Shock and awe in the war over ore
West Australia’s Pilbara is populated by oversized creations, from trucks which can carry 360 tonnes to ships which can cart close to 150,000 tonnes of ore around the world.
But perhaps nothing is bigger than the brawl between the big iron ore producers, and the smaller outfits represented most loudly by Fortescue Metals Group.
This is an eye-gouging, rolling-in-the-red-dust, steel-capped boots affair which will barrel into Parliament this week as the Government attempts to pass the $11 billion Minerals Resource Rental Tax (MRRT).
There remains a chance that that the aggressive Fortescue and allies could convince crossbench MPs to alter the Government’s plans for a new mining profits tax, or delay it until next year.
That chance is slight, but won’t stop the last-minute brawling, because there is more than a new tax at stake. Also at issue is the right to speak for the iron ore industry which in WA was worth $15.5 billion in exports for the June quarter alone.
The MRRT has the general support of the giants - BHP Billiton, Rio Tinto and Xstrata - but is opposed by Fortescue and the small operators of the Association of Mining and Exploration Companies (AMEC).
Simon Bennison of the AMEC yesterday defined the two camps using the supply of urgent needed investment, which he said for “the junior (mining) sector is just about at an all-time low”.
“Certainly there’s big dollars being invested in major oil and gas projects and by BHP and Rio, but in the smaller sector we are seriously looking for venture capital,” Mr Bennison told TEN’s Meet the Press.
He wants miners to keep more of their profits to re-invest, because they can’t get the money elsewhere.
The disagreements over the MRRT and its legislation are just part of the hostility. There is relentless competition for the iron ore of the Pilbara, for overseas markets, and for the facilities to get the ore to those markets.
In Port Hedland, BHP won’t allow Fortescue to build a level crossing over one of its rail lines, forcing the company’s trucks to make a 15 minute detour near the wharves.
Late last week there was an unoffical contest between BHP and Fortescue to load a record tonnage onto an ore carrier. Fortescue won by heaping 247,906 tonnes onto the Wugang Innovation, breaking the old record set by BHP – by 48 tonnes.
While that might have helped Fortescue think it was a player, the big boys don’t agree.
A Rio executive dismissively uses Fortescue as measure of small quantities. He last week described a Rio project as equal in size to “4.5 Forescues”. Another operation was said to be relatively unimportant, “a Fortescue”.
Let’s be clear on this: Fortescue isn’t a tiddler.
It is in the process of tripling its Pilbara operations with facilities worth $8.5 billion, and hopes to get around $5 billion of that from its own liquidity rather than borrow it.
This is not a mum-and-dad corner shop.
The CEO of Fortescue is Neville Power, a miner who worked his way up from the diggings themselves and who is a direct contrast in style to Marius Kloppers, the PhD-holding head of BHP.
Last week Mr Power suggested there was a link between Prime Minister Julia Gillard’s about-turn on uranium exports to India, and BHP’s backing of the MRRT. BHP owns Olympic Dam, the biggest uranium mine in the world.
“All I know is there was a deal done between BHP and Rio and Xstrata with Julia Gillard to bring MRRT in,” he told reporters.
It was a cheeky assertion which he knew he couldn’t prove. But maybe it might upset the BHP boardroom for a few minutes.
He also took shots at Treasurer Wayne Swan as well as Ms Gillard and demanded access to Treasury modeling of the tax, withheld because of commercial sensitivities.
“In every measure that you would put against a good, efficient tax, this is a bad one,” said Mr Power.
But the greater sin appeared to be the Government siding with the mining establishment in the battle for survival on the Pilbara ore fields.
“The reason we are lobbying so hard against this,’’ said Mr Power, “is it may not impact us now but we know what it took to start up as a mining company in Australia against people like BHP and Rio standing on the hose and trying to choke us off.”
Mal toured Pilbara mining projects courtesy of the West Australian Chamber of Minerals and Energy last week.
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