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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-12-02 Daily Xml
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MINING INDUSTRY

The Hon. J.M. GAZZOLA (15:08): My question is to the Minister for Mineral Resources Development. Will the minister provide an update on the government's work on creating a climate of confidence for international companies to invest in South Australia's mining sector?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (15:08): I thank the honourable member for his important question. This government has worked hard in the past 6½ years to create a climate of certainty in this state. That provides investors with the confidence they need to plan long-term investments in the mining sector. That work has recently been recognised by Resource Stocks magazine, which rated South Australia as the least risky jurisdiction in Australia in which to invest, and second internationally in its world risk survey.

While initially this confidence-building policy led to a record surge in investment and exploration in this state, rising to $355 million in the most recent ABS survey, we are also witnessing an increase in investment to transform some of this exploration into mine development. The global financial crisis has generated much uncertainty in world markets, so it is quite timely that South Australia has established itself as a low-risk destination for investment.

While commodity prices have fallen sharply during this round of financial turmoil, the price of some key resource commodities is still high in absolute terms. In fact, the structural fundamentals that drove much of the commodity price growth in the past decade remain largely in place, with the industrialisation of China and India continuing to support demand for mineral resources. These are the structural factors masked by the current volatility of world markets that I suspect will drive investment decisions by international resource companies for some time yet.

In fact, China recently announced a $US590 billion fiscal stimulus package to finance public works programs intended to cushion the fallout from the global slowdown on that country's domestic economy. Recently reported statistics issued by the Department of Foreign Affairs and Trade show that China has overtaken Japan as Australia's major trading partner. While imports from China exceed our exports, the volume of commodities leaving our shores is destined to increase to support that country's continued economic expansion.

Given that outlook, it is not surprising that China has become a major strategic investor in South Australia's resources sector. I would like to highlight just a few of those ventures that are helping to finance and develop our state's mineral resources. In June this year PepinNini Minerals Ltd announced a joint venture alliance with Sinosteel Corporation to form Sinosteel PepinNini Curnamona Management. That Adelaide-based joint venture is managing and operating the development of the Crocker Well and Mount Victoria uranium deposits and other commodities in South Australia's Curnamona province.

Sinosteel occupies an important position in economic and trade relations between Australia and China. As early as the 1970s, Sinosteel began to import iron ore from Australia. In 1987, Sinosteel and Hamersley Pty Ltd set up the Channar joint venture in WA which was the largest Sino-Australian cooperative project at that time. CITIC Group, an investment and trading company under the control of China's central government, and Talbot Group have invested $2.225 million in Southern Gold Limited primarily to fund uranium, copper and gold exploration in South Australia's Gawler Craton.

China remains extremely interested in South Australia's uranium resources, especially as the government rolls out a program to construct new nuclear power generators to reduce the economy's reliance on fossil fuels and particularly steaming coal, but China is also interested in a diverse range of resources, including iron ore, banking on Australia as a reliable and stable source of supply. OneSteel, Australia's second-largest steelmaker, has established long-term sales agreements for the supply of iron ore to China with Rizhao Steel, the Shanxi Haixin Iron and Steel Group Co., Hebai Jinxi Iron and Steel Co. and the Tanshan Guofang Iron and Steel Co. Ltd.

Centrex Metals Ltd has signed an arrangement to sell to Baotau Iron and Steel Group, China's 10th-largest steelmaker, half of the estimated iron ore production per year for five years from the Wilgerup deposit in central Eyre Peninsula. Similarly, the company has also forward sold 1 million tonnes a year to Shenyang Orient Iron and Steel. Shenyang has invested $3 million in Centrex, whereas Baotau has invested $4.38 million.

Western Plains Resources has signed a $7.5 million heads of agreement to develop the Peculiar Knob and Hawks Nest iron ore deposits with Hong Kong-based Focus Investment and the Tangshan Xingye Industry and Trade Group. Western Plains has already been granted a 14-year mining lease for its Peculiar Knob iron ore project located in central South Australia about 90 kilometres south-east of Coober Pedy. Its Hawks Nest project is located 120 kilometres south-west of Coober Pedy.

While we are in the vicinity of Coober Pedy, IMX Resources NL and Jilin Tonghua Iron and Steel (Group) Mining Co. have signed a detailed heads of agreement in which Tonghua will invest almost $14 million for a 9.99 per cent stake in IMX and, in return, purchase 100 per cent of the production from the Cairn Hill deposit. Cairn Hill is located about 55 kilometres south-east of Coober Pedy and is expected to produce 1.3 million to 1.4 million tonnes per year of magnetite-copper ore.

Havilah Resources NL has signed a memorandum of understanding with Heilongjiang Resources Ltd to carry out a feasibility study at the Mutooroo copper-cobalt deposit near Broken Hill. Havilah Resources, an Australian-listed company holding a strategic ground position in the Curnamona province in South Australia, has been actively exploring for a variety of commodities including gold, copper, molybdenum, zinc and uranium with the backing of China's Heilongjiang Resources Ltd. Together, Havilah and Heilongjiang Resources have spent about $2 million on a feasibility study of the Mutooroo copper-cobalt deposit near Broken Hill.

It does not end with traditional resources such as iron ore and copper. Chinese companies also have a role in developing new technologies in the Arckaringa Basin which seek to tap the vast coal resources located in the remote parts of Australia. London-listed Altona Resources this year announced that it had signed a share subscription agreement with Tongjiang International Energy Co. Ltd, a Hong Kong-based investment company to raise ₤STG11,618,000 through the placement of 240 million new ordinary shares. The funds are required to complete the final stage of the bankable feasibility study for the proposed development of a coal-to-liquids plant and a 560 megawatt co-power generation plant in the Arckaringa Basin.

Altona Resources has signed a memorandum of understanding with CNOOC (Beijing) Energy Investment Co. Ltd, a unit of China National Offshore Oil Corporation, one of the three largest state-owned oil companies in China. The MOU provides a basis for CNOOC Energy and Altona to build a long-term cooperative relationship towards the development of its coal-to-liquids and co-power generation project in South Australia.

This multimillion dollar flow of investment into South Australia should provide this state with some reassurance that, despite the economic turmoil of our times, our local economy has fundamental strengths that should allow us to weather this storm. In the past six years, this government has established a supportive policy framework for the minerals industry, which has boosted the number of mines from four to 11. Off a small base of $20 million to $40 million a year in total oil exploration investment, our state has now attracted record expenditure of $355 million.

In taking a long-term view, I can assure members that this government will not be relenting in its efforts to bring potential mines into operation. PIRSA is actively seeking to increase staffing levels to seamlessly manage the facilitation of 30 projects, with an estimated capital expenditure of more than $25 billion. This government is confident that the momentum we have created in the past 6½ years will carry us through these turbulent times on the global front, as investment in mining underpins our future economic growth and prosperity.

It is interesting that, in recent days, Japan, which was once a significant investor in this country, is again showing interest in investing in resource projects, particularly uranium. This investment, from China and elsewhere, will generate well-paid, keenly sought jobs for South Australians and provide export and royalty revenue that will further drive this government's vision to develop a modern state, supported by the necessary infrastructure and economic stability that will carry us through well into the 21st century.

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