Bowen Basin Coal Mine Approved

Bowen Basin Coal Mine Approved

The government in the Australian state of Queensland has approved the development of a A$4 billion coal mine in the state’s Bowen Basin region that will create over1500 new jobs. However, the government also announced said the development was subject to a raft of strict development and operating constraints.

The Caval Ridge project is proposed by the BHP Billiton Mitsubishi Alliance and plans an open-cast mine that straddles the Peak Downs Highway, near Moranbah, 170 kilometres south-west of Mackay.

State treasurer Andrew Fraser said the government's decision was based on the coordinator-general's evaluation, which followed over 18 months of environmental impact assessments.

The state’s conditions set clear principles and procedures with respect to air quality monitoring, dust and water management, community consultation and the mitigation of potential social impacts of the mine.

The Federal Minister for Environment will assess the report under Commonwealth environmental legislation.

Around 1200 construction jobs and 495 ongoing operational jobs will be created for up to 30 years.

Construction of the mine could start in 2011, with first coal exports by 2014.

Atlas, Aurox Merger Clears Final Hurdle

Atlas, Aurox Merger Clears Final Hurdle

The merger between Australian iron ore miners Aurox Resources and Atlas Iron have cleared its final regulatory hurdle on Thursday when the country’s Federal Court approved the $A143 million deal.

As a result of the approval, shares in Aurox will cease to be traded on the Australian Securities Exchange on Friday with shares in the merged entity set to be traded from Monday.

Under the merger deal, shareholders in Aurox will receive one Atlas share
for every three Aurox shares held, a deal that values Aurox at 74 cents a share, a 173 premium to Aurox’s share price prior to the deal being announced on 9 March 2010.

The merged entity will have up to 33 million tonnes per year of allocated port capacity in Western Australia’s Pilbara region.

Atlas commenced DSO mining at its Wodgina iron ore project in the Pilbara region
on 20 June. Atlas plans to export iron ore from Wodgina and its Pardoo project in the Pilbara at an annualised rate of 6 million tonnes by the end of the year and 12 million tonnes by 2012.

The company is also developing the Balla Balla project in the West Pilbara area with a mineral resource of 456 million tonnes and ore reserves of 238 million tonnes.

The company will also benefit from Aurox’s allocation of 6 million tonnes a year at the Utah Point berth at Port Hedland.

Chinese Anger At Q3 Iron Ore Prices Rise

Further 23 Per Cent Asked For Iron Ore

Chinese steel mills have expressed outrage as Vale and BHP propose an iron ore price of $160 per tonne for the third quarter.

"BHP has recently informed us that they will raise third quarter iron ore prices, including freight, to 160 U.S. dollars a ton, which is unacceptable for us," according to an official from a large steel mill.

"We will become unprofitable with such prices on the back of a persistent fall in steel prices," the source said.

The price is 23 percent higher than that in the second quarter.

One source suggested that the price was unreasonable given the fall in spot prices in recent weeks.

"We will see a complete loss in the steel industry if the much-talked-about price is inked, and most small-sized mills will go bankrupt," said Chu Xueliang, an analyst at China Jianyin Investment Securities.

"We estimate that the acceptable price for Chinese steel mills is around 130 U.S. dollars per ton in the third quarter," Chu said.

Chinese Steel Mills Receive Rio Tinto Price Offer

Price Is Double 2009 Benchmark

Rio Tinto has delivered its official iron ore price offer for the second quarter of this year to Chinese steel mills. According to sources within the Chinese steel industry, the offer was received on Friday.

The free-on-board price for fine ore with grade of 63.5 per cent was about $US123 per tonne and around $US138 per tonne for lump ore. With ocean freight added on, the price is around $US135 per tonne – around double the 2009 benchmark price agreed with Japanese and Korean steelmakers.

The China Iron & Steel Association admitted last month that the country's mills and the large iron ore miners had reached private price deals on iron ore supply, even as negotiations continued.

The offer means the end of the annual benchmark system and a move to quarterly pricing.

Fortescue To Review New Projects

Miner Blames Super Tax

Australian iron ore miner Fortescue Metals Group Ltd. has put two of its three expansion projects on hold.

