v o-3«*V V-« : >* V*?^Y V-- : >* V*2*> V--. ft" *^ •«&'- ^ 0< :*«»■ *^ •«»• *■* :«■& ^* - N ^fe*- ^ v «o V*^?-\^* ^*^*£\ o V*"%-\ <*„ ^?V a o V-S^-tr. JD* .l^L'. > L ^^ - 'SK** ** v %> °-xPP?** <,^\. vSBv" ** v % »;OT^ «/%. '•-' »j<5SVfc*_ o $'o* S^^S?" J>** \**^|^\c/ %/?Pf^V* %/*^i$\o** %/*^l?'V* 5> ._L^L'» *> >. * • • • ° v& c°*..^Ki*>o ^\v^k-V . c°*..^ji:->o y\^*A ^/^k-'° O > ^tf 1 ST •*■ ^v . ■ v '■W$. : /% : -SK ; ** v ^ '°™ ; /x -SR-' ** v ^- ••™ ; f /x -I •X ^ ^-.\ /\^&'X /*sjgm?\ y<-im&\ •• j> %*??!&#> v^^ # y %/^>'V V^\^ %^-*V •w V V v* v " ^ < ! fl5°««v \/ t o. 4- v ^* IC 8900 Bureau of Mines Information Circular/1982 Future Trends and Prospects for the Australian Mineral Processing Sector By L. Nahai and Charlie Wyche UNITED STATES DEPARTMENT OF THE INTERIOR jDONESIA INDIAN OCEAN WESTERN AUSTRALIA Perth SO Darwin GULF O OF CARPENTARIA] NORTHERN TERRITORY CORAL SEA QUEENSLAND SOUTH AUSTRALIA 6 \ Brisbane • » Adelaide^ NEW SOUTH WALES Sydney t Canberra Q [VICTORIA 1 Melbourne^ INDIAN TASMANIAV J (Hoban/ XJJ OCEAN FIGURE 1. - Administrative boundaries of Australia. Information Circular 8900 II Future Trends and Prospects for the Australian Mineral Processing Sector By L. Nahai and Charlie Wyche UNITED STATES DEPARTMENT OF THE INTERIOR James G. Watt, Secretary BUREAU OF MINES Robert C. Horton, Director This publication has been cataloged as follows: 0$ \>V 1\ 4, Nahai, Lotfollah Future trends and prospects for the Australian mineral processing sector. (Information circular/ United States Department of the Interior, Bu- reau of Mines ; 8900) Includes bibliographical references. Supt. of Docs, no.: I 28.27:8900. 1. Mineral industries— Australia. 2. Mineral industries— Government policy— Australia. 3. Competition, International. I. Wyche, Charlie. II. Title. III. Series: Information circular (United States. Bureau of Mines) ; 8900. -T#295.U4 1TTDSfffif37*^622s [338.2'0994] 82-600278 CONTENTS Page Abstract 1 Introduction 2 Acknowledgments 3 Status of the Australian mineral industry 3 Prospects for shifts toward further processing 5 Overview 5 Political, economic, and social factors 7 Political factors 7 Economic factors 8 Labor 8 Capital 10 Foreign equity 12 Energy 13 Infrastructure 16 Transportation 16 Tariffs 19 Environmental and social factors 21 Implications of increased Australian mineral processing for the United States.. 21 Commodity reviews 22 Bauxite, alumina, and aluminum 22 Commodity profile 22 Analysis of pertinent factors 24 Bauxite-alumina 24 Alumina-aluminum 24 Copper 25 Commodity profile 25 Analysis of pertinent factors 28 Iron ore 28 Commodity profile 28 Analysis of pertinent factors 30 Lead, zinc, and silver 31 Commodity profile 31 Analysis of pertinent factors 33 Manganese 34 Commodity profile 34 Analysis of pertinent factors 35 Nickel 35 Commodity profile 35 Analysis of pertinent factors 37 Tin 37 Commodity profile 37 Analysis of pertinent factors 38 Titanium minerals 38 Commodity profile 38 Analysis of pertinent factors 39 Tungsten 39 Commodity profile 39 Analysis of pertinent factors 40 ^ Summary 40 ii ILLUSTRATIONS Page 1. Administrative boundaries of Australia Inside front cover 2. Major metalliferous mines and smelters of Australia Inside back cover TABLES 1 . Australia: Production of selected mineral commodities 4 2 . Exports of ores and concentrates from Australia 11 3. Estimated investment costs for expansion of production of selected nonfer- rous metals 11 4. Mineral and metal transportation in Australia 17 5. Tariff levels of European Community, Japan, and tbe United States for selected commodities 20 6 . Principal Australian aluminum companies 23 7. Australian copper production by company, 1980 26 8. Leading copper-producing mines in Australia, 1980. 27 9. Leading iron-ore-producing mines in Australia, 1980 29 10. Lead-zinc mines in Australia 32 11. Leading nickel-producing mines in Australia 36 FUTURE TRENDS AND PROSPECTS FOR THE AUSTRALIAN MINERAL PROCESSING SECTOR By L. Nahai ' and Charlie Wyche ' ABSTRACT An important objective of the Australian Government's policies on re- sources development is to encourage further processing of raw materi- als domestically, to the extent that this is economically feasible and consistent with sound industrial development. This Bureau of Mines report examines the extent to which Australia is able to pursue this policy in terms of its own competitive advantages and the implications of such a policy for the United States. Such factors as the impact of other competing producers and their advantages, expected world demand, and infrastructural problem — which may limit pursuit of this policy to the fullest extent — are discussed. After a broad review of the re- source, economic, social, and environmental factors, the perspective for increased processing is examined for a number of mineral commodities. 