Olympic Dam expansion 'shelved'.

[jim and adel]

Has there been a post about the BHP decision to 'shelve' the Olympic Dam expansion? Had a quick look around but couldn't see one; surely the biggest blow to SA in years has been mentioned on here somewhere ... hasn't it?

Assuming it hasn't been covered elsewhere, what do you think the decision will do to the state's ailing fortunes and confidence?

Jim

[Guest Guest5035]

its politics between the state/federal goverments and the mining companies

 

stevo

[Guest andylynnchriskirst]

Suppose it won't stop them from expanding in the future.

The resources are there, and really, the more SA hold on to them, the quicker its going to run out elsewhere, and therefore, more money for SA when they do decide to expand! Supply and demand and all that

 

Things are still a lot better here than in the UK though .

[jim and adel]

Perhaps I've imagined all the front page news articles, discussion and headlines on TV, radio and in the press– and I mean national, not just SA – over the last week, because when I come on here it's as if the BHP announcement that it's shelved plans for the OD expansion indefinitely hasn't happened.

For anyone who doesn't know (and if you keep up-to-date on happenings in SA via this site that would be quite likely), this has been by far the biggest news about SA in the almost five years we've been here, and those reporting on it say it's easily the biggest SA story in twenty years (since the collapse of the state bank almost crippled the economy).

SA being 'on the cusp of a mining boom' – we all know how the sentence goes given how often we've heard it – has underpinned all aspects of the state government's economic policy, including infrastructure projects and the building of the new hospital (over $1 million per day for the next 30 years even if it doesn't blow out – and this doesn't include staffing or clinical costs).

With SA losing its triple A rating (the second biggest story of the year) and experiencing the biggest revenue write-downs in its history (the third biggest story), the current state budget is predicated on the OD expansion happening. This is how the 2012-13 budget statement begins: 'South Australia will be a very different place in a few years. The expanded Olympic Dam mine – the largest open pit mine in the world – will be operating, along with dozens of others, exporting copper, gold and uranium to a region hungry for our resources.' I'm not sure about the 'dozens of others' (presumably they're the same ones that have been spoken of for the last five years during which the number of people working in mines in this state has reduced ...) but clearly the OD expansion won't be happening.

The day after its announcement, BHP disbanded the project team looking at the expansion and started laying off some people from its Adelaide office. Meanwhile it continues to fill its shiny new 45 storey skyscraper in Perth with more employees.

This project was a game changer: it was going to bring 28,000 jobs not just to service the mine but in order to build the thousands of kilometre roads, rail and services, desalination plant (with all the piping to pump water from the coast to the desert site), new airport, two new power stations etc. For the first time, we'd see a net gain in people from other states moving here to work instead of the annual net loss. The payroll tax and mining royalties would mean we could do what Perth has done and plan and pay for top-notch infrastructure. It was even mooted that SA would no longer be regarded as a 'single city state', because the activity in the Upper Spencer Gulf and Eyre Peninsula would mean other places would see their populations boom and produce sizeable intrastate migration from Adelaide. In short, we'd be looked on by other states as a success instead of an economic backwater/basket case.

It took years to get to the point where this project might happen (with the state accepting much lower royalties than WA or Qld get in order to secure it). The politicians thought it was formality; Weatherill and Koutsantonis (the premier and resources minister) looked like they were both about to faint at the press conference announcing it wasn't happening. The treasurer has since said that the impact of it not going ahead hasn't been calculated into state figures. A deal couldn't have been more done. The government is shell shocked.

In a bid to show that there's more to life than a mine, the Advertiser yesterday ran a special edition with ads from businesses showing their support for SA (it gave free space for this very purpose). However, although there were the usual banks and retailers, having a bakery, a plumbing company etc declare their support for the state only made SA look parochial – a point picked up by several people when this was discussed on radio yesterday morning.

This next year will be an interesting one, and how SA responds will have a big impact on the long-term choices of many of its residents. I for one will be weighing things up carefully.

 

Jim

[trevorpayne]

It is a big disappointment for the state but it could be an even bigger disappointment for the states like WA and Qld if the mining boom comes to a halt.

The one thing SA has in its favour is that it has never had a mining boom to depend upon.

[Guest Rosy]

We survived the State Bank disaster and we will survive this.

 

I agree with trevorpayne, we are managing ok though the "boom" never happened for us in SA. And while we have lost money over this failed expansion plan, I believe this whole issue pales almost into insignificance compared to the State Bank which pretty much had us on our knees.

 

I have lived in SA for most of my life and I believe we are resilient people here. I guess to be honest, we are not used to a boom economy and the benefits which go with that. That means we have become used to being seen as "different" or some would say "worse" than our interstate neighbours. If we seem parochial because our paper runs free ads to give us a boost after our disappointment I would ask, what is so wrong with a bit of positive self talk at a bad time? It's just part of us getting up, dusting ourselves off and getting on with it, come what may.

 

If you guys are all still game to come and join us in SA, come on down . Olympic Dam is a big disappointment no doubt about it, but rest assured we will go on, we've done it before. And, even if I say so myself, we are a pretty welcoming bunch here for the most part - I like to think that, as a state, we value the confidence that our immigrants place in us when they decide to become a South Aussie.

[Leyland CJ]

I am in a "related" industry and so I have an understanding of it...what my personal belief, is that the project will go ahead "in some form", just maybe not the "original Grand Plan", and certainly not the "Grand Plan" right now.

 

What many people (esp. outside of SA) do not realise is that there was a projected FIVE YEARS worth of 'digging' before they got to the orebody...i.e. all that time before you see a dollar from the Grand Plan, and all that dirt has got to go somewhere, plus all that diesel and all the other related costs. It's not just that, it's all the other things that it would consume in SA and Australia wide - trucks, cement, tyres, oil, diesel, labour, food, steel etc. for such a huge project. One of the questions is "how do we supply so much of X to it ?", where, if you think of X as being any of the aforementioned (amongst other things). It is not just something you can turn a switch on and off for; once you start, you have to keep going, otherwise you run into huge cost overruns as other project milestones are kept waiting.