The company has said that it wants to review the potential impact of the 40% tax on mining profits proposed by the Australian government. The tax is due to come into force in July 2012

Fortescue is to review its US9billion Solomon hub and its $6billion Western hub projects. Between them the two projects were set to employ up to 30,000 people.

"The uncertainty in the financial markets caused by the proposed tax and the cash impost that RSPT payments will place on future business revenues has necessitated an urgent review of the economics surrounding the development of Fortescue's major projects," the miner said in a statement on Wednesday.

The company had been aiming to approve Solomon next year but the only work to continue will be the completion of existing studies.

The project was slated to produce 160 million tonnes a year of iron ore.

However Fortescue continues to expand its Chichester hub capacity from 55 million tonnes to 95 million tonnes a year. Unlike the Solomon and Western projects, Chichester is to be financed from internal cash flows.

Macarthur Rejects Reduced Peabody Offer

Shares Plunge As Miner Rejects Bid

Macarthur Coal Ltd., the world’s largest pulverized coal producer, has rejected the latest bid from Peabody Energy Corp.’s saying it is too low. Macarthur’s two biggest shareholders, Citic and ArcelorMittal are also expected to reject the bid.

Peabody reduced its offer from A$16 a share to A$15 a share, citing its due diligence review of Macarthur’s finances and the Australian government’s plan to bring in a ‘super tax’ on mining companies’ profits.

Shares in Macarthur fell over 20 per cent on the news to close at A$11.25 a share.

Rare Metal Found In North Queensland

Scandium Found Near Townsville

Australian miner Metallica Minerals says it has found deposits of scandium at its Ludrow nickel-cobalt project as Greenvale near Townsville in the Australian state of Queensland.

The element is used to strengthen low-weight aluminium alloys in the aerospace, automotive and sporting industries but supplies have been limited.
Metallica managing director Andrew Gillies says the company hopes to capitalise on that shortage, and subject to a feasibility study, become the world's largest scandium supplier.

"It has got fantastic attributes, and everybody likes quality products," Mr Gillies said.

"We are talking to serious end users that are in need of long term reliable supply. The problem has always been is that there's no long term reliable supply, so the main end users would be reluctant to add it to their plane wings, rocket wings [and] mainstream lighting components.

Mr Gillies said he thought there was around 1500 tonnes of scandium oxide in around 20 drilling holes at the Ludrow site. The Scandium will be processed in conjunction with nickel and cobalt from the project, making the venture worthwhile.

BHP, Rio Set Year-End Date For Iron Ore Deal

Year-End Deadline for Pilbara Merger

Iron ore giants BHP Billiton and Rio Tinto may re-evaluate plans to merge their Western Australian iron ore operations if the two parties cannot reach an agreement by year end.


The Wall Street Journal quotes BHP chief executive Marius Kloppers as saying the deal was being hampered by the proposed 40 per cent tax on mining profits proposed by the Australian government.


“The tax brings in uncertainty," Mr Kloppers told the paper. Earlier this week he told the Australian Broadcasting Corporation that both parties were keen to complete the joint venture despite the tax and despite opposition to the deal in the EU and China.


Mr Kloppers recently met his counterpart at Rio Tinto, Tom Albanese, and the two agreed on a 31 December deadline to complete the deal.


Mr Kloppers also said that BHP would invest elsewhere if the Australian government approved the deal.

Kangaroo To Complete Indonesian Coal Acquisition

Five More Coal Mines To Be Added To Portfolio

Australian mining company Kangaroo Resources is to acquire five Indonesian coal projects, after completing its due diligence. The company announced its plan to buy the projects late last year.

Drilling will soon commence at Kubah Indah, where the company’s exploration target is for 100-400 million tonnes of coking coal.

The company said this drilling program will be conducted in parallel with the ongoing ramp-up of production at its other Indonesian operations.

Prior to announcing these latest acquisitions Kangaroo already had two coal mines in Indonesia.

Managing Director Mark O’Keeffe said “The completion of due diligence was high on our list of priorities and, as expected, the projects were found to be technically and legally sound.”

“Kubah Indah in particular will become a very important project for us and, in combination with the Mamahak Project, will form the backbone of our coking coal production profile in the future."