'Physical scientist, Division of Foreign Data, Bureau of Mines, Washington, D.C INTRODUCTION Australia has had an impressive growth in mineral production since the early 1950' s and, based on value, is the fifth largest nonfuel-mineral-producing coun- try. In view of the limited domestic demand and processing facilities, a sub- stantial share of Australian mineral out- put is exported as metal as well as con- centrates (bismuth, copper, lead, zinc, tin, and nickel) or as concentrates (ilmenite, rutile, zircon, and tungsten ore). Although some steel and aluminum are exported, the largest shares of iron ore and bauxite output are exported as iron ore and as bauxite and alumina. In terms of metal content, percentage of mine production processed to metal is estimated as about 90 for lead, 70 for copper, 65 for zinc, and 44 for tin. For iron and manganese ore the figures are 13% and 19%, respectively. Practically all tungsten and titanium ores are ex- ported as concentrates. The importance of the export trade is illustrated by ex- ports as percentages of production. In 1979, the percentages were 88 for lead, 8.5 for iron ore, 87 for alumina, 42 for zinc, and 64 for copper. Except for mod- est tonnages of ilmenite, used for domes- tic production of titanium paint, all titanium- and zircon-bearing mineral sands are exported as concentrate. The percentage for manganese, although not reported, must also be in the neighbor- hood of 75% to 80%. Many countries have established good mineral trading relations with Australia. Australia is an important supplier of coal, iron ore, bauxite, copper, manga- nese ore, zircon, and zinc concentrate to Japan. Australia is particularly impor- tant to the United States as a source of bauxite, alumina, and rutile. Western Europe is the market for some of Austra- lia's production of iron ore, coal, lead and zinc concentrates, and rutile. feasible and consistent with sound indus- trial development. However, the policy statement stipulated that the Government seeks to do this without restraining the potential for exports of unprocessed raw materials^ and while recognizing the development of raw materials processing is a matter for private enterprise. Most base and precious metal ores produced in Australia are smelted in the country, but Australia also exports some of its mine production of these metals (copper, lead, and zinc among others) as concentrates. In addition substantial shares of the total output of bauxite and of iron, man- ganese, titanium, tungsten, and zirconium ores are also exported as ores with only benef iciation. The policy of encouraging domestic processing is designed to change the balance toward more metal production and export; anticipated benefits include added value and employment opportunity. The figures on the percentages of mine production processed to metal indicate that there are substantial opportunities for Australia to expand production and export of aluminum, copper, zinc, tin, tungsten, and iron and steel at the ex- pense of that share of production which is currently exported as beneficiated ore and concentrates. This Bureau of Mines study examines the factors that favor or impede the attainment of the objective of increased domestic processing of Austra- lian mineral raw materials, which, in line with the policy, should be economi- cally feasible. These factors are not only resource related but also include economic, social, and environmental fac- tors; the expected supply and demand in the next decade or so; and the position of Australia's competitors (developed and developing) in the world market. Impli- cations of the policy for the United States are reviewed. Since about 1978 an important objective of the mineral policy of the Australian Government has been to encourage further processing of minerals domestically to the extent that this is economically 2 Australian Department of Trade and Re- sources. Australia's Mineral Resources, Development and Policies. Australian Government Publishing Service, Canberra, 1981, 18 pp. Figure 1, on the inside front cover, shows the administrative boundaries of Australia. The major metal mines and smelters appear in figure 2, on the in- side back cover. ACKNOWLEDGMENTS The authors would like to express their appreciation to L. Baumgardner, H. Kurtz, W. Butterman, F. Klinger, J. Rathjen, V. A. Cammarota, G. DeHuff, S. Sibley, J. Carlin, L. Lynd, and P. Stafford, commodity specialists of the Bureau of Mines, who reviewed respectively the com- modity reviews on bauxite and alumina, aluminum, copper, iron ore, lead, zinc, manganese, nickel, tin titanium, and tungsten. The review of the whole re- port by V. A. Cammarota, Donald Colby, John Corrick, Hermann Enzer, Ebraham Shekarchi, John Stamper, and Phillip Yasnowsky, and their helpful suggestions, are also acknowledged. STATUS OF THE AUSTRALIAN MINERAL INDUSTRY The mineral industry, including value added by domestic smelting and process- ing, accounts for about 10% of the gross national product of Australia. Mineral and metal exports also account for about 38% to 40% of all exports. Coal ranks first in value of mineral exports, ac- counting for 29%, followed by iron ore (18%) and alumina (14%). Table 1 gives production of selected mineral commod- ities for 1979-81. Domestic capital is dominant in nonfer- rous and precious metals production and in titanium mineral operations, but for- eign capital has been a big factor in the expansion and production of coal, iron ore, and bauxite -alumina and in the ex- pected