South Australia Minerals and Resources Overview Sydney Mining Club – 31 July 2014 Dr Paul Heithersay Deputy Chief Executive Resources and Energy
South Australia Minerals and Resources Overview
Sydney Mining Club – 31 July 2014
Dr Paul Heithersay Deputy Chief Executive Resources and Energy
Premier and our ministers Hon. Jay Weatherill MP • Economic Development Board • Chair; Economic Development Cabinet Committee
Hon. Tom Koutsantonis MP • Minister for State
Development • Minister for Mineral
Resources and Energy • Minister for Small
Business
Hon. Martin Hamilton-Smith MP • Minister for
Investment and Trade • Minister for Defence
Industries
Hon. Gail Gago MLC • Minister for
Employment, Higher Education and Skills
• Minister for Science and Information Economy
Hon. Susan Close MP • Minister for
Manufacturing and Innovation
• Minister for Automotive Transformation
Hon. Jack Snelling MP • Minister for the Arts • Minister for Health
Industries
Hon. Ian Hunter MLC • Minister for
Aboriginal Affairs and Reconciliation
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Dr Don Russell – Incoming CEO
• Dr Don Russell was the Secretary of the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education from 2011 to 2013. Dr Russell was previously Independent Chairperson of State Super, a role that he held from January 2008. State Super is a $38 billion fund that manages public service defined benefit schemes for the NSW State Government.
• Until March 2010, Dr Russell was the Global Investment Strategist at
BNY Mellon Asset Management Australia. BNY Mellon is a global investments company.
Source: www.economicdevelopmentboardsa.com.au
• Between 1997 and 2000, Dr Russell worked for Sanford C. Bernstein, a research and money management firm in New York. Between 1985 and 1993 and again in 1996, he was Principal Adviser to the Hon Paul Keating both during his time as Treasurer and Prime Minister. Between 1993 and 1995 Dr Russell served as Australia’s Ambassador to the USA in Washington. He has a PhD from the London School of Economics, a MEc from ANU and a BEc (Hons) (First) from Flinders University. Don also holds the Chartered Financial Analyst designation (CFA) 2007.
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Resources Industry Achievements 2013
• Minerals ($144.7m) and Petroleum ($367.7m)
$512 million EXPLORATION EXPENDITURE
• ~$30 billion of potential capital for Minerals and Energy projects in the Major Developments Directory
$1.6 billion new CAPITAL EXPENDITURE
• Minerals ($5.4 b) and Petroleum ($1.6 b) RECORD HIGH
$7.0 billion resources PRODUCTION
• Minerals ($4.5 b) and Petroleum ($0.2 b) RECORD HIGH • 38% of South Australia’s total exports ($12.3 b)1
$4.7 billion EXPORTS
$188.7 million ROYALTIES
• more than double - 6,641 ten years ago RECORD HIGH
15,372 EMPLOYED
1 Twelve months to April 2014
5
0
1
2
3
4
5
6
7
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Bi
llion
Copper Hematite Magnetite Gold Uranium Coal
Other Metallics Industrial Construction Gemstones Caroline 1 CO2 (well) Condensate
Crude Oil Ethane LPG Natural Gas
Mineral and Petroleum Production
Record Production
Production by commodity 2000 – 2013 In 2013 was $7 billion ($5.4b – Minerals and $1.6b – Petroleum)
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Exploration Expenditure
Minerals and Petroleum exploration expenditure 1998 – 2013 For 2013 was $512.4million ($144.7m – Minerals and $367.7m – Petroleum)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
0
100
200
300
400
500
600
700
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Minerals Petroleum SA % share of Australia
$m
