From: WA Business News News: 1-November-07 by Mark Beyer
MIXED RESULTS: While the state government review provided good news for the bigger mining projects in the Mid West, the conclusions from the review may make it difficult for some smaller projects to secure environmental approval.
A state government review of iron ore developments in the Mid West has been welcomed by companies with major projects in the region but left a cloud over several potential mines.
The strategic review has effectively paved the way for companies such as Gindalbie Metals, Murchison Metals and Midwest Corporation to gain environmental approval for their big projects.
But some of their smaller projects, like Gindalbie’s Mungada hematite project, may not win approval if the government stands by the conclusions of the review.
In addition, smaller exploration projects at an early stage of development may also struggle to win environmental approval.
The strategic review of the ‘banded iron formation ranges’ was designed to give greater certainty for project proponents and provide the Environmental Protection Authority with guidance on government priorities.
It was commissioned in November 2006 after the EPA recommended that mining should be banned from the BIF ranges, which are home to many of the Mid West region’s iron ore deposits.
This led to concern that expansion of the Mid West’s emerging iron ore industry could be halted before it has hardly begun.
Resources Minister Francis Logan said the review proposed a responsible middle ground that maximised the potential of the mining sector while maintaining a high degree of environmental responsibility.
One of the key conclusions of the review was that the government has a “predisposition” to development over areas of Jack Hills, Weld Range, Tallering Peak, Yalgoo and Wiluna West.
The review also favoured the development of identified magnetite ore bodies in the south-west section of the “highly biodiverse” Karara/ Mungada Blue Hills area but “the government is not predisposed to the extraction of the hematite deposits of the area”.
In addition, the review concluded that the government “further considers both the economic and biodiversity values present in the Koolanooka Hills when projects in this area come forward for assessment”.
The review was good news for Gindalbie’s $1.6 billion Karara magnetite iron ore project, which the company is keen to proceed with following completion of a bankable feasibility study in September.
The bad news for Gindalbie was the uncertainty over its $94 million Mungada hematite project, also located at Karara, which the company planned to develop following completion of its bankable feasibility study.
Gindalbie has been targeting first production at Mungada in the first quarter of 2009, with the mine set to provide early cash flow for Gindalbie and its partner, China’s Ansteel, in the lead up to commissioning of the much larger Karara project in 2010.
Gindalbie managing director Garrett Dixon said that, based on a reading of the entire review, the company believed Mungada may still gain environmental approval but was seeking clarification.“There are a few things that could be read in different ways,” he said.Midwest Corp, which has plans to develop up to four iron ore projects in the region, noted the government’s predisposition towards development of Jack Hills and Weld Range.
This is good news for Midwest, which plans to develop a hematite mine at Weld Range, producing between 15 million tonnes and 20mt a year, and is hoping to develop a 5mt-10mt/year mine at Jack Hills.
The review also provided good news for Murchison Metals, which currently has a small mine at Jack Hills and is planning to develop a much larger 25mt/year mine at the same location.
Murchison executive chairman Paul Kopejtka welcomed the report, which he said provided further clarity and certainty on the process for securing the remaining environmental approvals for Jack Hills stage 2.
“The review also reaffirms the government’s support for the development of the Oakajee port and rail infrastructure to support Jack Hills and Midwest Corporation’s nearby Weld range project,” Mr Kopejtka said.
However, the review seemed to indicate that Midwest may battle to gain environmental approval for its hematite and magnetite expansion projects in the Koolanooka/Blue Hills area, to the south-east of Geraldton.
Midwest said that, in relation to the expansion of its Koolanooka/Blue Hills hematite project, the review “suggests that the government’s predisposition is not to support hematite projects at Koolanooka and Blue Hills but that each project will be considered on a case-by-case basis”.
“In light the minimal environmental impact of the Koolanooka/Blue Hills direct shipping project, which involves mining previously mined pits, and the economic benefit that it would bring to the communities of Morawa and Perenjori, the company will continue the process of seeking environmental approval of the project,” chief executive Bryan Oliver said.
Midwest did not comment on the implications for its Koolanooka magnetite project, which could produce 6mt-12mt/year of magnetite concentrate and iron pellets.
That didn’t stop Murchison drawing its own conclusions, based on the statement that the government should consider the economic and biodiversity values in the Koolanooka Hills when projects come forward for assessment.
“In Murchison’s view, these comments suggest that it is unlikely that Midwest will obtain approval to mine its magnetite resources at Koolanooka,” the company said.
Murchison said this conclusion had no impact on its $1 billion takeover offer for Midwest, because it ascribed no value to the Koolanooka magnetite resource.
Another company that welcomed the review was Ferrowest, which is looking to develop a mine and 500,000t/year pig iron plant at Yalgoo.
“We were concerned that the EPA would treat all banded iron formations as being of high biodiversity value without proper scientific assessment,” Ferrowest managing director Brett Manning said.
“This report provides clear guidance on government priorities and recognises the results of the detailed spring botanical surveys carried out by the company in relation to the proposed Yalgoo iron project.”
Ferrowest said flora surveys at its Yogi deposit, which forms the basis of the Yalgoo project, clearly demonstrated that the biodiversity value of the range was low.
The Association of Mining and Exploration Companies said the review provided some degree of direction for the iron ore industry, but also left questions unanswered.
“Serious uncertainty remains, however, in relation to which particular mining and exploration tenements will be impacted and which companies will be affected,” AMECs policy and public affairs manager Ian Loftus said.
“It looks like a number of mining companies will have their future potential operations curtailed or even denied, so it’s likely that some companies, their shareholders, and workers won’t be happy,” he said.
“The creation of additional conservation estate, as detailed in the review, is undoubtedly linked to the ongoing conversion of pastoral leases by the state.”
The government said it was committed to the creation of class-A nature reserves or national parks over the Helena-Aurora Range, Die Hardy Range and Mt Manning Range, with a pre-disposition against development of these ranges.
An updated strategic review of biodiversity and mineral resource values in three years will make more specific recommendations for conservation reserves across the remaining BIF ranges.
Since 2002, the EPA has completed formal assessments on three mining proposals in the region and is currently working on another three. There are a further three at the feasibility stage and 25 prospects under exploration.
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