production of diamond. Australia is a major world producer of coal, iron ore, bauxite, titanium minerals (ilmenite and rutile), and ores of manganese, lead, zinc, tin, and tungsten. (Coal, petro- leum, and uranium are included in this overview for completeness only and are not examined individually in the commod- ity reviews section. ) For many of these commodities, Australia is one of the top five world producers. In addition, Aus- tralia has emerged as an important producer of nickel and is expected to become the same for diamond. In mine output of ores and concentrates, Austra- lia ranks first in world production of bauxite, bismuth, ilmenite, rutile, and zircon, second in iron ore, third in tungsten ore, fourth in nickel, and fifth in manganese and tin ores. In 1980 its share of world production of these com- modities, as well as of bituminous coal and lignite, were as follows, in percent: bauxite 31, bismuth 27, coal 4, ilmen- ite 27, iron ore 11, lignite 3, manga- nese 7, nickel 8, rutile 69, tin 5, tung- sten 6, zircon 79. Because of its large bituminous coal and lignite production, currently 112 million and 33 million tons per year respectively, Australia is a net energy exporter, but domestic petroleum produc- tion (about 144 million barrels in 1981) is sufficient for only about two-thirds of domestic consumption. Australian smelting capacity, except for steel, substantially exceeds domestic consumption. The 1981 capacities in thousand tons follow: crude steel 9,100, aluminum 367, copper 200, lead 400, nick- el 35, and zinc 300. Coal is produced substantially in New South Wales and Queensland, and iron ore in Western Aus- tralia. Queensland and New South Wales lead in production of copper, lead, sil- ver, and zinc. Besides being the princi- pal iron-ore-producing State, Western Australia has much of the gold and nickel ores and diamonds. At present the Mary Kathleen Mine in Queensland and the Nabarlek and Ranger Mines in the Northern Territory are the only uranium-producing mines , but future developments in the Northern Territory are expected to make Australia a major world producer. TABLE 1. - Australia: Production of selected mineral commodities (Thousand metric tons unless otherwise specified) Commodities 1979 1980 1981 (est.) METALS Aluminum: Bauxite , gross weight , Alumina , Metal, refined , Copper: Mine output, metal content Blister , primary , Refined, primary , Gold: Mine output , metal content thousand ounces Metal, refined do , Iron and steel: Iron ore , gross weight , Metal: Pig iron , Crude steel Lead: Mine output , metal content , Refined , primary , Manganese ore , gross weight , Nickel: Mine output , metal content Metal, refined , Metal in oxide Silver: Mine output, metal content. .. .thousand troy ounces Metal, refined. do , Tin: Mine output , metal content , Refined, primary Titanium minerals, concentrates, gross weight: Ilmenite (including leucoxene) , Rutile 4 Tungsten, concentrates (calculated to 65% WO3) , Zinc: Mine output , metal content , Refined, primary. , Zircon, concentrates, gross weight , MINERAL FUELS Coal , bituminous and subbituminous Coal, lignite Petroleum thousand 42-gallon barrels . . Natural gas million cubic feet . . 27,583 7,415 270 238 163 138 597 534 91,717 7,811 8,125 422 216 1,724 70 22 17 26,756 9,469 13 5 1,203 275 6 529 305 445 83,160 32,597 159,560 295,971 27,179 7,246 303 232 175 145 548 475 95,534 6,960 7,594 397 200 2,020 74 17 18 25,375 9,761 12 5 1,409 312 7 495 301 492 84,252 32,895 139,885 337,874 26,500 7,079 379 223 160 164 522 482 88,000 6,860 7,635 392 208 1,397 74 23 19 23,247 10,776 12 4 1,390 236 6 508 296 425 111,700 32,963 143,674 397,938 The Australian mineral industry is rel- atively well served by infrastructure and ports. Port Kembla, Sydney, and New- castle serve coal exporters in New South Wales, and Hay Point, Gladstone, and Bowen handle coal exports in Queensland. In Western Australia, iron ores are shipped from Dampier, Cape Lambert, and Port Hedland, and bauxite-alumina from Fremantle. The port at Gladstone is used for alumina shipments in Queensland. Australia enjoys a geographical advan- tage in the Pacific Basin as a mineral exporter. Japan, as the world's third largest economy, and Korea and Taiwan, as emerging industrialized countries, pro- vide ready markets for Australian raw materials. In the foreseeable future, the Austra- lian minerals industry will remain export oriented because domestic consumption is not expected to increase sufficiently to absorb all the minerals produced. Aus- tralia is a highly developed country with a population of about 14.6 million and a 1979 per capita income of $8,360. Aver- age annual growth in population is 1.2%, and immigration is strictly controlled. Therefore, a dramatic increase in popula- tion is not foreseen. Assuming a sus- tained economic buoyancy, the Government has predicted that real gross domestic product (GDP) growth could average 5% per annum over the next decade. Although this is a respectable rate of growth, considering that the per capita income Is already high, such a GDP growth would not be enough to absorb domestically all the minerals produced. Australia also imports minerals