“We will now move quickly towards the commencement of an initial exploration programme at Kubah Indah, and over the coming months we expect to be able to delineate a significant JORC resource,” added Mr O’Keeffe.

Kangaroo has issued 300 million shares to the projects’ vendors as consideration for the acquisition and these would be issued once its shareholders approve the deal.

Kangaroo recently announced an export sales contract with Chinese energy company, Yudean Farnon.

The contract involves three trial shipments of a total of 150,000 tonnes of coal over a two-month period. The deal will then be extended with pricing linked by a formula to the Chinese Coal Index.

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Gindalbie To Raise $200m For Karara Project

Australian iron ore miner Gindalbie Metals Ltd is seeking up to $206 million to help fund the development of its $2 billion Karara iron ore project in Western Australia.

The capital raising will include a $111.8 million share placement to institutions and another placement with its joint venture partner and largest shareholder, China's Angang Steel Company Ltd (AnSteel), to raise between $63.2 million and $74.6 million.

Last month Gindalbie secured last month a $US1.2 billion ($A1.34 billion) loan facility with funds sourced mainly from China Development Bank and Bank of China.
Gindalbie said at the time that it had about $200 million in cash reserves remaining from equity payments totalling $534 million that have been contributed by Gindalbie and AnSteel to the joint venture company.

Mining is expected to begin in mid-2011.

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Coal Offloaded from Stricken Ship

Shen Neng 1 To Be Towed Back To China

Salvage crews have begun to offload coal from the Chinese-registered ship that ran aground on the Great Barrier Reef off the coast of Queensland, Australia last month.

A smaller bulk carrier has docked beside the Shen Neng 1 and work has begun to offload a third of its coal. A second coal lighter will take over offloading duties when the first is full, probably this weekend. Around 19,000 tonnes will be removed from the over the next three weeks and the ship will then be towed back to China.

The Shen Neng 1 ran aground on 3 April causing extensive damage to the reef. It was refloated on 12 April 12 and towed to calmer waters off Hervey Bay on Tuesday for the salvage operation.

MSQ general manager Patrick Quirk said extensive environmental protection measures were in place.

"Water sprays are being used to suppress any coal dust which may be stirred up by the lighter's grab buckets, which are also specially designed to reduce spillage," Mr Quirk said.

"We will also have skilled observers watching the transfer process for any sign of spillage and they can call an immediate halt to the operation if they have any concerns."

Environmentalists have called for the Queensland government to guarantee that the state’s marine parks won’t be used as a refuge for ships that have run aground. A Greenpeace spokeswoman pointed out that the ship had been anchored in the Hervey Bay marine park that was home to dolphins and whales and she urged the state not to allow the Shen Neng 1 to set a precedent.

Iron Ore Contract Prices May Rise 32 Per Cent

Calculation Is Based On Three Months Spot Average

Contract prices of Australian iron ore may rise 32 percent in the July quarter over the previous three months, the Japan Metal Daily newspaper said.


Based on a calculation being put forward by iron ore miners BHP Billiton and Rio Tinto contract prices may rise from around $120 a tonne in the April to June quarter to around $158 a metric ton in the quarter from July to September.


The new amount is apparently derived from the three-month average of the iron ore spot price from March to May on the assumption that the market price stays at its current level until the end of this month.


At $158 a ton, iron ore would cost 2.6 times more than it did in the year ended 31 March.

Macarthur Cool On Peabody Offer

"Not Inclined To Take A Discount" - Chairman

The Chairman of Australian coal miner Macarthur Coal has said that Peabody Energy’s lowered takeover will be hard to recommend.

Keith Lacy is quoted in the Australian Financial Review as saying that while acknowledging the Australian government’s proposed 40 per cent tax on mining companies’ profits makes it harder of Peabody to pay top dollar, he added "we're not inclined to take a discount for a tax that may never be introduced."

The “super tax” is expected to be introduced from July 2012.

Peabody lowered its cash offer yesterday by one dollar to A$15 per share citing the proposed tax and following its due diligence exercise.

Shares in Macarthur Coal closed down1.9 percent to A$13.12 on the Australian stock exchange, their lowest level since 30 March and 13 percent below Peabody’s reduced cash offer.