Source: ABS data cat . 8412.0 Dec 2013
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Mineral Exploration Expenditure 1993 - 2013
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
50
100
150
200
250
300
350
400
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
South Australian expenditure SA's percentage share of Australian expenditure SASP Target 41 - $200m to 2015 Former SASP Target T1.18 - $100m
Sout
h Au
stra
lian
min
eral
ex
plor
atio
n ex
pend
iture
($ m
)
SA's
sha
re o
f Aus
tralia
n m
iner
al e
xplo
ratio
n ex
pend
iture
(%
)
source: ABS data Cat. 8412.0 and Department of State Development
Challenger discovery
PACE
Four Mile discovery
Olympic Dam Expansion
Carrapateena discovery
Olympic Dam drill-out
PACE 2020
Prominent Hill
discovery
Jacinth-Ambrosia discovery
Hillside discovery
Impact of GFC
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South Australia’s Major Mines and Resource Projects
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Economic Demonstrated Resources operating Australian copper mine (Geoscience Australia)
Olympic Dam – a world class Tier 1 asset
Resource: 9.6 billion tonnes, 0.82% Cu, 0.26 kg/t U3O8
• world’s largest U deposit
• 4th largest Cu deposit
Australia’s largest underground mine ~60 years reserves at current production. 2013 production:
• 174,400 tonnes copper (cathode)
• 4,009 tonnes U3O8
• 119,928 ounces gold
• 882,000 ounces silver
Focus on returning mine to profitability, despite negative trends in commodity prices
Technology studies proceeding. Heap Leach testing continues
Nyrstar Port Pirie Smelter Transformation The Issue
Nyrstar required to improve lead-in-air emissions levels from 2016, through EPA licence variation in July 2012 • Reductions in % children with blood lead levels below Australian guideline level
had plateaued
2 options
1. INVEST - replace 60-year-old sinter plant smelting technology
2. CLOSE - significant economic, environmental, social and community impacts for the Port Pirie region and the State • Lose 965 regional jobs,
• Lose 2,500 jobs across SA;
• Lose $840 million in exports;
• GRP reduced by $132 million in Port Pirie region;
• GSP reduced by $304 million
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Nyrstar Port Pirie Smelter Transformation The Solution 1. Financing Agreement - to transform smelter, secure Port Pirie’s long-term
sustainable and commercial future 2. Regulatory certainty for 10 years relating to lead-in-air concentrations for
transformed smelter • Port Pirie Smelting Facility (Lead-In-Air) Concentrations Act 2013 commenced operation on 1
May 2014 3. 10 year, $50 million ‘Targeted Lead Abatement Program’ for Port Pirie, jointly
developed with Nyrstar • Leverage air quality improvements to lower children’s blood lead levels through targeted
interventions on lead exposure
4. Major Development Authorisation, granted in December 2013
Outcomes • Modern - best available enclosed bath smelting technology • Flexible - ‘advanced metals processing facility’ • Reduce emissions - lead reduced by 50%, sulphur by 90% • Lower blood lead - improve health outcomes for young children • Avoid - major economic, environmental & community impacts
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Nyrstar Port Pirie Smelter Transformation
Source: Courtesy of Nyrstar
Feed material
Spent slag to construction industry
Sulphuric Acid Plant
Blast Furnace
Sinter Plant Sulphur dioxide
Sulphuric Acid
Sinter
Lead Refinery
Copper Plant Slag Fumer
Zinc Plant
Precious Metals Refinery
Zinc rich slag
Lead bullion
Precious metals concentrate
Selenium Palladium
Platinum Rhodium
Silver Gold
Copper
Lead Antimony