and mineral products. The most important import is crude oil, which accounted for 80% of the total value of 1981 imports valued at $1 billion. Modest tonnages of steel semi-manufactures are also imported because the industry does not produce all the required shapes and sufficient quan- tities of various grades. Phosphate, sulfur, and manufactured fertilizers, asbestos, and diamonds are the principal nonmetallic imports. PROSPECTS FOR SHIFTS TOWARD FURTHER PROCESSING OVERVIEW The Australian Government has placed a high priority on processing minerals from Australian raw materials for export; where such a course is economically fea- sible and in keeping with sound indus- trial development. A 1980 report on mineral processing prepared by the Aus- tralian Trade Development Council 3 states that the potential exists "...for the longer term development of additional world-scale smelting or refining capacity" of primary copper, zinc, ferro- manganese, and ferrosilicon production. Some potential also exists for moderate expansion of lead production capacity. Downstream processing of tungsten to ammonium paratungstate is mentioned as a possibility. This report does not ^Australian Trade Development Council. Mineral Processing, A Comparative Study. Canberra, 1980, 209 pp. discuss the processing of bauxite, presumably because it has been the sub- ject of other studies. The Government has reviewed the taxa- tion system to see if more effective assistance could be offered for the establishment of new processing opera- tions in Australia. A Commonwealth/ State Standing Joint Study Group was estab- lished in 1979 to provide information to the Australian Minerals and Energy Council. Australia enjoys a number of compet- itive advantages (e.g., abundant re- sources, favorable energy situation, numerous ports , and proximity to the con- suming countries of Southeast Asia and Japan) for processing some of the min- erals produced in the country. As noted in the following paragraphs, these pros- pects differ from commodity to commodity. Bauxite and aluminum. — Australia is uniquely well posed for growth in alumi- num production. Current plans for alu- minum, if implemented, would add 600,000 tons to the current capacity of 400,000 tons of aluminum. The amount of bauxite processed domestically for alumi- num is 4.5%, based on 4 tons of bauxite being needed to produce 1 ton of metal. Processing of bauxite to alumina has some inherent shipping advantages because of weight ratio of the ore to alumina. For bauxite-aluminum the ratio is 4 to 1, compared with about 1.75 to 1 for lead and zinc concentrates to their respective metals and less than 3 to 1 for copper (assuming 30% copper concentrate and 60% lead and zinc concentrates). Of course, the shipping cost advantages for metals resulting from the above ratios are to some extent reduced by shipping cost advantages for bulk materials (bauxite and concentrates) versus metals, which would be subject to higher freight. Australia's competitive advantage lies in the fact that it has a number of baux- ite deposits, each with reserves of such magnitude that, ignoring other considera- tions such as infrastructure, water sup- ply, etc., it can support investment for an alumina/ aluminum complex. Also the Weipa deposit in Queensland, the Jar- rahdale deposit in Western Australia, and Gove in the Northern Territory are well located for sea transportation. These deposits, except for Gove with 250 mil- lion tons of bauxite reserves, have reserves ranging from 1 billion (Jarrah-' dale) to 3.5 billion tons (Weipa). On the other hand, posed as it is for expan- sion in aluminum production and enjoying competitive advantages, Australia has environmental and other restraints that may preclude the full exploitation of the resource advantages. Iron ore. — As with bauxite, the over- whelming tonnage of iron ore output is exported. In terms of metal content only about 12% of iron ore production is smelted domestically (assuming 1.5 tons of ore per ton of pig iron). In terms of resources of iron ore and energy (principally coking coal) Australia has also the same advantages as for bauxite. However, a number of factors would cau- tion against substantial expansion in the Australian iron and steel industry except to meet increased domestic demands. These factors include (1) the expected low increase in the rate of world demand for steel, (2) increased production in emerging industrialized countries such as the Republic of Korea, China, and Brazil with low labor costs, (3) modest produc- tion in a number of countries such as Saudi Arabia and Qatar with low energy costs, and (4) existing excess capacity in countries responsible for the bulk of current world production, i.e., the United States, Europe (East and West), and Japan. In fact, the Broken Hill Proprietary Co. Ltd., the only steel producer in Australia, has been investing in improvements and modernization at existing facilities rather than in new capacity. Copper. — As for copper, lead, and zinc, an increase in smelter capacity would be modest because much of the ore production is already smelted domestically. Proven and indicated reserves at the mines that