o m i c a n d f i n a n c i a l m o d e l l i n g

Sizing up the value of resource projects

What is the value of a mine? Howmuch is an oil and gas projectworth? The answer depends on

who is making the assessment.A mine accountant may access the

company’s assets register to find an answer.The banker who financed the miningoperation may dig into a risk file and comeup with another figure, while the jumbooperator at the mine face and the localshopkeeper who sells provisions to theminer may view the mine’s value completelydifferently.

Likewise, costs can be viewed from manydifferent perspectives, far beyond simpleaccounting procedures. For example, whopays for the wear and tear on the roads to themine? What about the extra school teachersneeded in the town for the miners’ children?

More profoundly, what value is put on aconstruction workforce for a potentialresource project, if workers are committedto a project somewhere else.

To tackle this seemingly mind-bogglingarray of valuation issues, economic andfinancial models are necessary.

Akin to running a pilot-scale plant toassess the viability of a new mineralprocessing technique, economic models area key step in the process of evaluatingbenefits, threats and opportunitiesassociated with a potential new investment.

Proponents of large-scale resourceprojects often request Government supportin building or extending infrastructure suchas ports and roads. Many of these projectsare in remote locations. In response, theGovernment needs to be able to measurebroader community benefits that will flowfrom an individual project and comparethese with the costs incurred in facilitatingthe project.

One model that the Department ofMineral and Petroleum Resources (MPR)uses when assessing projects is the ProjectAnalysis System (PAS). This model wasdeveloped to undertake cost-benefitassessments of single, relatively large-scaleprojects with significant exports. MPR hasused different versions of PAS since the mid1990s to analyse more than 40 individualprojects covering a broad range of resourceindustries including, nickel, iron and steel,natural gas, methanol, ammonia, urea,wood fibre and gas-to-liquids.

The PAS model has two facets,comprising a financial analysis system (FAS)that derives a discounted cash flow financial

analysis of projects and a project-analysissystem that uses the data and analysis of FASto provide a broad economic impactassessment of projects.

Impacts assessed include royalties andpayroll taxes paid to the State Governmentfrom a project plus associated employment.PAS also assesses a project’s impact onCommonwealth revenue flows by way ofcorporate taxes, incomes taxes and fringebenefits tax. The PAS model can also broadlyshow the impact of a project on the Stateeconomy in general terms of output andemployment.

However, for a more sophisticatedanalysis of how projects impact on the Stateeconomy, MPR has acquired MonashUniversity’s Computable GeneralEquilibrium, Multi-Regional Forecastingmodel (MMRF-Green).

General equilibrium modelling is a well-established field of applied economics, withwidespread application and stronginfluence in the Australian policycommunity. To capture the entire economy-wide effects of various mineral investmentactivities, a computable general equilibriummodel is the ideal tool. It can be applied to awide range of economic issues such as majorproject analysis, industry assistance,environmental regulation, competitionpolicy, structural change and trade policy.

The genesis of the MMRF-Green modelcan be traced back to Monash University’s

IMPACT Project initiated in 1975. The mostimportant and well-known product of thisproject was a model of the Australianeconomy named “ORANI”.

For MPR, a general equilibrium model isessential in analysing the economy-wideimplications of a variety of shockspertaining to the State’s mineral andpetroleum sector such as mineralinvestment booms, changes to oil prices,productivity growth and greenhouse gasemission control.

The fruits of MPR’s first GeneralEquilibrium efforts using MMRF-Greenwere borne recently by modelling the broadeffects of changes in exploration on theWestern Australian economy. It showed, forexample, that a A$100 million annualincrease in exploration expenditure for fiveyears, would see 0.8% higher Stateemployment (or about 11 700 jobs) in2020–21. It was also projected to add anadditional A$10.4 billion in investment,A$45.8 billion in export revenue, A$32 billionin GSP and $1.7 billion in the StateGovernment revenue over the entiresimulation period to 2020–21.

Results such as these serve as a reminderthat as we may take for granted theenormous economic benefits of resourceprojects, it is often necessary to back up thesector’s proud assertions with hard numbersthat economic and financial modelling canproduce.

By Richard BorozdinManager, Resource EconomicsDepartment of Mineral and Petroleum Resources

Key concepts: Senior Economist Qiang Ye and Manager Resource Economics Richard Borozdinworking together on a resource-related modelling project.


The Global SceneMild recovery should continue but risks remainThe world economy has been recovering gradually during 2002, driven bygrowth in the United States. However, early expectations for a robustrecovery, founded on rapid US growth in the first quarter of 2002, havebeen revised down in the wake of sharp declines on global sharemarkets,uncertainties related to the Middle East and concerns over oil prices.

A modest recovery should continue given generally supportivemacroeconomic policies and low inflation. However, significant downsiderisks remain, reflecting the potential for further financial market weaknessand higher oil prices due to instability in the Middle East.

The outlook for the global economy as outlined in the InternationalMonetary Fund’s (IMF) September 2002 World Economic Outlook is forslower than expected, but still improving, growth into 2003 (Table 1).

TABLE 1 — INTERNATIONAL GROWTH OVER THE NEAR-TERM (%)

Actual Forecasts2000 2001 2002 2003

World 4.7 2.2 2.8 3.7

United States 3.8 0.3 2.2 2.6Japan 2.4 -0.3 -0.5 1.1European Union 3.5 1.6 1.1 2.3Germany 2.9 0.6 0.5 2.0Non-Japan AsiaNewly Industrialised Asia 8.5 0.8 4.7 4.9Developing Asia 6.7 5.6 6.1 6.3China 8.0 7.3 7.5 7.2

Annual percentage changesSource: International Monetary Fund. World Economic Outlook 2002.

United States growth has slowedInventory building and strong consumer spending drove a robust recoveryin the US in early 2002. Since then, however, growth in the US economyhas slowed significantly, driven by sharply higher imports (and thus lowernet exports) and softer consumption amid rising uncertainty (Chart 1).

This uncertainty has been partly driven by continued sharp declines on USsharemarkets reflecting, among other things, lower earnings expectations(Chart 2).

The sharemarkets’ falls and concerns about the pace of the recovery haveled to a sharp weakening of consumer and investor confidence from early2002 highs. Adding to rising uncertainty have been growing internationalpolitical tensions relating to Iraq and the Middle East.

US business investment, the key driver of economic growth, has remainedweak, in part because the strong investment of recent years, particularlyin manufacturing and IT, led to over-capacity. While some economistshave pointed out that long-term interest rates have fallen to very lowlevels, and thus should support US investment, to a significant degree thedecline in rates has reflected market concerns about the weakness inrecovery and associated flows of capital out of equities into safer long-term bonds. The outlook for investment therefore depends partly on theextent to which low interest rates counterbalance the gloom about theeconomy and the reductions in equity-based wealth that has caused them.As Japan’s case indicates, low interest rates do not necessarily offset apoor economic outlook.