 

With the global situation as it is, perhaps some of these questions of supply were not easily answerable. Perhaps some of the required infrastructure ISN'T in place, and you can guarantee that there isn't "just one person" who is willing to pay for everything (on either side of the deal).

 

A lot can happen in that time between 'start', 'dig' and 'finally get to the ore', especially wrt commodity prices (which can be anyone's guess at the best of times)...if the commodity price bottoms out, the economics of even a great mining project can be thrown completely out of whack. The "dirt game" is not easy, it is very high risk at the best of times.

 

AndyLynnChrisKirst is absolutely right. Things here (in Australia, in SA) are a lot better than in some places right now.

 

And Rosy is right. I personally thought it WAS the Aussie way that when you fell off the horse, you got up, patted yourself down and got on with it, it's the Boxing Kangaroo spirit - the traditional 'have a go, battler' attitude that I associate with the best bits of this country.

[Misplaced]

I saw this reported in the Advertiser before we came home from our reccie whilst it is disappointing I think it is probably a blessing at this stage in the global economy - why China's output has slowed and if I am correct fallen so the need for Australia's commodities has slowed. This in my opinion will mean a rough ride for the like of Perth as they have had a huge BOOM but a bust always follows, on what scale will depend on the time it takes for the world economy to turn around and thus in turn China will begin to produce again.

 

Just my thoughts!

[Jimjustin]

There seems to be a lot of doom and gloom about this project being shelved (for now) and Ive heard some utter crap spoken by the politicians...phrases like, "the mining boom is over." These people obviously haven't been to a mine in SA lately.

 

I visit most of the remote SA mines for my work and Ive seen nothing but expansion everywhere for the last 2 1/2 years. Places like OD and Prominent Hill are literally making millions of dollars a day and employing ever larger numbers of people from SA and across Australia.

 

Olympic Dam focus primarily on the Uranium resources, but that is only part of the story. Fifth on the list of commodities for OD is gold, found in far smaller amounts than anything else- yet the gold alone pays for the mine to operate. The rest is profit - and we are talking millions of dollars a day. They still made billions of dollars last year.

 

The expansion was a way off yet, and yes the research team have been laid off in Adelaide, but everywhere else in SA mining I just see more and more people everytime I visit a mine site.

 

Its still a huge breadwinner for SA and will continue to be for many years to come. The resources are still there, and they will be mined at some point. The whole state is rich in resources and it seems every time a drill rig is put into the ground, new ore bodies are found.

 

The doom mongering pollies should button it until they've had a look.

[Diane]

There seems to be a lot of doom and gloom about this project being shelved (for now) and Ive heard some utter crap spoken by the politicians...phrases like, "the mining boom is over." These people obviously haven't been to a mine in SA lately.

 

I visit most of the remote SA mines for my work and Ive seen nothing but expansion everywhere for the last 2 1/2 years. Places like OD and Prominent Hill are literally making millions of dollars a day and employing ever larger numbers of people from SA and across Australia.

 

Olympic Dam focus primarily on the Uranium resources, but that is only part of the story. Fifth on the list of commodities for OD is gold, found in far smaller amounts than anything else- yet the gold alone pays for the mine to operate. The rest is profit - and we are talking millions of dollars a day. They still made billions of dollars last year.

 

The expansion was a way off yet, and yes the research team have been laid off in Adelaide, but everywhere else in SA mining I just see more and more people everytime I visit a mine site.

 

Its still a huge breadwinner for SA and will continue to be for many years to come. The resources are still there, and they will be mined at some point. The whole state is rich in resources and it seems every time a drill rig is put into the ground, new ore bodies are found.

 

The doom mongering pollies should button it until they've had a look.

 

What a great post from someone who has seen things for themselves, and is not being taken in by the political hype and media hysteria over the whole thing. So many of the commentators on this news are falling into the "End of the World is Nigh" trap and the whole victim mentality does no favours to this state or this country. South Australia often stabs itself in the foot with its inferiority complex and the knee-jerk reaction to this announcement by so many ill-informed doom-merchants is sad evidence of this I'm afraid.

[jim and adel]

Thanks all for the responses - at least I now know I didn't dream it!

 

Like Trevor I do wonder what will happen to the states in this country that actually have a mining boom when it does get tough (mining accounts for a third of WA's GSP, about 12% in Qld and just 4% in SA), although places like Perth have managed to build and pay for incredible infrastructure from mining and plough money into other sectors as a result of it, so they've already done very well out of it as Perth's skyline suggests (and many businesses outside of mining have head offices in Qld, which has a more diversified economy than WA).

 

I've been to plenty of mines in this state - there has been some growth in the last couple of years but let's not blow it out of proportion; the roles created have only replaced the ones lost in the previous four or five years. Mining added 44,000 jobs in the last couple of years - 4,000 of these have been in SA, but in the preceding period SA shed 5,000 mining roles so it's only putting back what used to be there.

 

Jim

[Leyland CJ]

I hear that, JimJustin and could not have said it better myself. What you write is absolutely on the money...it's like one of my "old timer miner" friends says - "people outside of SA just don't actually realise what is going on here, they don't understand the ground" (and by that he is referring to those that he terms as the "suits", "they've never gotten their shoes dirty in their life" in the other places like ACT, NSW and VIC).

 

He's not one to 'talk up' the industry or SA, he just tells it as he sees it - and believe me, he's seen a bit of digging and he's seen people come and go, so I wouldn't be betting against him !