More than six years after an excited South Australian government began spruiking a state mining boom, the proposed $20 billion expansion of South Australia’s Olympic Dam mine is getting close to a real deal.

Premier Mike Rann, chief spruiker of the “world’s biggest uranium mine”, is in Melbourne finalising an indenture agreement with BHP Billiton today, the final tick in administrative approvals that leaves the project’s fate in the hands of BHP’s board. Rann, who has come full circle from his anti-uranium days, ends his term tomorrow week, October 20.

Ousted by the party’s powerful right wing in July, Rann brokered a deal to hang on till late October, so he could see the Olympic Dam deal through, adding to his legacy. It’s been a long and winding road. Politics, finance and the environment have proved major hurdles.

In the early 1980s, the ALP was split over whether the mine should go ahead, with Rann labelling the mine a “mirage in the desert”. Rann had come to SA in 1977 as an anti-uranium campaigner from New Zealand and quickly began working for then-Premier Don Dunstan.

Dunstan resigned in 1979 and incoming Liberal Premier David Tonkin became an advocate for mining 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 in state parliament to allow the Roxby Downs 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 Premier John Bannon.

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 Western Mining, was commissioned in 1988 and the township of Roxby Downs was built to service it.

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 in spades.

But the ore lay deep below the surface and removing the over-burden to get to the copper, gold and uranium was always going to be costly and environmentally risky. The mine would have to change from underground to open-cut.

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

A leaked US embassy cable found among the pile of WikiLeaks documents this year revealed BHP 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, also revealed that neither BHP nor the state government believed there would be much community concern about the environmental impact of the mine. The cable 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’.”

Hewlett noted that there is a natural ceiling on uranium demand because customers prefer to diversify their sources in order to minimise political risk: “According to Hewlett, India represents a potentially massive market for the mine, but the Rudd government will not sell uranium to India until it signs on to the non-proliferation treaty.”

The cable also showed the extent to which the mine would increase demand for power generation and water:

“Responding to Consul General’s question on whether the EIS would generate similar public opposition as did the controversial Gunns paper mill in Tasmania and the desalination plant in Victoria, Hewlett said the company is not anticipating much reaction.

“[Paul] Heithersay [SA’s executive director Minerals and Energy Resources Department] echoed this sentiment and said that Australian worries over greenhouse gas emissions may actually increase support for nuclear power.

“The Olympic Dam mine presently consumes 10% of South Australia’s electricity, but when expansion is complete, it could absorb as much as 60% of existing capacity in SA.”

The GFC-induced delay gave BHP plenty of time to pull together its environmental studies and keep resistance at bay. A 15,000 page draft EIS version was given to the state government in early December last year. 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.

This week the federal and state governments signed off on the environmental framework for the project. The proposal now goes to the company’s board.

BHP officials said this week it’s expected a decision will be made in the first quarter of next year. Their options include an all-out expansion, a staged expansion or a deferral. Industry sources expect a staged expansion over at least 15 years.

The South Australian Chamber of Mines and Energy says the environmental approval announced this week heralds 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.”

Although actual production from the mine is not anticipated until 2016, benefits to the state will be seen much earlier with approximately 6000 jobs to be created during the construction phase, and 4000 ongoing once operational.

“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,” Kuchel said.

*This article was originally published on InDaily

Peter Fray

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