The outlook for the US economy depends on the extent to which lowerequity prices and rising global tensions lead to lower consumption growthand/or a further delay in recovery in investment spending.

On a positive note, there have also been signs that investment isbeginning to improve, notably in terms of software and capital equipmentspending. On balance, therefore, the US economy should continue its

t h e b i g p i c t u r e �

mild recovery, though consumption and investment are likely to be softer thanpreviously expected.

One of the key risks to this benign outlook is that the equities marketcontinues to sag, causing further erosion in consumption and investmentplans to be further delayed. High levels of consumer and business debt havethe potential to exacerbate this factor in two ways. If investors andconsumers decide that declines in wealth and ongoing uncertainty aboutemployment and economic growth require balance-sheet rebuilding,households will lift savings and reduce consumption and firms will cutback oninvestment. Second, if further falls in equities add to the uncertainties in theeconomy, financial institutions, in a climate of rising bad debts, may decide torestrict access to finance, thus reducing the ability of households andinvestors to borrow.

Another risk is that further instability in the Middle East causes oil prices torise sharply. Sharp rises in fuel prices would reduce real consumer spendingand raise business costs, thus reducing profitability and the incentive toinvest.

The Federal Reserve has signalled its recognition of these risks and itswillingness to further reduce interest rates should the US economy weakenfurther.

Japan’s outlook remains weakFollowing the third, and most severe, contraction in the Japanese economy inthe past ten years, economic activity seems to have troughed. The currentoutlook is for a modest recovery in 2003.

Activity accelerated mildly in the first half of 2002 driven by net exports.Industrial production has picked up in response. Domestic demand, however,particularly household consumption, has remained very weak raisingquestions about the sustainability of any recovery. Prices have continued tofall, exacerbating consumers’ tendency to “wait and see” before spending.Lack of domestic demand has provided a disincentive for businesses toinvest and consequently unemployment has resumed its drift upwards to5.4% in July 2002.

Signs of an incipient stabilisation are there, however. Shipments of capitalgoods, which had fallen since early 2001, have stopped declining andsoftware investment has started a reasonable recovery. More recently,business surveys including the Bank of Japan’s tankan (Short-Term EconomicSurvey of Enterprises) suggest that business investment is on the verge ofpicking up, though given weak retail sales and rising unemployment, any lift islikely to be very modest.

Significant excess capacity remains and price deflation continues to increasethe real debt burden on firms and the financial sector. The balance sheets ofthe latter are further weakened by falling equity and land prices, restrictingthe ability of the sector to lend to willing investors.

The outlook is for a modest improvement in domestic demand with householdconsumption rising and, as noted, business investment slowly recovering.Stronger import demand as consumption and investment rise, combined withthe rise of the yen against the $US, will weaken net exports’ contribution togrowth. Tax cuts will offset some of the negative impact of fiscalconsolidation on spending.

The key risks to the economy are on the downside and to a large degreeexternal. A deterioration in global, particularly US, growth or a furtherappreciation of the yen, would reduce net exports. Internally, further falls inequity prices would erode fragile confidence and the precarious state of thebanks.

EuropeRecovery in European economic growth has lagged behind that of the US,Canada and much of the Asian region.

Growth in Europe has been driven by net exports rather than domestic growthwith exports rising and imports actually falling.

Household consumption is weak and investment has yet to recover from its2001 slump. Recent indicators of retail sales, GDP and business confidence,particularly in Germany and Italy, have been softer than expected.


Positive factors supporting the European growth outlook are the likely end of thestock cycle, so that production rises to lift inventories, underpinned by strongerconsumption spending. The latter reflects higher wages and employmentgrowth, and modest inflation. Investment should be boosted by improvedcorporate earnings and falling levels of capacity utilisation.

There are a number of risks to the outlook. Weaker world growth and/or furtherappreciation of the Euro would reduce the stimulus from net exports. WhileEuropeans are not as exposed to equities as in the US case, European marketshave fallen further in recent quarters than their US counterparts. Further fallshave the potential to dampen consumer demand and put pressure on financialsector balance sheets, reducing the latter’s capacity to lend.

The German economy is of some concern, given its relatively dominant role inthe Euro economy, with an uncertain outlook for industrial production anddomestic demand. Weak growth in Germany would be a significant drag onEurope as a whole.

Non-Japan Asian growth expected to be sustainedIn contrast with other regions the Asian region (excluding Japan) has seen astronger than expected recovery in growth from the recession of 2001.

Stronger growth in global trade, and in particular the electronics trade, hasprovided the key boost to growth prospects. However, domestic demand growthin some instances, notably China, India and Korea, has played an importantrole. Macroeconomic policy, notably fiscal policy in Korea, has contributed tokick-starting sustained growth.

The IMF’s current forecast for the region is for a mild acceleration in growth: inthe newly industrialised Asian economies from 4.7% in 2002 to 4.9% in 2003and the developing Asian economies from 6.1% in 2002 to 6.3% in 2003.China is expected to slow mildly from growth of 7.5% in 2002 to 7.2% in 2003.

The key risk to the outlook is that global growth disappoints, removing one ofthe underpinnings present in the strong performance to date.

Western Australia’s economy continues its growthThe Western Australian economy showed growth patterns similar to the nationaleconomy through the past year. Western Australian domestic demand grew by7.2% over the year to the June quarter 2002 period, underpinned by ongoingdwelling investment, higher business investment and strong householdconsumption.

This strength is notwithstanding the negative impact of the slowdown in the US,Europe and Japan, and consequent continued decline in exports.

The outlook remains positive, though, should the international economy take aturn for the worse, this would place downward pressure on the State’s growth,particularly if investment in the globally exposed resources sector were to bedelayed.

The A$ remains subject to volatile international forcesThe Australian dollar (A$) has fallen against the major currencies since May2002 following a period of appreciation beginning in the second half of 2001(Chart 3).

This early appreciation was driven by a number of basic factors. These included:rising global growth and expectations of strengthening growth; rising commodityprices, falling risk aversion to peripheral and growth-driven currencies like the A$and the expectation that Australian interest rates would likely rise more quicklythan those in other economies owing to Australia’s relatively strong growth rate.

Since then these factors have turned around and the A$ has fallen by 2.9%against the Yen, 3.5% against the US$, 7.8% against the Euro and 3.4% againstthe trade weighted index (TWI).

Driving these falls have been: the deterioration in actual and expected globalgrowth reflecting the slowdown in the US economy; the ongoing falls in equitymarkets; rising risk aversion to peripheral currencies owing to developmentsrelating to Iraq and the war on terror; and reduced expectations of further RBAmonetary policy tightening. Providing some support to the currency has beenthe strong domestic growth that Australia continues to experience.