Sinosteel, Anshan To Continue Investing In Australia

Move Comes Despite 40 per cent Tax

China's large steel makers, Sinosteel and Anshan Iron and Steel Corp, say they are willing to continue to invest in Australia, despite a proposed 40 percent tax on the profits of Australian mining companies.

Speaking at a conference in Beijing on Monday, Sinosteel president Huang Tianwen said "We are reviewing how the tax will impact our companies, and undoubtedly, it will affect costs and profits in our local projects," however the company is still committed to exploring overseas resources.

Bai Jingpu, vice-president of Anshan Steel, also said the company is evaluating and analyzing the impact of the "super tax" on the Australian mining industry, but he also added that the company will continue to invest in the country.

Australia’s tax plan for miners was released last week and is expected to start in July 2012. Some Australian companies have criticised the plan saying it will adversely affect future projects in the country. Xstrata Copper has already announced that it is to shelve future plans for projects in northern Queensland.

However, Chinese steelmakers companies are looking to secure raw material supplies, particularly in the light of huge increases in raw materials and a shift from annual to quarterly contracts by the big three global iron ore miners, BHP Billiton, Vale and Rio Tinto.

Sinosteel and Anshan already have projects in Australia. Sinosteel bought iron ore company Midwest in 2008 while Anshan steel has a stake in Ginadalbie Metals Ltd with whom it is developing the Karara iron ore project in Western Australia.
China’s iron ore imports grew by 11.6 per cent in the first four months of this year compared to the corresponding period in 2009.

Xstrata Copper To Review New Australian Projects

Xstrata Copper says it is now reviewing all of its operations in northern Queensland in Australia after the Australian government's proposed tax on the mining sector. Last week the government announced it will tax mining company’s profits by 40 per cent from 2012.

Xstrats will now suspend its exploration programme in the Mount Isa and Cloncurry districts. Chief operating officer Steve de Kruijff says its exploration programs in the region were all going ahead until the Government announced the new tax.

"We started to think about well are new exploration sustainable under a tax regime that overlays on our current tax system of that size," he said.

"I guess until we can find out more certainty over what the different requirements of this tax are we're not prepared to continue to spend money on exploration projects on the North West regional area."

"Exploration activities are high risk and, while the targets we had identified are prospective, the proposed tax has introduced great uncertainty about the potential impact on the economics of developing resources into viable operations in Australia," he added.

The company says that current operations will continue. Xstrata produces about 200,000 tonnes a year of copper from its Australian operations.

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BC Iron To Start Production Later This Year

Exports slated for December quarter

Australia’s BC Iron says it is on track to begin production at its Nullagine iron ore project in Western Australia's Pilbara region in the September quarter.


It expects to commence production at Nullagine in the third quarter of the 2010 calendar year with exports scheduled to begin in the December quarter.


The project is an equal joint venture with Fortescue Metals Group Ltd, which agreed in June 2009 to provide rail haulage, port handling and ship loading facilities to in exchange for half of the project.

Centennial Warns Of Higher Met Coal Prices

Global Supply "Fragile"

Australian coal exporter, Centennial Coal, has said that fragile supply conditions in the global metallurgical coal market mean that it expects the contract price to "significantly increase" from the $US200 per tonne in the Japanese fiscal first quarter.

In March Japanese steel mills agreed to pay BHP Billiton, Rio Tinto Group and Teck Resources around $200 a tonne for a three month contract beginning 1 April 2010. That’s a 55 per cent increase over the 2009/10price. Previous contracts have run for one year’s duration.


In a presentation to a coal industry conference, Tony Macko, Centennial’s general manager of corporate affairs said he expects a recovery in demand for metallurgical coal to drive the contract price increase for the Japanese fiscal second quarter commencing 1 July 2010. This is on the back of an increase in global steel demand.


Centennial said that China is expected to remain a net importer of thermal coal, used to fuel electrical power stations to remain tight after bad weather caused cuts in production in Queensland and Indonesia and impacted on export shipping times.

Centennial said there are more than 60 export vessels queued at the Dalrymple Bay and Hay Point coal terminals in central Queensland.