export copper concentrate (Rosebery and Mount Lyell Mines in Tasmania, and the Mount Gunson Mine in South Australia) are not large enough to sustain an integrated processing operation. The rather low- grade ore of the Tasmanian deposits also makes their production subject to the vagaries of the copper price. Therefore, it would seem that substantial additional reserves need to be developed before establishing additional smelting and re- fining capacity. The Roxby Downs copper deposit in South Australia has the poten- tial for supplying sufficient ore to sup- port an integrated smelting refining complex. Lead and zinc. — The picture is similar for lead and zinc for which the largest producers — Mount Isa Mines Ltd. and New Broken Hill Consolidated Ltd. — smelt the ore in Australia at Mount Isa and Port Pirie. The Port Pirie smelter also includes refining; it is, in fact, the world's largest lead smelter-refinery complex. The remainder of the lead-zinc ore production, not smelted locally, originates from a number of deposits oc- curring over a wide geographical area. Individually, these deposits are not large enough to justify their own smelt- ers. Operators may find it more economic to export concentrates, at least in the short run. Tin . — About half of Australia's tin production is smelted locally. Renison Ltd. in Tasmania, which accounts for nearly half of Australia's tin mine pro- duction, is in a good position for estab- lishing a smelter. The company ships its concentrate for smelting to Malaysia and to the Sydney smelter of the Associated Tin Smelters Pty., Ltd. The Sydney smelter receives concentrates also from the Mount Cleveland deposit of Cleveland Tin Ltd. and several small operations in the Emmaville district. Because of the changing demand pattern, tin has a very low anticipated rate of growth in demand in the major consuming countries. In fact, under certain assumptions, 4 current world tin-refining capacity may be ade- quate for anticipated demand in 2000. The development of the Rondonia deposits in Brazil could influence decisions in Australia to construct smelters. Nickel. — The Australian nickel industry is expected to follow the world trend whereby most nickel processing is carried out close to the source of supply. Vir- tually all of the current nickel ore produced in Australia is processed locally into matte, oxide, or metal. The Western Mining Corp. (WMC), with the installation of a new flash furnace at the Kalgoorlie smelter, has an annual capacity of 55,000 tons of nickel in nickel matte. Use of existing oxy- gen plant with some additional equip- ment could easily increase production capacity to about 85,000 tons of nickel in nickel matte. The capacity is con- sidered adequate to process the expected production from both WMC's own and other mines. Based on Australia's 4 Carlin, J. F., Jr. Tin. Ch. in Min- eral Facts and Problems 1980 Edition. BuMines Bull. 671, 1981, p. 957. extensive nickel reserves , the Bureau of Mineral Resources forecasts nickel production to reach 100,000 tons in 1982 and 155,000 tons by 2000. It is expected that the additional production would be processed domestically. The main constraint on the anticipated pro- duction expansion is the rate of expansion in world demand. POLITICAL, ECONOMIC, AND SOCIAL FACTORS Political Factors Endowed with rich mineral resources and having attained the position of a leading world producer for a number of commod- ities, Australia pursues a policy of (1) maximizing income from exploitation of its mineral resources, (2) limiting foreign ownership and control, (3) exer- cising controls on mining and marketing of mineral deposits so as to meet Govern- ment policy objectives, and (4) limiting the adverse environmental consequences of mining. In Australia, power is shared by the Federal and State Governments. The ownership of mineral rights is held by the Federal Government, and the right to exploit is vested in the various States. The Federal Government plays a crucial role, because it sets income tax rates, regulates foreign investment and minimum Australian participation in mineral projects, and establishes international trade policy. The Federal Government is also responsible for matters affecting the aborigines of the Northern Territory. The Environmental Protection Act of 1974 gives significant authority to the Federal Government (e.g., reviewing to- gether with the State governments the environmental impact studies that must be undertaken prior to the approval or com- mencement of a mineral project). The States have primary responsibility for protecting the environment, however. Granting exploration rights and mining leases, mining operations, levying royal- ties and similar charges, and providing infrastructure, including utilities, come within the powers of the State governments . The extent to which the Federal Govern- ment has direct involvement in the explo- ration and/or development of mineral resources has been dependent on the gen- eral economic policy of the government in power. Whereas the present government encourages both national and interna- tional private enterprise and relies on the market forces, the previous