Chart 1: Recent Major Economy Output Growth

Quarterly Economic Growth. Source RBA Bulletin

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

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1.5

2.0

Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02

-2.5

-2.0

-1.5

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1.0

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2.0

US Euro area Japan

per cent per cent

Chart 2: Global Sharemarkets to end September 2002

50

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110

120

130

140

150

Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02

Index Jun-99 = 100

US Japan Germany AustSource: Reserve Bank Bulletin

Chart 3: Australian dollar exchange rate againstmajor currencies

Source: Reserve Bank Bulletin

40

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75

Oct-99 Apr-00 Oct-00 Apr-01 Oct-01 Apr-02 mid Oct-02

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Yen (lhs) TWI (lhs) $US (rhs) Euro (rhs)

Yen,TWI $US,Euro

C o m p i l e d b y M P R ’ s R e s o u r c e S t r a t e g i e s B r a n c h

Economic trends


t h e b i g p i c t u r e �

Tale of two marketsExpectations and concern about a sustained and robust global economic recoverycontinue to influence most commodity prices. While US equity markets recovered inOctober, they provided no crutch for the commodities sector. Major industrialcommodities have turned their backs on Wall Street to focus on real actual economicperformance. Commodity prices have therefore mainly floundered on the back of alacklustre US manufacturing sector and weak business investment.

However, oil and gold markets paint a different picture. Oil has been on a high,dancing to its own rhythm beaten out by geopolitical tensions surrounding the MiddleEast. Gold is also in another world, in limbo between its diminishing ‘safe haven’status, equity market gyrations and hard-nosed supply and demand priceexploitation.

Oil — marching to its own beat Since June 2002 the West Texas Intermediate (WTI) oil price has crept higher to beconsistently above US$30/bbl by late September and early October. By late Octoberthe crude oil market fell sharply to around US$28/bbl on the news of a diluted,softened stance on war with Iraq.

With oil prices recently running at high levels and possibilities of US attacks on Iraq,many market observers hoped OPEC might lean towards increasing its exportquotas. However, at the 121st meeting of the OPEC conference in Osaka on 19September 2002, it was decided that agreed production levels would be maintained.This decision was based on an expectation of very moderate global economic growthrates for the remainder of 2002 and normal seasonal growth in demand beingexpected for the fourth quarter. It is also likely that an increase in OPEC quotaswould tend to have legitimised current cheating. In response to high prices, OPECmembers are estimated to be producing 1.5 million to 2 million barrels per dayabove the current quota level of 21.7 million barrels per day. If OPEC were to raisequotas now, further cheating may be encouraged. The danger from OPEC’sviewpoint, is that if the disruption of an Iraqi war is avoided and world economicgrowth and demand for oil are slack, prices can fall sharply.

The conference closed with OPEC reiterating its commitment to continued monitoringof the market and to taking any further measures, including the convening ofextraordinary meetings if necessary, to maintain prices within the range US$22-28/bbl. With this in mind, the conference agreed to meet again in Vienna on 12December 2002 to review the situation.

… beating to the tune of IraqThe softening of the US stance towards Iraq and Saddam Hussein’s apparentwillingness to admit weapons inspectors helped to ease oil prices in October.Another potential downward move in oil prices could be influenced by a less noticed,but important announcement by Iraq that it would cease to levy a surcharge on itsoil.

Under UN sanctions, Iraq is only allowed to export oil under an oil-for-food program,aiming to ensure that Iraq’s oil export earnings can only be used for food andmedicines — not to purchase weapons. But, Iraq has had some success incircumventing these restrictions by selling its oil under the UN program to energytraders and levying a separate surcharge (around 25 cents per barrel). The UN’sannouncement that it will crack down on this practice means that Iraqi oil flowingonto the world market could increase as Iraq’s desperation for revenue grows. Thiswould be in addition to the estimated 400 000 barrels of oil per day that Iraqmanages to transport via pipelines and road tankers to Jordan, Syria and Turkey.

Iraq’s OPEC quota is in suspension but its total current output capacity is judged bythe EIA to be about 3 million barrels per day, a level that could be surpassed only bytwo other OPEC members, Iran, at 3.85 million barrels per day and Saudi Arabia,which is capable of producing 10 million barrels per day, but whose quota is 7.05million barrels per day.

Energy analysts have estimated Iraq’s average daily exports for the year thus far, tobe around 1.19 million barrels per day. Strategically though, and most significantly,Iraqi oil reserves stand at 112.5 billion barrels — the second largest in the world,surpassed only by Saudi Arabia.

Source Bloomberg via WA Treasury Corporation*average of Tapis, West Texas and Brent prices

Oil price

15.00

17.00

19.00

21.00

23.00

25.00

27.00

29.00

31.00

Jul-0

1

Aug-

01

Sep-

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02

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-02

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-02

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US$/barrel*

World Crude Oil Reserves and Production atthe end of 2001

0

50

100

150

200

250

300

SaudiArabia

Iraq IAE Kuwait Iran Venezuela Russia UnitedStates

Libya Mexico

Reservesbillion barrels

Source: BP Statistics Review of World Energy

Productionper day

8.8 2.4 2.4 2.1 3.7 3.4 7.1 7.7 1.4 3.6

Copper Price

Source: LME Cash Official

1,400

1,500

1,600

1,700

1,800

2-Ja

n-02

29-Ja

n-02

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2

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ay-0

2

13-Ju

n-02

10-Ju

l-02

6-Au

g-02

2-Se

p-02

29-S

ep-0

2US$/t

21-O

ct-0

2


C o m p i l e d b y M P R ’ s R e s o u r c e E c o n o m i c s B r a n c h


Lead and Zinc

400

450

500

550

2-Ja

n-02

24-Ja

n-02

15-F

eb-0

2

11-M

ar-0

2

4-Ap

r-02

26-A

pr-0

2

21-M

ay-0

2

14-Ju

n-02

8-Ju

l-02

30-Ju

l-02

21-A

ug-0

2

13-S

ep-0

2

7-Oc

t-02

US$/t (lead)

720

740

760

780

800

820

840

860US$/t (zinc)

Lead Zinc

21-O

ct-0

2

Nickel prices

5,000

5,500

6,000

6,500

7,000

7,500

8,000

2-Jan-02 1-Feb-02 3-Mar-02 2-Apr-02 2-May-02 1-Jun-02 1-Jul-02 31-Jul-02 30-Aug-02 29-Sep-02

US$/t

22-Oct-02


Gold Price

Source: NY Comex

250

260

270

280

290

300

310

320

330

340

02-Ja

n-02

29-Ja

n-02

25-F

eb-0

2

24-M

ar-0

2

20-A

pr-0

2

17-M

ay-0

2

13-Ju

n-02

10-Ju

l-02

06-A

ug-0

2

02-S

ep-0

2

29-S

ep-0

2

US$/oz

21-O

ct-0

2

Base metals — rough southern rideWorld base metal market fundamentals continue to remain less than encouraging.Following annual lows in August 2002, the base metals market appeared to stabiliseand then rise again by early September. However, this was a false dawn. Hammeredby fitful equity news and distrustful global economic outlooks, prices came crashingdown again in early October. New annual lows were touched before staging anotherfeeble upward assault.

