Premier Mike Rann tweeted from Melbourne yesterday “No reduction in royalties” and “commitment to maximise use of local companies and local workers”. No reduction means no increase, and a commitment to maximise means no more than that: a commitment.
Rann was in Melbourne at BHP Billiton’s headquarters to sign the indenture agreement that specifies several of the terms under which BHP can expand its mine at Olympic Dam. Marius Kloppers, the busy global boss of the company with more than $72 billion turnover, held the whip hand on the Premier of a state with annual turnover of about $13 billion.
The indenture agreement goes before Parliament next week where there will be some token debate, but little in the way of exhaustive analysis of the terms of a deal that gives BHP 45 years of certainty, control and exclusive access rights that make this mine site look more like Kloppers’ Kingdom than a part of South Australia.
It comes two years and seven days after a massive shaft closure on the site caused by a fully laden skip cutting loose from its winder and roaring down the kilometre-long shaft. In the period after the incident, AWU boss Wayne Hanson lamented the union’s lack of access to the mine site.
“They have a code of silence at that mining lease that’s stronger than any code in downtown Calabria,” he said. “They even have the government tied up because when BHP says jump, the government says how high.”
An ore skip holding 34 tonnes had almost reached the top of Clark shaft before it suddenly snapped clear and plummeted 800 metres to the bottom. As InDaily reported at the time, the incident coincided with worker’s crib break, a lucky break for the workers who otherwise would have been in a disastrous position.
Yet, 18 months later, the state government announced there would be no action taken against the company. This contrasts with a government that regularly prosecutes and fines small businesses tens of thousands for safety breaches.
Yesterday, Rann again signed off on BHP’s powerful proprietary interests over the site. BHP gets freehold over the extended Olympic Dam mining lease. Few mining companies have this ultimate level of control.
Mining analysts report that the leasehold on the site of the desalination plant that BHP will build also contains an option to convert to freehold while BHP has been given “support for acquisition of infrastructure corridors”.
In The Australian today, Matthew Stevens reports that the indenture’s royalty arrangements and processing demands also give BHP a strong hand. As he points out, this mine won’t attract the proposed mining tax and the rate negotiated isn’t a lot different to what is paid now. He wrote:
“Rann and South Australia are banking on BHP’s board supporting a proposal that emerged first in BHP’s 2009 draft EIS expansion and which received environmental clearance on Monday from the Commonwealth, Northern Territory and South Australian environmental regulators.
“That plan would see Olympic Dam’s refined copper cathode production double from 180,000 tonnes annually to 350,000 tonnes over the life of the expansion. Under this configuration, the new OD would extract 17,000 tonnes a year of uranium, 1 million ounces of silver and 270,000 ounces of gold from the ore used to produce that copper cathode.
“It would then export up to 400,000 tonnes annually of a copper concentrate which would contain about 1.9 million ounces of silver and 530 ounces of gold.
“But Rann needs to be cautious about claiming any political capital from this shift because, as ever in commercial life, the configuration presented in the EIS remains but an option until its final draft is presented to and approved by the BHP board. And that is not expected to happen until the first quarter of next year.”
Ever since the SA premier began spruiking the mining boom in 2005, BHP has held the cards in negotiations. South Australia’s economy was desperate for the money and the activity; Rann wanted the political capital and BHP had time on its hands.
Yesterday, he flew to another state capital to give a global mining giant freehold title to the state’s biggest asset.
The estimated mining royalties for South Australia ($350 million) from the “world’s biggest mine in human history” are around one tenth of what Western Australia pulls every year from iron ore.
*This article was originally published at InDaily