Copper in matte
Zinc oxide
Oxygen Enriched Bath Smelting
Furnace
Transferred to Hobart from August 2014 onwards
Nyrstar to construct new and improved capacity acid plant
Internal residue to blast furnace
Nyrstar Port Pirie flowsheet transformed
Slag
Tellurium
Existing metals & other products recovered Possible additional metallurgical circuits
Core assets Change due to Redevelopment process
External sales
Potential future investments to capture additional metal streams
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Nyrstar Port Pirie Smelter Transformation
Source: Courtesy of Nyrstar
Slag Fuming Plant
Precious Metals Refinery
Lead Refinery
Sinter Plant
Blast Furnace
New Acid Plant
Oxygen Enriched Bath Smelting Furnace
Zinc Plant
Copper Plant
Closed end of July. Zinc oxide transferred to Hobart from August 2014 onwards
Change due to Redevelopment process Advanced metal recovery and refining facility 3-D snapshot of Redevelopment on completion
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Nyrstar Port Pirie Smelter Transformation
Source: Courtesy of Nyrstar
Residues
Concentrates
2017e 2013
Own mine concentrates & residues from own zinc
smelting network - ca. 50% of feed material
requirements
2013 2017e
319
399
80 Pb
Zn
Cu
Ag
Au
TCs
183
ca. 50% increase in throughput Kt
Material increase in gross profit EURm
Residues and own mine lead concentrates
ca. 250,000 tonnes of refined lead 179,000t ca. 40,000 tonnes of zinc in fume 30,000t metal
ca. 7,000 tonnes of copper in matte 4,100t
ca. 25.0 million troy ounces of silver dore 18m troy ounces
(containing ca. 100,000 troy ounces of gold) 65,800 troy ounces
Improved production capacity - 2017e 2013
Improved throughput and production capacity
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Nyrstar Port Pirie Smelter Transformation
Source: Courtesy of Nyrstar
Forward sale of future silver deliveries AUD120m / EUR79m
Funding package delivered
Financing summary
Direct contribution ends 2014 AUD103m / EUR68m
Nyrstar Port Pirie Total capital
investment: AUD 514m / EUR 338m
Nyrstar’s direct contribution
Project level financing Proceeds from forward sale of
silver production
Equity-like perpetual securities with EFIC guarantee AUD291m / EUR191m
Increase from ca. EUR 231 million (ca. AUD 351 million) at prefeasibility stage: reflects Nyrstar constructing a sulphuric acid plant; and expected inflationary impacts over the spending horizon for the project being formalised
AUDm EURm
Nyrstar direct contribution 1031 68
Project level financing 2912 191
Proceeds from forward sale of silver production 120 79
Total 514 338
1 Exact Nystar contribution AUD 102,750,000.
2 Exact Project Level Financing AUD 291,250,000.
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Nyrstar Port Pirie Smelter Transformation
Source: Courtesy of Nyrstar
Structured equity-like investment; perpetual securities receive IFRS equity accounting treatment Nyrstar expects to utilise the funding from early 2015 Forecast distributions expected to reduce amount of perpetual securities outstanding, 2017 - 2021 Amortisation of perpetual securities is discretionary however no perpetual securities expected to be on issue
by the end of 2021
SPV Created solely for financing
Redevelopment
Nyrstar Port Pirie Third party financiers
EFIC
NPP will issue perpetual securities to SPV
South Australian Government ffinancing agreement with Nyrstar and EFIC, Australia’s export credit agency
Raised funds benefit from a guarantee from EFIC
supported by a back-to-back guarantee from the
South Australian Government
SPV Special Purpose Vehicle. EFIC: Export Finance and Insurance Corporation.