Zinc, for example, is facing tentative indications of improved demand. However, aspointed out by ABARE’s September issue of Australian Commodities, so far,production in 2002 has exceeded consumption. Official stocks at the end of 2002were forecast to be at historically high levels. Price rises, therefore, critically dependon producers’ response to expectations of strengthening demand and prices. Ifdecisions to permanently close high-cost operations and delay potential restartsmaterialise, a foundation for higher prices will have been laid. Increased consumptiondepends of course on augured economic pick up taking place in major consumercountries. ABARE points out that rebuilding activity following severe flooding in Chinaand central Europe is hoped to be a major fillip in rising global zinc consumption.

Likewise, copper depends on the timing and magnitude of global economic recovery.China is particularly crucial, where it is expected that copper demand will continue togrow on the back of major infrastructure development. The prognosis is similar forlead, though weak demand by the battery industry and high production levels are stillmajor factors hindering a solid recovery in lead prices in the short term.

Nickel — weaker but still hopefulNickel prices have held up relatively well compared with other base metals throughmost of 2002. Prices have been driven largely by uncertainty surrounding productionand relatively robust stainless steel demand. Nevertheless, the metal has sufferedfrom the generally weaker tone set by the same maladies as those of the base metalmarkets.

Evidence is now materialising that global stainless steel production has slowedcomparef to the first half of 2002. While global growth in the 5–6% range is stillpredicted by ABARE, the main driver behind this is expected to be only China, with theJapanese sector down, US flat and Europe showing only fickle growth.

Gold — price el Dorado postponed?The opening six months of 2002 started optimistically enough for gold with pricesrising from lows of less than US$280/oz to well above US$320/oz in June 2002.However, following this buoyant first six months of 2002, prices took a decidedlysouthern turn, flirting with the US$300/oz mark in July before getting on a generallyupward roller coaster ride to beyond US$325/oz. This ride was short lived.

Stock market manoeuvrings appear to be the primary driving influences on gold’smixed fortunes. Resurgence of large-scale terrorism in early October unsettledinvestors and prompted a flight to gold as a safe-haven asset, reaching highs ofUS$319.50/oz. However, firmer US stock markets on the back of some strongercorporate results illustrated the strong negative correlation between gold and the DowJones Index. Gold prices subsequently plummeted to US$310/oz in the latter half ofOctober.

Gold is rallying on each dip in the stock market and falling on each rally. In thisrespect, the gold market is truly caught in a vicious trap, as on each rally, physicaldemand plummets. Demand for gold in India (the largest buyer globally) is extremelyprice sensitive and demand dissolves when prices move higher. North American andEuropean commercial interests have now been trained, in the Indian fashion, to bebuyers on dips, instead of chasing rallies, especially those rallies that are due to safe-haven buying.

Commodity trends


Significant resource projects underway or plannedin Western AustraliaIRON AND STEEL PROJECT VALUE (ESTIMATED)Hope Downs iron ore mine and railway $1050mFortescue (Cape Preston) mine and HBI plant $3000mKwinana HIsmelt pig iron and steel plant $1200mMt Gibson iron ore mine, pig iron and pellet plant $500mKoolyanobbing iron ore mine expansion $100m Sub total $5850mNICKEL/COBALTRavensthorpe mine $950mCosmos Deeps $33mSally Malay $50mSub total $1033mPETROCHEMICALSDampier Nitrogen ammonia–urea plant $900mBurrup Fertilisers ammonia plant $630mJapan DME — di methyl ether plant $1000mGTL Resources methanol plant $770mMethanex methanol plant $2000mSasol Chevron gas-to-liquids plant (Phase 1) $2040mSub total $7340mGASGorgon project $4000mLNG Train-4 and trunkline $2400mTrain-5 LNG project $1600mSub total $8000mOTHERAlcoa Wagerup Train-3 expansion $995mBoddington Wandoo gold mine expansion $500mKemerton titanium dioxide pigment plant expansion $470mTelfer gold mine expansion $1000mPort Hedland manganese dioxide project $136mSundry projects — at least another $5000mSub total $8101mTOTAL A$30 324 million

Committed Projectsas at 3 December 2002

Commissioned Projectsfor the financial year 2002–2003

HEAVY MINERAL SANDSDardanup — Mineral Sands MineDORAL MINERAL SANDS PTY LTDDoral has spent more than A$30 million on assetacquisition and construction costs to bring a new130 000 t/a open pit mine into operation during Q32002. The company plans to mine 120 000 t/a oftitanium-based minerals and 10 000 t/a of zirconover a nine-year period. The ore is being processedat a refurbished plant at Picton (purchased by Doralfrom the Japanese company ISK Minerals Ltd). Theproject was officially opened on 8 October 2002.Expenditure: A$30 millionEmployment: Construction: 60; Operation: 60

IRON OREWest Angelas — Iron Ore MineROBE RIVER MINING CO PTY LTDA new iron ore mine at West Angelas in the CentralPilbara region of Western Australia was officiallyopened on 24 August 2002. Based on a resource ofaround one billion tonnes of Marra Mamba ore, themine commenced production earlier this year andis building up to a production rate of 20 Mt/a. A newjoint rail arrangement with Hamersley Iron has beenfinalised to allow ore from West Angelas to bedelivered to Cape Lambert for export to Japan. WestAngelas iron ore will be transported, in part, viaHamersley’s railway. These arrangements haveinvolved the establishment of a new entity, thePilbara Rail Company (PRC), which is equallyowned by Robe and Rio Tinto. PRC operates the railnetwork on behalf of Robe and Rio Tinto.Expenditure: A$1 billionEmployment: Construction: 1200; Operation: 330

IRON OREMining Area C — Iron Ore MineBHP BILLITON IRON ORE PTY LTDBHPBilliton and the State approved thedevelopment of Mining Area C on 3 April 2002.Mining operations at deposit C are planned tocommence in Q3 2003. The product and capacityexpansion (PACE) project at Finucane Island wasapproved on 19 July 2002.Expenditure: A$1 billionEmployment: Construction: 500; Operation: 200

IRON ORE PROCESSINGKwinana — HIsmelt Commercial IronMaking PlantHISMELT CORPORATION LIMITEDHIsmelt Corporation, in a joint venture withNucor (25%), Mitsubishi (10%) and Shougang(5%), announced on 24 April 2002 that it will builda commercial scale HIsmelt process plant atKwinana, near Perth. The first stage plant willinitially produce around 800 000 t/a of pig ironfrom iron ore fines, coal and fluxes. Constructionis proposed to commence on receipt of statutoryapprovals in Q4 2002 with the plant beingcommissioned in 2004.Expenditure: A$1.2 billionEmployment: Construction: 320; Operation: 80

