Mineral Resources spared no expense on mine worker accommodation, from “love shacks” for coupled up employees to an 18-hole putt putt course, underlining just how difficult it will be for the miner to extract itself from the legacy of Chris Ellison.
The board is looking for Mr Ellison’s successor since deciding last year that his related party dealings and participation in an offshore tax scheme were the end of his MinRes leadership.
MinRes could have built the camp for about $55m, but instead opted to spend $140m.
Mr Ellison was nowhere to be seen on Thursday when the company officially opened the camp it has named Mungala Resort in a nod to traditional owners represented by the Robe River Kuruma Corporation.
And despite the parlous financial state the company now finds itself in, the “resort” was a source of corporate pride at one of the Pilbara’s most humbled iron ore producers.
Director of strategy, Tim Picton, said the 500-room site at Ken Bore’s mine that underpins the $3.5bn Onslow Iron project had paid for itself within a few months.
“It’s completely changed how a mining camp feels and turned it into a community that people like being at,” he said. “That means that you’ve got a happier, more productive, safer workforce, and it means your retention rate is much, much higher.”
MinRes also claims to have a long list of workers wanting to jump ship from its struggling lithium and other operations for life at Ken’s Bore.
FIFO workers break for golf on site. Picture: Mineral Resources
It has shed more than 1700 workers since the end of last financial year and is weighed down by a $5.4bn net debt pile.
Rooms feature queen-size beds, washing machines, private verandas and are three-times the size of a typical ‘donga’.
There are 23 couples who fly-in and out of Ken Bore’s on MinRes Air, the company airline.
Mr Ellison has also delivered on his promise to offer some of the cheapest childcare in Australia in a centre next to his headquarters in Perth.
The MinRes share price plunged in March after it revealed a first-half loss of $807m and admitted it would need to spend $230m repairing and upgrading the 150km-long haul road that connects the Ken’s Bore iron ore mine to port facilities at Onslow.
The Australian Securities and Investments Commission is investigating the governance implosion that erupted last year but apparently ran for decades unchecked.
Newcomer Malcolm Bundey take up his role as chair on July 1. Other board appointments are expected to follow after independent directors Jacqueline McGill, Susie Corlett and Denise McComish quit in April.
MinRes mining services boss Mike Grey, in charge of the Onslow Iron project, said it was starting to hit its straps.
Repairs and upgrades to the haul road were on track and on budget for a September quarter finish. MinRes is also in sight of its target production rate of 35 million tonnes a year.
“There’s no risk about that,” he said.
Inside the fully furnished rooms at Mungala. Picture: Mineral Resources
Onslow Iron faces a softening iron ore price.Fortunately, China’s Baowu Steel Group, the world’s largest steelmaker, is a partner in Onslow Iron and has been buying 75 per cent of the MinRes share of production plus taking its own share of about 18.7 per cent.
Mr Picton said MinRes remained confident of Baowu support – its top leaders visited Onslow Iron in recent weeks – and in Chinese demand more broadly.
“The iron ore price at about $US90 during the midst of a global trade war with tariffs on China shows that it’s incredibly resilient,” he said.
“We think that between $US90 and $US110 a tonne is where the iron ore price will float. If it got down to $US80, are we worried? Not at all because this project makes a lot of cash regardless.”
“Those two mine are running better than they ever have before,” Mr Picton said of Wodgina and Mt Marion.
Dump truck driver Lisa Vines is happily embedded at Mungala Resort. Ms Vines, 59, left a 30-plus year career mainly in WA’s Department of Communities to join MinRes a couple of years ago.
“It’s the ClubMed of the Pilbara,” she said.
She is sorry to see Mr Ellison go when that day comes.
“He talks to you individually, and I’m just a truck driver. He comes down to our level. ‘Are you safe? Are you happy?’”
Brad Thompson travelled to the Pilbara as a guest of MinRes
MinRes spruiks its $3.5b Onslow project, the ‘Club Med of the Pilbara’
The bank-busting project has the market divided, with its remote location and haulage road troubles. But the mining giant says it’s all blue sky from here.
It’s the remote Pilbara iron ore project that has the market divided. Now, two years after first breaking ground at Ken’s Bore, Mineral Resources is out to spruik its flagship Onslow project, built at a cost of $3.5 billion.
That sales pitch is why a two-dozen strong press pack – from television presenters toThe Australian Financial Review– found themselves transported by the company’s own airline service to the mine on Thursday.
The project’s problems are well known, and centre around a 147-kilometre private haul road half owned by Morgan Stanley Infrastructure Partners, which is in poor shape considering it is almost new. The remote nature of the mine makes it too expensive for a rail connection, and MinRes is using the road to transport ore to port and onward to China.
If it can make that work, there’s hope for the company, founded and run by high-profile businessman Chris Ellison, which is hoping to prop up a tottering balance sheet. Shares are down almost two thirds in a year.
The road is in such poor condition that MinRes has had to spend $230 million repairing it already, adding to a $5.8 billion pile of debt.
“That’s the main bottleneck – the upgrade on areas of the road,” says Mike Tonkin, executive general manager of Onslow Iron. Once the costly repairs are completed by September, Tonkin added, the project will flourish.
The miner’s troubles with Onslow come amid the backdrop of a falling iron ore price, a reduction in steel output from China, and the looming problem of the falling quality of the Pilbara’s ore. Steelmakers are increasingly favouring high-grade ore found in mines such as Simandou in Guinea, in a shift thatcould sideline the Pilbara’s big iron ore miners.
MinRes, which mines relatively lower grade iron ore compared to BHP and Rio Tinto, believes the impact of Simandou will, in fact, be beneficial.
Simandou’s part owner Baowu, the world’s biggest steelmaker, is a partner in the Onslow project. It wants to combine ore from the mine with the high-grade product from Guinea to create “a perfect blend”, says Tim Picton, MinRes’ director of strategy. “[Baowu] can’t get enough of our product.”
To keep Ken’s Bore running and its staff happy, the miner has sunk $140 million into its 500-room Mungala Resort – a facility that MinRes truck operator Lisa Vine called “the Club Med of the Pilbara, if not Australia”.
The resort is lavish by hotel standards, let alone byfly-in, fly-out camp levels. The rooms have queen-size beds, an in-room washer-dryer, a television with video-call function, kitchenettes and a couch. When not working 12-hour shifts, staff can use the Olympic size swimming pool, basketball court, tennis court, cricket nets and 18-hole mini-golf course.
The recreation room has every indoor entertainment available – table tennis, pool table, foosball, air hockey, darts, golf simulator and more. Staff fly to Mungala Resort on MinRes Air – the miner’s in-house airline.
Vines, who joined MinRes after three decades in the public service, said becoming a fly-in, fly-out worker was “the best decision I ever made. And the money is better than the public service”.
When asked about Ellison – including his comments that employees at the miner’s Perth head office should be held “captive all day long” to keep them working – Vines offered nothing but praise.
“I really admire Chris Ellison. He gave us a resort like this. He’s a salt of the earth type of guy,” she says.
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