Labor government had a policy of promoting do- mestic ownership and control of mineral policy. This policy resulted in the Petroleum and Minerals Authority Act of 1973. Despite the present government's philosophy of avoiding direct involvement in mineral development and pro-business attitude on economic management, most of the policy measures implemented and new regulatory institutions created as a re- sult of the 1973 act have been retained. Also, the degree of foreign ownership and control of Australia's mineral resources remains a matter of continuing concern and becomes, at times, an emotional issue. Both the Federal and State governments have control over mineral development. No company, Australian or otherwise, can explore for, mine, or market minerals without first receiving permission from the appropriate Federal or State agency. When a company mines a mineral deposit, it does so under terms and conditions set by the appropriate agency. A company does not own the resources, but is merely given the right to develop them. The Australian Government furthermore can control minerals development by revoking export licenses and regulating the bor- rowing of foreign funds. Generally speaking, the States encour- age the rapid development of their mineral resources because it brings them direct benefits, e.g., royalties, infrastructure development, and employ- ment opportunities. Since the States are generally eager to attract foreign capi- tal, they (particularly Western Austra- lia, Queensland, and New South Wales) are also interested in relaxing present guidelines. These divergent policies cause a certain dichotomy for investors, especially when the Federal and the State governments are politically opposed. Economic Factors The execution of a policy of maximum processing of Australia's raw materials must take into account a number of eco- nomic and special factors. Although min- eral processing is not labor intensive, a pool of skilled labor must be available to operate the new smelters and refin- eries. Another aspect of labor that would influence investment decisions and cost effectiveness of the operation is industrial labor relations. Mineral processing is capital intensive. Capital availability — domestic and/or foreign — and capital costs of establishing proc- essing facilities in Australia compared with capital costs of similar facilities in potentially competitive countries must be taken into account. Attitude toward foreign capital and concern or even hos- tility toward the development of the country's natural resources by foreign capital will influence capital availabil- ity. Environmental restraints — location of processors and smelters , and air and water pollution resulting from the opera- tion of such facilities — would inhibit execution of the processing policy. Land use restrictions because of aborigines' rights would also be a deterring factor. Labor Australia has a long history of mining. Coal mining started not many decades after the arrival of the first settlers in 1788, and nonferrous metal mining started almost 150 years ago. With this long tradition of mining and experience in mining and smelting, it can be ex- pected that Australia will be able to recruit skilled labor, train the un- skilled from the unemployed labor force, or retrain other unemployed workers. (The unemployment rate was 6.1% in 1980.) However, many mining companies and mining industry trade associations have men- tioned their increasing concern with present and potential shortages of specialized personnel to meet the skilled labor requirements of the industry. The anticipated demand for highly trained specialists and technicians and for skilled workers is expected to exceed available workers at local levels. It is estimated that, with any upsurge in demand for Australian minerals, the mining industry will need hundreds of additional engineers, laboratory techni- cians, geologists, mining engineers, metallurgists, and other mineral scien- tists during the coming decade, but the number of students studying these disci- plines is far below the requirements. Following the collapse of the previous minerals industry boom in the early 1970' s, many recent graduates in engi- neering and mining fields were unable to find appropriate jobs, and the number of students entering these fields subse- quently dropped dramatically. ^ Shortages in the numbers of skilled workers could pose even more acute prob- lems. Fitters, mechanics, metalworkers, draf tpersons, electricians, and other skilled workers are already very much in demand both inside and outside the min- eral industry. Company and government efforts to provide training for unem- ployed workers have had only limited suc- cess to date. Efforts to increase the number of immigrants with the required skills have run into strong opposition from elements of the present work force. The impact of the labor shortages will fall unevenly on the mining industry be- cause mines that are more profitable and/or located in less remote areas will be able to attract skilled workers from less desirable locations. The mines in the remoter tropical areas of Western Australia, Queensland, and the