Minerals andpetroleum

Department ofMineral and Petroleum Resources

NICKELCosmos — Nickel Mine (sulphide ore)JUBILEE MINES NLA feasibility study based on the Cosmos Deeps orereserve of 520 000 t at 7.2% nickel grade was completedin April 2001. Development of the decline to theunderground orebody commenced in Q4 2001, withaccess to the ore anticipated to occur in Q2 2003. Thistiming will ensure a smooth transition from the open-cut development, and with current ore reserves, will seeoperations extended into mid-2007. Exploration drillingis continuing in and around the Cosmos Deepsorebody.Expenditure: A$33 millionEmployment: Construction: 15; Operation: 55

OIL & GAS DEVELOPMENTSNorth West Shelf — Project Expansion —4th LNG Train, Second TrunklineWOODSIDE ENERGY LTDProposals by the NWS partners for additional LNGtrains 4 & 5, and a second trunkline and expansion ofthe Domgas plant, received environmental approval in1998 and 1999. The LNG expansion is based on growingAsian energy markets. In April 2001 the partnerscommitted to development of the A$1.6 billion LNGTrain 4. Construction of Train 4 commenced in Q3 2001.In December 2001 the joint venturers approvedexpenditure for the A$800 million second subseatrunkline linking the offshore production facilities tothe onshore gas plant on the Burrup Peninsula.Construction of the trunkline is scheduled to finish inApril 2004 to coincide with the completion of Train 4. Expenditure: A$2.4 billion


Projects under considerationas at 3 December 2002

GALLIUMPinjarra — Gallium Extraction PlantGEO SPECIALTY CHEMICALS INC.In March 2001, GEO Speciality Chemicals Inc of theUSA announced plans to construct a major newgallium metal extraction facility at Pinjarra, south ofPerth, on the site of the former Rhodia galliumchloride plant. The facility is planned to have acapacity of 100 t/a of ‘4N’ gallium metal. The galliumwill be extracted from the Bayer liquor streamgenerated in Alcoa’s adjacent alumina refinery. Timingis dependent on favourable market conditions andstatutory approvals.Expenditure: A$75 millionEmployment: Construction: 150; Operation: 50

GOLDBoddington — Gold Mine (WandooExpansion)BGM MANAGEMENT COMPANY PTY LTD Boddington Gold Mine (BGM) is now managed byBGM Management Company Pty Ltd on behalf ofNewmont, AngloGold and Newcrest. BGM hasenvironmental approval to expand the Wandooproject, based on mining the extensive bedrock thatunderlies the mined-out oxide resource. The projectincludes a dedicated 100 MW gas-fired power station.Project go-ahead will be subject to commercialfactors.Expenditure: A$500 millionEmployment: Construction: 450; Operation: 600

Telfer — Gold Mine (Expansion)NEWCREST MINING LIMITEDConceptual studies for the Telfer expansion haveidentified a large low-grade resource (up to 200 Mt ofsulphide and 50 Mt of oxide ore) adjacent toNewcrest’s suspended (October 2000) mine pit.Newcrest intends to commence construction of themine extension in late 2002. The expected life of theexpansion should go beyond 2017. Newcrest isinvestigating the potential for exporting copper as ametal instead of concentrate. A final decision will bemade by the end of 2002.Expenditure: A$1 billionEmployment: Construction: 1200; Operation: 620

HEAVY MINERAL SANDSJangardup South — Mineral Sands MineCABLE SANDS (WA) PTY LTDCable Sands has outlined a titanium minerals orebodyadjacent to D’Entrecasteaux National Park. Feasibilityand environmental studies are underway. A formalproposal to mine has been put to Government. Theproposal is subject to an environmental impactassessment which has been set at the ERMP level. Theenvironmental impact statement is expected to bereleased in the first half of 2003.Expenditure: A$40 millionEmployment: Construction: 100; Operation: 50

Kemerton — Titanium Dioxide PigmentPlant ExpansionMILLENNIUM INORGANIC CHEMICALS LTDMillennium proposes a major expansion of itsKemerton titanium dioxide pigment plant to 190 000t/a. The EPA approved the proposal in April 1999. Adecision to proceed is dependent on market factors.Expenditure: A$470 millionEmployment: Construction: 500; Operation: 200

Kwinana — Titanium Dioxide Pigment PlantExpansionTIWEST JOINT VENTUREEnvironmental approval for the staged expansion ofthe pigment plant capacity to 180 000 t/a has been given. A decision to proceed withfurther stages within this expansion is dependent onimproved market conditions.Employment: Construction: 108; Operation: 98

INFRASTRUCTUREOakajee — Oakajee Deepwater Port &Industrial EstateSTATE GOVERNMENT INFRASTRUCTUREThe WA Government has established the economic,environmental and technical feasibility ofdeveloping an industrial estate and associateddeepwater port at Oakajee, about 20 km north ofGeraldton. Land has been acquired for the core areaand acquisition of land for the buffer zone iscontinuing. The initial users of the industrial estateand port will be major Mid West resource projects. Acommitment to proceed with the port developmentwill be dependent on an agreement, with a majorcustomer, on the terms and conditions of use.Expenditure: A$221 millionEmployment: Construction: 150; Operation: 10

IRON OREHope Downs — Iron Ore MineHOPE DOWNS LIMITEDHancock and Kumba have completed a feasibilitystudy of the Hope Downs project. The alliance isnow progressing project finance, joint venture andmarket agreements. Expenditure: A$1.05 billionEmployment: Construction: 500; Operation: 300

Koolyanobbing — Expansion — Iron OreMinePORTMAN LIMITEDPortman is proposing to increase iron oreproduction at its Koolyanobbing operations to 6Mt/a in the next few years through the developmentof deposits located at Mt Jackson and Windarling, 50to 100 km north of Koolyanobbing. Mining of theseareas may commence in early 2003. A new railwayconnecting the northern deposits to Koolyanobbingis being considered. The company is seekingenvironmental approval to proceed with theexpansion.Expenditure: A$100 millionEmployment: Construction: 120; Operation: 35

Nammuldi — Iron Ore MineHAMERSLEY IRON PTY LIMITEDHamersley Iron intends developing iron oredeposits near its current Brockman No 2 iron oremine, 55 km northwest of Tom Price. Environmentalapproval was granted in November 2000. TheNammuldi deposits will produce Marra Mambalump and fine ores either as stand-alone products,or for incorporation into the Hamersley blend,depending upon market conditions. The existingBrockman No 2 loadout facilities and rail spur willbe used to transport the ore from the mine.Production is likely to commence at 2 to 3 Mt/a withpotential expansion of up to around 20 Mt/a asdemand dictates. Development timing is dependenton customer acceptance of Nammuldi trialshipments and prevailing market conditions. Pre-feasibility studies were completed in late 2002.

