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House of Assembly - Fifty-Second Parliament, First Session (52-1)
2011-10-18 Daily Xml
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Ministerial Statement

OLYMPIC DAM

The Hon. M.D. RANN (Ramsay—Premier, Minister for Economic Development, Minister for Social Inclusion, Minister for the Arts, Minister for Sustainability and Climate Change) (12:32): I seek leave to make a ministerial statement.

Leave granted.

The Hon. M.D. RANN: Legislation will be introduced into both houses of parliament today to ratify the amended Olympic Dam indenture to enable the multibillion-dollar Olympic Dam expansion project to proceed. The amended indenture was agreed to and signed last Wednesday by Marius Kloppers, Chief Executive of BHP Billiton, and me on behalf of the government of South Australia. It is the product of years of hard-fought negotiations between the company and the government, particularly the minister assisting in the Olympic Dam negotiations.

The signing of the indenture is a significant milestone in the life of this project, which is a game changer for the South Australian economy. This is a project like no other. The scale of the investment and the longevity of the mine put Olympic Dam into a league of its own. Olympic Dam is the world's largest uranium deposit and the fourth largest gold resource on the planet. It is also the world's fourth largest copper deposit, currently producing around 180,000 tonnes of copper each year. Under the proposed expansion, that would increase more than fourfold to around 750,000 tonnes per annum. It is likely that production would extend beyond this in decades to come, but this would require approval after a subsequent EIS process. So, a fourfold expansion in copper production and, of course, it could go much, much more than that.

The ore body is valued at more than $1 trillion. By 2050, the size of the pit would grow to be about 4.1 kilometres long, 3.5 kilometres wide and one kilometre deep, and the entire mine site would eventually stretch the equivalent distance of Gepps Cross to Flagstaff Hill. The expansion would see an unprecedented fleet of giant earthmovers and trucks take five years of daily digging to reach the ore body, allowing real mining to begin. So, we are talking about five years of shifting a million tonnes of rock a day before they get to this giant ore body.

Olympic Dam is already a significant contributor to South Australia's economy, contributing $1.7 billion a year to the gross state product and 12 per cent of the state's exports. More than half a billion dollars a year is spent by BHP Billiton directly on contracts with South Australian businesses and services. The expansion would see this contribution to the state's economy increase significantly, bringing Olympic Dam's total annual contribution to South Australia's GSP from $1.7 billion a year to $8.6 billion a year at full operating capacity.

BHP Billiton estimates that the expansion would generate up to 6,000 new jobs during construction, a further 4,000 full-time positions at the expanded open pit mine, and an estimated 15,000 new indirect jobs. This could include approximately 6,500 jobs in Whyalla, Port Augusta, Port Pirie and Roxby Downs itself, which is expected to double in size.

These figures show just how important this project is to all of us but particularly to regional South Australia. But the sheer size of the project would not have justified the government agreeing to terms which did not maximise the benefits to all South Australians. The government needed to ensure that the amended indenture protected the state's interests and locked in the gains from this project. I can assure the house that we did not discount South Australia's future to get this agreement signed. The ore body was not going to disappear—it is going to be there for ever—and that is why we were determined to get the best possible deal.

Indeed, BHP Billiton will pay the same royalty rates as other mining companies pay under the Mining Act. We have agreed to lock in these rates for 45 years in recognition of the high capital costs faced by the company for the first phases of the project. The company will also pay the same rate for water from the Great Artesian Basin as others do, for the first time paying for water that under the previous indenture was totally free.

The new indenture sees more comprehensive environmental management and compliance regimes for Olympic Dam, bringing the legislative framework for the mine into line with our Mining Act. BHP must develop a stringent program for the protection, management and rehabilitation of the environment that is subject to a strong compliance and enforcement regime. Under the indenture, the Olympic Dam mine will be subject to the Environment Protection Act for environmental authorisations for the project, ensuring the independence of the Environment Protection Authority for environmental approvals, licensing and necessary compliance action.

In addition, BHP Billiton is obliged to produce a greenhouse gas and energy management plan, which will detail its commitments to greenhouse reduction. This includes using renewable energy to totally power the desalination plant and the water pipeline, pumping hundreds of kilometres, and installing solar hot water systems or equivalent at Hiltaba village.

Under the indenture, the company has made commitments to using South Australian suppliers, manufacturers and contractors where economically practicable. The company will report annually on their use of local suppliers and local workers, including opportunities for Aboriginal workers. BHP Billiton will work with the government to ensure expanded opportunities for local businesses. A series of supplier forums has already begun, outlining the opportunities available for South Australian businesses to become involved in the expansion.

Most crucially for the minister and myself, the indenture contains a 12-month sunset clause which ensures that, if the BHP Billiton board has not made a decision within 12 months of the revised indenture passing through the parliament, then the entire agreement will lapse. Under the sunset clause, they have 12 months and that is going to be a ticking clock on a decision by the board to commit to the immediate expansion. It should encourage a decision by the board in early to mid-2012, and I am very confident that will happen.

Last Wednesday, BHP Billiton announced approval for $US1.2 billion in precommitment capital for the first phase of the Olympic Dam project. So we have front-ended and back-ended. We have bookended that, first, before we would sign the indenture, there had to be a precommitment of spending money right now and then the ticking clock starts, and then they have 12 months to get the thing started. Of course, this $1.2 billion commitment will facilitate the procurement of long-lead items, such as trucks and accommodation, infrastructure development and early site works for the phase of the Olympic Dam project. This will be the biggest order of trucks in world history.

The signing of the indenture and the precommitment funding decision followed the approval of the project on Monday last week by the South Australian, commonwealth and Northern Territory governments after an exhaustive six-year-long environmental impact process. Last week saw many significant milestones in the life of this project, from environmental approval to the signing of the indenture. Today, the introduction of the ratification bill into parliament marks another important milestone.

I would like to thank all the people whose efforts have led to this point. First, I would like to particularly thank the minister assisting with the Olympic Dam expansion, Kevin Foley, whose tireless persistence on behalf of South Australians in the indenture negotiations was simply outstanding.

I would also like to thank the members of the Olympic Dam task force, currently under the leadership of Dr Paul Heithersay as chief executive, who builds on the work done by former chief executive Paul Case. Bruce Carter, former chair of the Economic Development Board but as chair of the Olympic Dam task force, has also played a critical role in reaching this point. I would like to warmly thank Marius Kloppers, his deputy Andrew McKenzie, and Dean Dalla Valle from BHP Billiton for their commitment to this project and to South Australia.

I also recognise that this was a project which began under Western Mining Corporation and was taken on by BHP Billiton under the stewardship of Chip Goodyear and Roger Higgins. Graeme Hunt also made a valuable contribution to the development of this project.

The Olympic Dam expansion is a project of state, national and global significance which will bring enormous benefits to the state for generations to come. I urge all members to put South Australia first and ratify the amended indenture before the end of the year so that this project can proceed without delay, employing thousands of South Australians and eventually lifting its contribution to the gross state product from $1.7 billion a year to $8.6 billion a year.

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