Australian To Introduce New Tax On Miners

Mining Companies To Pay Extra 40 Per Cent Tax

The Australian government is proposing a new 40 per cent tax on the profits of resource companies.

Shares in mining companies fell after Prime Minister Kevin Rudd announced on Sunday that the tax would be introduced in 2012, raising $A9 billion a year in government revenue. The income would be used to finance economic reforms and would shore up state retirement pensions. In return corporation tax would be cut from 30 per cent 28 per cent.

Profits in mining companies have boomed in recent years on the back of increased demand from China and India.

Shares in mining companies fell sharply on the Australian Stock Exchange. BHP Billiton fell 3 per cent while Rio Tinto shares fell 4.3 per cent. Analysts suggested that the new tax could scupper plans by the two companies to controversially merge their iron ore operations in the Pilbara region of Western Australia.

BHP Billiton said the measure would raise the total effective tax rate on the company's profits from 43 percent to 57 percent.

"These proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact on the future wealth and standard of living of all Australians," BHP Billiton chief executive Marius Kloppers said in a statement.

BHP Billiton’s profits were $6.14 billion for the six months ending 31 December 2009, more than double that of a year earlier.

Rio Tinto's Australian managing director David Peever said the new tax would make the Australian mining industry the highest taxed in the world and less competitive.

Rio Tinto’s profits were $4.9 billion for 2009, up 33 percent over the previous year.

Mr Peever said Australia had been kept out of recession by the strength of its mining sector.

"But the same industry is now being portrayed by the government as not paying its way," he said in a statement.

The opposition Liberal Party said the move could kill Australia’s mining boom.

Third Coal Terminal Opens At Newcastle

Terminal Opens to Protests from Unions and Environmentalists

A third coal export terminal has opened in Newcastle, New South Wales, at a cost over $A1 billion.

Owner Newcastle Coal Infrastructure Group (NCIG) says the expansion is needed because of continued strong export demand and the step will keep a workforce of 800 busy for another two to three years.

NCIG won the right to construct the third terminal three years ago. The new terminal – stage one - will take shift as much as 30 million tonnes a year. NCIG will now turn to plans for stage two which will take capacity to 66 million tonnes a year.

"Stage two will double the capability of stage one, adding more than $600 million a year to state revenue through royalties and attract extra investment of more than $1 billion to New South Wales," NCIG chairman Tony Galligan said in a statement.
However, the new terminal has incurred the wrath of trade unions and environmentalists.

About 100 members of the Maritime Union of Australia gathered outside the terminal this morning angry that workers at the new terminal are paid 17 per cent less than those at nearby terminals.

Greens MP Lee Rhiannon said the project would lock the region into what she described as “coal dependency".

"The New South Wales government should be working with the people of the Hunter on a transition plan involving restructuring of industry and retraining programs for workers in clean energy delivery and manufacturing," she said in a statement.
"This coal terminal will drive the opening up of coal mining in the Upper Hunter, Gloucester and Liverpool Plains.

"The resulting increase in coal exports is a setback for dealing with climate change."

Meanwhile, environmental protesters painted "quit coal" in large white letters on the side of a bulk carrier bound for Japan.

Atlas Iron Receives Approval For Wodgina

Mining Expected to Commence in June

Australian iron ore junior, Atlas Iron, has secured government approval for its Wodgina iron ore project in Western Australia.

With all environmental approvals complete, Atlas expects to move its mining fleet to the site with mining expected to commence in June this year.

"To take a project from an iron ore discovery to an iron ore mine in less than 18 months is simply remarkable," managing director David Flanagan said in a statement on Friday.

"We are now well positioned to benefit from very strong demand, high iron ore prices moving forward, and to meet our target export rate of six Mtpa by December 2010."

The Wodgina project will start at a production rate of two-million tons a year, with the initial mining from the Anson deposit. The mine is expected to produce a quality, low-alumina fines only product, which would be trucked to the nearby Port Hedland for export.

The company has also commenced drilling at its Wodgina North iron ore prospect which has an exploration target of between 20 million and 40 million tons at 57 per cent to 60 per cent iron.

"In the event that drilling is successful, Atlas will move to fast rack feasibility studies targeting a production expansion of Wodgina during late calendar year 2011," it said.