IRON ORE PROCESSINGFortescue (Cape Preston) — Mine andHBI PlantAUSTEEL PTY LTDThe Austeel consortium is promoting a 3.85 Mt/aEAF steelmaking project, utilising the Fortescuemagnetite deposits. The Austeel plan is to produceslab, hot-rolled and cold-rolled coil and galvanisedsteel at a new plant in Newcastle, NSW, that willreceive its feed from a new iron ore mine and HBIproduction facility at Fortescue. Processing in WAincludes magnetic concentration, pelletising andDRI processes. HBI will be shipped to Newcastlethrough new port facilities at Cape Preston.Environmental impact assessment for the mine toHBI stage commenced in late 2000. Other projectsbased on the Fortescue deposits (being promoted

AGRICULTUREMantinea Flats — Ord River IrrigationScheme (Stage 2 Development) —Mantinea FlatsHENRY WALKER ELTIN LTD.The project consists of developing and servicingapproximately 80 farms (about 4200 ha total) atMantinea Flats for irrigated intensive horticulturewhich will then be offered for sale. Following anExpression of Interest process in late 1998, aconsortium headed by Henry Walker Eltin Limitedwas mandated to carry out the development,subject to a successful feasibility study andassociated approvals. The studies have beendeferred pending resolution of land access issues.Expenditure: A$108 millionEmployment: Operation: 240

Ord River — Ord River Irrigation SchemeORD STAGE 2 M2 AREAThe potential exists for a 30 500 ha irrigatedagricultural development immediately to the northeast of the existing Ord Stage 1 development. TheWA and NT Governments are committed toinvestigating the project feasibility. Both WA and NTGovernments propose to consult with the localcommunity before progressing re-tendering OrdStage 2 M2 area. Environmental approval has beengiven for an irrigated agricultural project in the M2area, but it is possible that a future proponent orproponents may wish to develop this area for otherpurposes such as cotton, leucaena or horticulturalcrops.

West Kimberley — Water & LandResources Development ProjectWESTERN AGRICULTURAL INDUSTRIES PTY LTDWestern Agricultural Industries Pty Limited (WAI)was appointed in August 1997 to carry out feasibilitystudies into establishing an irrigated agriculturalindustry based on the ground and surface waterresources of the Canning Basin and Fitzroy Riversystem. Results to date indicate that there issufficient potential to establish a 20 000 hagroundwater-based irrigated cotton industry in anarea situated about 200 km south of Broome.Feasibility studies have been deferred pendingresolution of land access issues.Expenditure: A$600 millionEmployment: Construction: 250; Operation: 3000

BAUXITE/ALUMINAWagerup/Willowdale — AluminaRefinery/Bauxite Mine Expansion Train 3ALCOA WORLD ALUMINA AUSTRALIAEnvironmental approval was granted in August 1995to increase the mining rate and expand the Wageruprefinery to 3.3 Mt/a by construction of a thirdproduction train and round-out of total facilities. Around-out to increase capacity by 25% wascompleted in 1999. Commitment to build the thirdtrain is dependent on market and communityfactors.Expenditure: A$995 millionEmployment: Construction: 1500; Operation: 250

COPPERMaroochydore — Copper MineSTRAITS RESOURCES LIMITEDStraits Resources is continuing efforts to define thescope of work and synergies associated with theproposed integration of Maroochydore with thesulphide development at the Nifty mine. Thefeasibility scope and project schedule is expected tobe completed in Q1 2003.Expenditure: A$200 million


by parent company Mineralogy) involve an exportDRI/slab project and an export pellet project.Expenditure: A$3 billionEmployment: Construction: 5000; Operation: 1050

Mt Gibson — Iron Pellet PlantMT GIBSON IRON LTDMount Gibson Iron Ltd is proposing a small exportiron ore development of 1.5 to 2 Mt/a. The initialoperation will be based on the company’s TalleringPeak deposits, although its Mt Gibson depositscould also be mined later. Mount Gibson also plansto conduct feasibility studies into value-addingproducts such as pig iron. The total investment withvalue-adding products being developed could be asmuch as A$500 million.Expenditure: A$500 million

KAOLINThangoo (100km SSE of Broome) —Kaolin MineMANSFIELD MINING NLA major kaolin deposit, to be mined by MansfieldMining NL as the Eaglehawk Kaolin Project, issituated on Thangoo pastoral station about 100 kmsouth-southeast of Broome in the West Kimberley. Itis one of Western Australia’s few high-gradedeposits, with proven reserves of around 410 Mt.The quality of the resource has been verified byindependent bodies (CSIRO, universities in Qld andSA). Once operating, the A$90 million project couldproduce and export 700 000 t/a of kaolin and by-product minerals such as silica sand, ilmenite andleucoxene.Expenditure: A$90 millionEmployment: Construction: 50; Operation: 130

LEADWiluna (Magellan) — Lead MineMAGELLAN METALS PTY LTDThe project is based on a lead carbonate (cerussite)deposit 30 km west of Wiluna. The company expectsto mine 950 000 t/a of ore to yield 100 000 t/a ofconcentrate. Magellan is developing this project inassociation with Ivernia West Plc, an Irish resourcecompany. Construction is projected to commencein Q3 2003. The plan is to export more than 50% ofproduction as a concentrate.Expenditure: A$23 millionEmployment: Construction: 150; Operation: 80

MANGANESEPort Hedland (Boodarie) — ManganeseDioxide Project — Stage 1HITEC ENERGY LIMITEDHiTec Energy Limited proposes to producemanganese sulphate and electrolytic manganesedioxide (EMD) at Boodarie, near Port Hedland. Itwill be a staged development, with first productionlevels being 25 000 t/a, with an expected rise to 50000 t/a. It will use ore from Consolidated Minerals’Woodie Woodie manganese mine in the EastPilbara, about 400 km east-southeast of PortHedland.Expenditure: A$136 millionEmployment: Operation: 115

METHANOLBurrup Peninsula — Methanex MethanolPlantMETHANEXMethanex is considering the establishment of a 5Mt/a methanol plant on the Burrup Peninsula.Feasibility and approvals work have commenced fora decision on the project by Q1 2003. Expenditure: A$2 billionEmployment: Construction: 1000; Operation: 150

Burrup Peninsula — Methanol PlantGTL RESOURCES PLCGTL Resources proposes to build a plant to produce 1Mt/a of methanol from mid-2005. The plant will besituated at Withnell East on the Burrup Peninsula. On17 October 2001, GTL Resources signed aMemorandum of Understanding with ApacheCorporation, Globex Energy Inc and Santos Ltd forthe purchase of 108 TJ/d of natural gas to supply theplant. Products will be sold to Swiss company Vitol fortrading on international markets.Expenditure: A$770 millionEmployment: Construction: 500; Operation: 60

NICKELMt Keith — Nickel MineWMC RESOURCES LTDWMC Resources is reviewing options to expand its MtKeith operations from 11 Mt/a to 14.3 Mt/a by thesecond half of 2004, and then possibly to a millthroughput of 16 Mt/a later in the projectdevelopment. A feasibility study into the preferredexpansion options is expected to be completed by theend of 2002. Options for expanding its output at itsKwinana refinery are also being evaluated.Expenditure: A$200 million