South Australian Government
Funding raised guaranteed by EFIC, AAA credit rating
Nyrstar Port Pirie Smelter Transformation
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Air quality improvement – before and after transformation
Arrium Mining – Iron Ore
• South Australia was the birthplace of Australia’s iron ore production and is South Australia’s second largest producer
• Production has stepped up from 3 million tonnes per year ($28 million) a decade ago to 14.6 million tonnes/year – with a production value of $1.9 billion
19 Source: Photographs by Sean Kelly, courtesy of Arrium Mining
20 Source: Photographs by Sean Kelly, courtesy of Arrium Mining
• 2013 was a watershed year, celebrating the expanded port capacity at Whyalla complete with rail-loops
• Strong case management is underwriting and will continue to underwrite the sector. The last year has seen Arrium port and mining operation expansion
Arrium Mining – Iron Ore
Resources Infrastructure Taskforce (RIT)
• The Regional Mining and Infrastructure Plan launched by the Minister for Transport and Infrastructure 12 June 2014
• Resources Infrastructure Taskforce (RIT) within the Olympic Dam Taskforce, jointly chaired by senior staff from the Department of State Development and DPTI
• The RIT will guide development of rail, road, port, water and electricity infrastructure supporting expansion of State’s resources and energy sectors
• In 12 months development of a business case for a port solution supporting increased export of iron ore from prospective mines in SA
• Work closely with key private sector stakeholders
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RIT 12 month program
• Establish Taskforce • Steering Committee, Taskforce, agency links, resources, budget • Further Cabinet approval
• Engage Stakeholders • Identification, mapping, meetings, forums • Undertake “Road Map” mapping • Summarise infrastructure issues
• Review infrastructure knowledge • Examine existing reports • Identify key commercially viable resource projects • Explore multi user access models
• Develop intervention/ assistance/ support options • Prepare spectrum of options and financing • Prepare Business Case
• Make recommendations to Government
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Mining and Petroleum Services Centre of Excellence (CoE)
• Supporting the development of South Australian capabilities that assist local supply chains to compete nationally and globally, providing high value added products and services to the resources sector
Objective
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Governance Structure
MIPO Advisory Council
CoE Executive
Committee • Provides formal approval of project funding
• Individual projects managed by lead project partner
CoE Secretariat • Entry point for inquiries and project proposals • Manages CoE activities and funding • Supports the Advisory Council and Executive Committee • Connects SMEs, resources industry and researchers
• Reviews projects and makes recommendation to the CoE Executive Committee on project prioritisation and funding
• Generates recommendations for new projects to be considered
CoE Projects
Project A
Project B Project D
Project C
Project E
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Project Pipeline
4. Project(s) Projects to proceed with CoE and partner funding, with clear links to
overarching objective of the CoE
3. Fund CoE Executive Committee to approve funding for projects
2. Qualify CoE Secretariat to assess project ideas that emerge from Stage 1, apply
CoE criteria to assess eligibility, then provide information to MIPO Board who will provide recommendation to fund or not
1. Generate CoE Secretariat to link SMEs, resources industry and researchers to
generate innovative ideas Part
ners
hips
& c
olla
bora
tion
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Build on existing SA comparative advantage, either in terms of research, industry or natural endowments
Have industry funding or in-kind support
Have material impact and be identified as priority for industry
Solve problems which industry can’t solve itself, for reasons such as incomplete or asymmetrical information or common resource problems
Have multiple partners and require a collaborative approach, and
Be publicly reportable
Criteria for Funding Project
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18/07/2014 27
• Onshore Petroleum training facility • Australia's first comprehensive ICT Roadmap for Minerals and Energy; • Brukunga Mine Skills Centre Feasibility Study; • Remote Mining Operations Centre; • Chair of Geo-statistics and Qualitative Geology; • South Australian Research Fellowship in Unconventional Energy Resources • The Real-Time Drill Site; and • Australian Copper/Uranium Transformation Research Hub
The following projects are being supported by the CoE:
Projects to date
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Disclaimer
The information contained in this presentation has been compiled by the Department of State Development and originates from a variety of sources. Although all reasonable care has been taken in the preparation and compilation of the information, it has been provided in good faith for general information only and does not purport to be a professional advice. No warranty, express or implied, is given as to the completeness, correctness, accuracy, reliability or currency of the materials. The Department of State Development and the Crown in the right of the State of South Australia does not accept responsibility for and will not be held liable to any recipient of the information for any loss or damage however caused (including negligence) which may be directly or indirectly suffered as a consequence of use of these materials. The Department of State Development reserves the right to update, amend or supplement the information from time to time at its discretion.
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