Northern Territory will find it hardest to attract key personnel. Another concern on the labor scene is the industrial labor relations. The total labor force is 55% unionized. The 5 U.S. Embassy, Canberra, Australia. Industrial Outlook Minerals - Austra- lia. State Department Airgram 125, Aug. 12, 1981. figure is higher for the mineral industry segment. Almost all workers at the major mines belong to unions. Often one union does not cover all the workers at a mine or plant, and, management must negotiate wages and working conditions with as many as half a dozen unions. Work stoppages are fairly frequent and add a consider- able cost to mine and plant operations. The rapid anticipated growth of the mining industry will place even greater strains on labor relations because expe- rienced miners and skilled workers will be in short supply. This would also in- crease demands on wages , which are al- ready high in comparison with such coun- tries as Brazil, Mexico, and Peru, which would compete with Australia in the export market. The average weekly base salary for min- ing and quarrying has recently been esti- mated at $246,6 a bove the average wage of $205 for all industry groups. Overtime and fringe benefits are additional. Including overtime, the annual average wage of a mine worker is estimated at $21,000. However, this figure covers workers in small as well as large under- takings. In the latter group, such as the large coal and iron mines , workers may earn $35,000 to $46,000. Also the average figure does not include sub- sidized housing and other benefits. In an analysis of Australian labor costs in comparison with those in other developed countries , the report by the Australian Trade Development Council con- cludes as follows: It appears from this comparison that, measured on a currency adjusted ba- sis, Australia's labor costs in the metals processing industries are not significantly lower than those of the USA, Japan and Belgium, commensurate with those of the UK, France and Italy. b Where necessary, values have been converted from Australian dollars ($A) to U.S. dollars (US$) at the rate of $A1 .00 = US$1.16. 10 This report states further that labor costs in South American nations and Mex- ico are substantially less than in Aus- tralia. Although wage rates in Brazil are considerably higher than in the other nations, they remain well below Austra- lian equivalent rates. The low labor costs in Brazil are sig- nificant because Brazil is a competitor for iron ore, bauxite, and manganese in world markets. Equally significant are the wage rates in Mexico and Peru, two countries that compete with Australia in the lead-zinc market. Labor costs in the Republic of Korea, which is emerging as a steel producer, are also lower than in Australia. In December 1980, the monthly wage in Korea for mining, using 660 won = 1US$, was $476 for metal mining and $401 for iron and steel. Capital A survey of major manufacturing and mining investment projects published in December 1981 by the Department of Indus- try and Commerce of Australia lists 366 projects totaling $38 billion in the "committed" or "final feasibility" cat- egories. For the "committed" category any one or combination of the following factors apply: construction is proceed- ing, construction is expected to commence shortly, Company Boards approvals have been given, studies have established the economic viability of markets, or con- tracts have been secured and the decision to proceed is expected shortly. The "final feasibility" category". . .indicates that advanced studies to establish eco- nomic, technical and engineering viabil- ity are at present being undertaken and approval for construction to commence is likely to be authorized in the next 1-3 years." 7 The projects are overwhelmingly in the mineral area. The projects listed 'Australian Department of Industry and Commerce. Major Manufacturing and Min- ing Projects, December 1980 and 1981 Sur- veys. Australian Government Publishing Service, Canberra, December 1980 and December 1981 . in the 1980 and 1981 surveys were as fol- lows, in billion dollars: 1980 1981 Oil and gas 10.40 10.40 Coal. 10.80 12.80 Base metals including baux- ite, alumina, and aluminum 8.80 7.05 Iron ore 2.84 .85 Uranium 1.42 1.30 Coal and oil and gas account for the lion's share of the planned investments. Review of the projects, other than fossil fuels and nonmetallic minerals, shows that, except for investments in the ex- pansion of existing or building of new aluminum plants and a vanadium extraction plant, there are no "committed" projects designed to shift materially the Austra- lian exports of ores and concentrates (copper, iron, lead, tin, tungsten, and zinc) to the respective metals. The projects for iron ore and base metals have also been revised downwards. For manganese, the 1980 survey listed a project to cost about $420 million to expand the production of ferroalloy and related products at the Bell Bay plant in Tasmania from 148,000 tons in 1981 to 746,000 tons in 1990. But this project has been abandoned indefinitely. For base metals, the listed projects are for exploration, reserve assessment, and increased ore and concentrate