Ravensthorpe — Nickel MineBHP BILLITON — RAVENSTHORPE NICKELOPERATIONS PTY LTDBHP Billiton is currently evaluating the production ofapproximately 180 000 t/a of mixed nickel/cobalthydroxide that contains at least 45 000 t/a of nickeland 1800 t/a of cobalt to be processed at QNI’s Yabulurefinery in Queensland. The definition phase hasbeen extended to December 2002 to undertakefurther pilot scale testing and plant optimisationmodelling. The project is then expected to move,subject to the results of the definition phase, into theengineering stage which is due to be completed bymid 2003.Expenditure: A$950 millionEmployment: Construction: 1000; Operation: 300

Sally Malay — Nickel ProjectSALLY MALAY MINING LIMITEDSally Malay Mining recently secured US$5 millionproject financing and signed a life-of-mineconcentrate offtake agreement with the Chineseresource giants Jinchuan Group and Sino MiningInternational. In Q3 2002 the company awarded thestage 1 (optimisation) EPCM contract to RocheMining/JR Pty Ltd. The company is aiming tocommission the mine and process plant in Q4 2003.The project proponents plan to employ both open-cut and underground mining methods to extract theore, which will be processed via a 535 000 t/a mill. Abulk nickel/copper/cobalt concentrate will beshipped by road and exported through the upgradedPort of Wyndham. The project is expected to have amine life of 5.5 years on current resource estimates.Expenditure: A$50 millionEmployment: Construction: 150; Operation: 120

OIL & GAS DEVELOPMENTSGorgon (Carnarvon Offshore Basin) — Gasand Condensate FieldCHEVRON AUSTRALIA PTY. LTD.A range of alternative development scenarios iscurrently being examined. The restricted use ofBarrow Island will be considered after a public reviewof environmental, social, economic and strategicaspects as part of an evaluation by Government.Potential markets include domestic gas consumers inWestern Australia and value-adding gas processingconsumers such as LNG or GTL. Gas reserves havebeen enhanced by positive results from anexploration program in the West Gorgon area.Development decisions by the Gorgon joint venturerswill be subject to market commitments. Expenditure: A$4 billionEmployment: Construction: 2000; Operation: 120

Macedon/Pyrenees (Carnarvon OffshoreBasin) — Oil/Gas FieldsBHP BILLITON PETROLEUM PTY LTDThese are two adjacent, but separate offshorehydrocarbon fields within the West Muironstructure, about 50 km north of Exmouth. TheMacedon gas field was discovered in 1992 by theWest Muiron-3 well with a follow-up appraisalcampaign in 1994. The Pyrenees oil and gas fieldwas discovered in 1993. There are no immediateplans to develop the Pyrenees oilfield. Pyrenees andMacedon are under consideration for domesticmarket opportunities.Employment: Construction: 35; Operation: 5

North West Shelf — Project Expansion —5th LNG TrainWOODSIDE ENERGY LTDProposals by the NWS partners, for LNG train 5 anda second trunkline, and expansion of the Domgasplant, received environmental approval in 1998 and1999. The LNG expansion is based on growing Asianenergy markets. In April 2001 the partnerscommitted to development of the A$1.6 billion LNGTrain 4. Train 5 development is contingent on futuremarket conditions. Expenditure: A$1.6 billion

Scarborough (Carnarvon Offshore Basin)— Gas FieldESSO AUSTRALIA LTDThe field is located in 900 metres of water, 300 kmoffshore in the Carnarvon Basin. Development willdepend on reserves proving up to 7 to 11 Tcf of gas.Further evaluation work is being undertaken, butcurrently there are no near to mid-termdevelopment plans.

Scott Reef/Brecknock (Browse Basin) —Gas FieldsWOODSIDE ENERGY LTDThe latest exploration is focussed on BrecknockSouth-1 in WA-33-P where a 167 metre hydrocarboncolumn over a single interval in the primaryreservoir objective has been found, a result that wasat the high end of expectations. The water depth is420 metres. In February 2001, the recoverablereserves for the Scott Reef/Brecknock project wereupgraded to 20.49 Tcf of gas and 311 million barrelsof condensate after multi-disciplinary studiesincorporating the results of drilling at BrecknockSouth. The fields are considered commerciallyviable in the future, but await firm developmentplans dependent on significant growth in domesticgas and LNG markets.

Tern/Petrel (Bonaparte Offshore Basin)— Gas FieldSANTOS LIMITEDThe offshore Petrel gas field, discovered in 1969, islocated about 250 km west of Darwin on the WA/NTseabed border in the Bonaparte Basin. The offshoreTern gas field, discovered in 1971, is located about300 km west of Darwin in WA waters in theBonaparte Basin. Field development optionsinclude installation of unmanned offshoreproduction platforms with a pipeline to a gastreatment plant south of Darwin. The developmentpossibilities for these fields have been enhanced byrecent significant discoveries by other partiesnearby which may provide tie-in potential for Petreland Tern to service domestic gas customers.

Whicher Range (Perth Onshore Basin) —Gas FieldAMITY OIL NLThe Whicher Range gas field, located 21 km south ofBusselton, was discovered in 1968. The four wellsdrilled to date have confirmed a significant-sizedgas field, but gas flow rates have been sub-commercial. Recent work by Amity Oil to increasegas flow rates from the extremely tight sands,including high pressure injection of carbon dioxide,


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Projects under considerationas at 3 December 2002

has increased the possibility of commercialdevelopment. Amity is presently holdingdiscussions with interested parties to take a farm-inposition to assist in funding expenditure of up toA$9 million on a new well (Whicher Range-5). If acommercial gas flow is obtained, the well would becompleted for production.

Woollybutt (Carnarvon Offshore Basin) —Oil Field DevelopmentAGIP AUSTRALIA LIMITEDThe Woollybutt development plan comprises the re-entry and sidetracking of two of the existing threewells to drill two horizontal production sections,each 500 metres in length. Produced oil will beexported via a shuttle tanker arrangement. The jointventure partners have signed an agreement for theprovision of a leased FPSO vessel. First oil isplanned for Q1 2003 at an estimated (gross)production rate of 35 000 barrels per day.Expenditure: A$100 million

PETROCHEMICALS/CHEMICALSBarrow Island — Gas to Liquids FuelsSASOL CHEVRON GLOBAL JOINT VENTURESasol Chevron is considering Australia as a locationfor a plant to produce environmentally clean dieselfuel from natural gas. This gas-to-liquids (GTL) fuelsplant would initially produce about 30 000 barrels aday, of which 22 700 barrels would be diesel and therest naphtha and LPG. Future expansions wouldprovide up to 200 000 barrels a day to supply bothAustralian and South East Asian markets with totalinvestments of $10 billion and utilising around 20Tcf of gas over the 25-year design life. Likelylocations for the plant are the North West of WesternAustralia or the Northern Territory.Expenditure: A$2.04 billionEmployment: Construction: 2500; Operation: 200

