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How Olympic Dam became a mirage in the desert

It’s seven years since an excited Premier Mike Rann and his then-deputy Kevin Foley started briefing media executives about an imminent mining boom. Central to the spruik was BHP’s new estimation of Olympic Dam, the copper, gold and uranium mine in South Australia that it had just bought from Western Mining Corporation.

When BHP bought Western Mining in 2005, it started drilling around the site to get a feel for the extent of the ore body. Word came through quickly that there seemed to be no end to the ore; BHP had bought a massive resource within the highly prospective Gawler Craton in South Australia’s north and it was going to deliver for decades to come.

Rann claimed the mining boom would swiftly change the economic foundations of South Australia. It underpinned his description of South Australia in the opening lines of his 2006 state election campaign speech, pitched on a theme “Rann Gets Results”.

The Olympic Dam mine is poised to more than double in size, creating a total of 23,000 jobs,” he told the party faithful on February 20, 2006. It coloured his political pitch right until the end of his decade-long run as premier.

Ousted by the party’s powerful right wing in July, Rann brokered a deal to hang on until late October, so he could see the amended Olympic Dam Indenture Agreement deal through Parliament, adding to his legacy. That legacy now has a hole in it; on a political scale, larger than the one BHP talked of digging.

In a curious political twist dating back 30 years when the ALP was split over whether the original mine should go ahead, Rann labelled it a “mirage in the desert”.

Rann had come to SA in 1977 as an anti-uranium campaigner from New Zealand and scored a job with then-premier Don Dunstan. Dunstan resigned in 1979 and incoming Liberal premier David Tonkin became an advocate for mining in the state’s north, but the numbers in Parliament were tight.

In 1982, Labor MP Norm Foster resigned from the party and crossed the floor to allow the original Olympic Dam Indenture Agreement to pass the upper house. Labor returned to office later that year, but by then it had taken a pro-mining stance through incoming premier John Bannon. Rann worked for Bannon and later, in 1985, he would also enter Parliament.

At a federal level, the ALP amended its ban on uranium mining at its annual conference in Hobart, clearing the way for the three mines policy that gave the Hawke government the flexibility to approve Olympic Dam. The mine, owned by WMC, was commissioned in 1988 and the township of Roxby Downs was built to service it.

In 1999, WMC had spent $2.48 billion expanding the mine, aimed at lifting annual ore production from 85,000 tonnes to 350,000 tonnes and “catering for the population boom that will go with it”. By March 2005, WMC had turned the deposit into one of Australia’s larger underground mines. Ore production stood at of 9.1 million tonnes comprising 220,000 tonnes of copper, 4500 tonnes of uranium oxide, plus gold and silver.

Three months later WMC was taken over by BHP Billiton, which, for its money, received the world’s fourth largest copper deposit and largest uranium deposit.

The state government briefed media on the mining boom that would swiftly change the economic foundations of South Australia. But there was trouble on the broader economic horizon.

A leaked US embassy cable found among the pile of WikiLeaks documents last year revealed BHP had delayed the expansion of Olympic Dam during the global financial crisis. The cable, from the US Consul-General in Melbourne to the Secretary of State in Washington, was sent following a visit by the Consul-General Michael E. Thurston to the mine site in April 2009:

BHP’s manager for integrated planning, Barry Hewlett told Consul-General that the halving of copper prices will delay expansion of the facilities by at least one year, but BHP still intends to release its environmental impact statement on May 1 for public review. The downturn in commodities prices has forced BHP to shelve several capital investment projects and to cut 200 positions (120 of whom were contractors) at the mine.”

As foreshadowed in the cable, BHP released its preliminary EIS on May 1, 2009. The cable also revealed that BHP’s intention at the time was to conduct a staged expansion:

Expansion of the mine’s uranium business will be carried out gradually in order to avoid ‘flooding the market’.”

The GFC-induced delay gave BHP plenty of time to pull together its environmental studies. A 15,000-page draft EIS version was given to the state government in early December 2010. The document addressed concerns regarding the proposed desalination plant at Point Lowly, the long-term impact on groundwater, on-site waste disposal and sourcing electricity from renewable sources.

In October 2011 the federal and state governments signed off on the environmental framework for the project.

The South Australian Chamber of Mines and Energy joined in the political chorus saying the environmental approval heralded the coming of the state’s long-awaited mining boom. Chief executive Jason Kuchel said:

In addition to the huge income stream brought to our state and the nation through taxes and royalties once the expansion is operational  —  together with the creation of thousands of jobs  —  the indirect benefits created will be phenomenal.

The indirect economic benefits of the massive project include thousands of jobs in the service sector, expansion of infrastructure and numerous flow-on developments within communities.”

Uranium Customer Sector Group president Dean Dalla Valle had also been keen to fuel the boom talk:

The Olympic Dam expansion will deliver enormous benefits to the South Australian economy, including generating up to 6000 new jobs during construction, a further 4000 full-time positions at the expanded open pit mine and an estimated 15,000 new indirect jobs.

Furthermore, the expansion has the potential to boost state revenue by billions of dollars over the life of the project.”

BHP officials said in October last year a decision would be made in the first quarter of 2012. That pushed out to mid-year and then finally, to yesterday’s announcement that it wanted to go back to the drawing board.

Today, Mike Rann is no longer premier. He’s reportedly on his way to London later this year to take up a top diplomatic posting there. His former deputy Kevin Foley has left politics and recently made an unsuccessful tilt for the presidency of Port Adelaide Football Club.

In the end, they weren’t able to deliver the new jobs, the billions in taxes and the mining boom.

The Olympic Dam expansion is now a genuine “mirage in the desert”.

*This article was originally published at InDaily

1
  • 1
    shanghai
    Posted Thursday, 23 August 2012 at 1:38 pm | Permalink

    The Razorfish in the gulf will be celebrating a reprieve.

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