Burrup Peninsula — Ammonia PlantBURRUP FERTILISERS PTY LTDBurrup Fertilisers plans to develop an ammoniaplant at King Bay/Hearson Cove industrial area onthe Burrup Peninsula, near Karratha. Around 760000 t/a of liquid ammonia will be produced andexported to India for the manufacture ofammonium phosphate fertilisers. The company hasconcluded a bankable feasibility study and is welladvanced in negotiations with government agencieson land tenure, water and port infrastructure.Environmental and Aboriginal Heritage approvalsand Native Title agreements have been obtained.SNC-Lavalin Australia Pty Ltd, was appointed theEPC management contractor for the project. TheHarriet Joint Venture has entered into an agreementto supply 82 TJ/d of natural gas to the project.Construction is scheduled to start up in Q1 2003.Expenditure: A$630 millionEmployment: Construction: 500; Operation: 60

Burrup Peninsula — Ammonia Urea PlantDAMPIER NITROGENAgrium Inc of Canada, Plenty River Corporation Ltd,Thiess Pty Ltd and Krupp Uhde GmbH of Germanyhave signed a Project Development Agreement tocomplete a bankable feasibility study for theconstruction of a A$900 million ammonia and ureaplant on the Burrup Peninsula near Karratha. Theworld-scale plant will produce around 1.2 Mt/a ofgranular urea and 100 000 t/a of ammonia. Urea iswidely used as a fertiliser, while ammonia is used infertilisers, explosives and as a chemical feedstock. Expenditure: A$900 millionEmployment: Construction: 1000; Operation: 130

Burrup Peninsula — Dimethyl EtherProjectJAPAN DME LTD.Japan DME Ltd, a joint venture of Japanesecompanies comprising Mitsubishi Gas ChemicalCompany, Itochu Corporation, Mitsubishi HeavyIndustries and JGC Corporation, plans to develop aworld-scale dimethyl-ether (DME) plant on the

Burrup Peninsula near Karratha. DME is used as anaerosol propellant and is a likely futureenvironmentally clean fuel for the power generationand transportation industries. The proposed plantwill produce methanol for conversion into 1.7 Mt/aof DME from around 220 TJ/d natural gas. Detailedfeasibility studies are underway. Environmentalconsultant, PPK Environmental and InfrastructurePty Ltd, has commenced work on obtainingenvironmental approval for the project. Acommitment to proceed is expected in the latterhalf of 2003. When a project go-ahead is given, theplant could be operating in late 2006.Expenditure: A$1 billionEmployment: Construction: 1000; Operation: 150

PLATINUM GROUP METALSHalls Creek — Panton Sill-PlatinumProjectPLATINUM AUSTRALIA LIMITEDThe Panton platinum-palladium project is located60 km north of Halls Creek in the Kimberley. It willbe an open cut and underground mine operation,and it is expected to have a mine life of 11 years. Theproposed high-grade plant will consist of crushing,milling and flotation to produce a final flotationconcentrate. It is proposed that 650 000 tonnes perannum will be processed through the plant.Platinum Australia anticipates construction tocommence in 2003.Expenditure: A$80 million

Munni Munni — Platinum DepositHELIX RESOURCES NLHelix Resources NL and UK-based Lonmin PLC, thethird largest PGM producer in the world,announced a joint venture covering the MunniMunni PGM deposit with Lonmin to provide A$8million in funding to October 2002 in return for 50%equity in the project. At the end of September 2001the indicated resource was 9.2 Mt at 2.9 g/tcombined platinum, palladium, rhodium, and gold,0.2% nickel, and 0.3% copper. Preliminary miningstudies suggested a mining rate of combined open

cut and underground production of 1.5 Mt/a.Extensive drilling was undertaken to add to theresource with work in early 2002 revealing thedeposit was not a typical layered PGM intrusion,with the western and eastern margins bounded bysteeply dipping faults. In the September quarter of2002 a A$2 million diamond drilling program wasbegun to test for feeder zones and downplungeextensions of the Ferguson Reef. The company willthen decide whether to proceed with a feasibilitystudy.

RARE EARTHSMt Weld — Rare Earths OperationsLYNAS CORPORATION LTDEnvironmental approval has been granted to mine100 to 150 000 t/a of ore at Mt Weld leading to up to40 000 t/a of 40% concentrates to produce up to 13000 t/a REO. Lynas intends to sell 30-40% of productas mixed REO carbonate, produced in Australia,with the balance of the material shipped to Chinafor separation and on-sale. Lynas will own andmarket the output through its Rare Earths Directbrand.Expenditure: A$55 millionEmployment: Construction: 100; Operation: 30

TIMBERFlynn Drive — Laminated Veneer LumberPlantWESBEAM PTY LTDWESBEAM Pty Ltd has reached an agreement withthe State, which has been ratified by Parliament, forthe development of an A$80 million laminatedveneer lumber (LVL) plant at Flynn Drive, Neerabup.LVL is prepared by peeling pine logs into sheets,then re-aligning and gluing them to produce verystrong engineered wood products. Timberfeedstocks will be pine trees harvested from StateGovernment- owned plantations in Gnangara andother areas. The project will sell LVL and veneers toAustralian and overseas markets.Expenditure: A$80 millionEmployment: Construction: 200; Operation: 160

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RESOURCE SYMBOLSBauxite−Aluminaa Alumina refineriesb Mines and depositsChemicals / Petrochemicals / Petroleum@ Processing plants / refineriesN Natural gas fieldO Oil field

! Natural gas / oil fieldu Natural gas / condensate field; Natural gas / oil / condensate fieldChromitec Mines and depositsCoalh Coal mines and deposits? Lignite mines and depositsCopper−Lead−ZincZ Mines and depositsDiamondsd Mines and depositsGoldj Mines and depositsGypsumx Mines and depositsHeavy mineral sandsm Mines and deposits — titanium-bearing sandsG Mines and deposits — garnet-bearing sandsJ Ti02 pigment and synthetic rutile plantsIron oreI Mines and depositsY Downstream processing plantsLimestone−Limesand4 Mines and DepositsC Cement plantsManganese orer Mines and depositsy Downstream processing plantsNickeln Mines and depositsv Smelters and refineriesPhosphateP Mines and depositsPlatinoidsK Mines and depositsRare earth elementsR Mines and depositsSalts Production facilities / pansSilica − Silica Sandw Mines and depositsX Silicon smeltersTalcT Mines and depositsTantalumt Mines and depositsVanadium−TitaniumV Mines and deposits

NON-MINERAL PROJECTS6 Irrigation schemesq Major port handling facilities8 Major power stations1 Downstream timber processsing plant

OPERATING PROJECTS ARE SHOWN IN BLUEPOTENTIAL PROJECTS ARE SHOWN IN RED

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1

1

Major Resource Development Projects: Western AustraliaAs at December 2002

PILBARA

KIMBERLEY

focus on albany

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