production but not in new smelting facilities. In iron and steel, the steel capacity of the smelter at Port Kembla will be increased from 3.8 to 5.9 million tons. Other iron and steel planned expenditures are for improvements and modernization of facil- ities. The expansion of the Cockle Creek zinc smelter is at the preliminary stud- ies stage, which means construction is "...unlikely to commence for three or more years." Compared to the magnitude of the in- vestment foreseen above, the capital requirements for further processing of the base metal ores and ores of manganese, tin, tungsten, and nickel, 11 currently produced in Australia and ex- ported in nonprocessed form, will be modest because, as shown in table 2, export tonnages of ores and concentrates are not large except for bauxite, alumina, and iron ore. Examining the data in table 2, and for the moment ignoring bauxite, alumina, and iron ore, it would appear that in terms of the current situation, the industry may well consider adding the following estimated capacities in producing primary metals to absorb concentrates and other intermediate forms now exported: Copper 50,000 tons; lead 30,000; nickel (sul- fide ore) 25,000 to 30,000; tin 7,000; zinc 250,000. Based on the compilation of information and data assembled for the study of the Australian Trade Development Council, one may assume that for the purpose of rough estimation the following figures are the probable investment cost per annual ton of installed capacity in U.S. dollars: Copper smelter and/or refinery 5 ,000 Lead smelter and/or refinery 1,000 Zinc smelter and/or refinery 2,500-3,000 Nickel smelter (sulfide ore) 3,500-4,000 Tin smelter 1 ,500 Using these figures, the investment cost for additional smelting capacities is estimated in table 3. TABLE 2. - Exports of ores and concentrates from Australia (Thousand metric tons) 1979 1980 1981« Bauxite Alumina Copper ore and concentrate 1 Iron ore, pellets, etc Lead ore and concentrate 1 Manganese ore High-carbon f erromanganese Nickel matte 1 Tin ore and concentrate 1 .... Tungsten (scheelite and wolframite) Zinc ore and concentrate e Estimated. 1 Metal content. 7,000.0 6,534.0 45.0 78,332.0 38.8 1,157.0 32.0 25.0-30.0 6.4 5.5 189.8 7,500.0 6,994.0 47.0 79,753.0 28.2 1,328.0 23.0 25.0-30.0 7.4 6.3 276.4 7,500.0 6,509.0 50.0 71,148.0 31.0 900.0 18.0 25.0-30.0 7.3 6.6 260.0 TABLE 3. - Estimated investment costs for expansion of production of selected nonferrous metals Commodity Capacity, Investment, metric tons million dollars 50,000 250 30,000 30 25,000-30,000 10 15,000 10 250,000 600- -650 900- -950 Copper Lead Nickel (sulfide ore) Tin Zinc Total 12 Should domestic production of these ores increase, as is expected, the capi- tal requirements would also increase. Although the Australian Bureau of Mineral Resources has projected growths in pro- duction of a number of Australian min- erals through 1990 and 2000, it is not certain whether the increases will in fact be realized in the short run and thus lead to serious consideration of establishing additional processing capacity. Australia's exports of manganese ore represent roughly 800,000 to 850,000 tons of ferromanganese, which is roughly the projected expansion at Bell Bay ferroal- loy plant and the level of current pro- duction of the Republic of South Africa. With the competitive advantages that South Africa has in the ferroalloy indus- try, it would seem that expansion in pro- duction of ferromanganese at Bell Bay would be for the use of the domestic iron and steel industry. The growth trend in world demand for ferroalloys , which fol- lows iron and steel demand, is expected to be modest. Regarding iron ore, infor- mation indicates that the expansion plans of Australia's principal steel producer are to meet domestic needs and not to project Australia as a steel exporter, presumably because of the world steel situation. The costs of the nonfuel projects listed in the 1980 and 1981 surveys total $9.2 and $13.1 billion respectively, of which it is estimated that about $1 bil- lion will be for expansion of nonferrous metals, other than aluminum. Despite the magnitude of capital re- quirements and barring radical change in investment policy, the availability of capital should not be a constraint. Well over half of the capital requirements for mineral projects in Australia has tradi- tionally come from overseas sources as either loans or equity investment. Gen- erally, international lending institu- tions are interested in participating in Australian resource developments and are prepared to lend large sums of capital to major Australian projects. For example, a group of major banks recently made over $1 billion available to the North West Shelf gas project. Other project devel- opments are also currently benefiting from major foreign loans. The Australian capital market has also been willing to participate in the minerals sector devel- opment and will probably provide a grow- ing proportion of the funding needs for major mineral projects. The magnitude of funds coming into the country during the next few years is, however, a matter of concern to some Aus- tralian economists and companies in other sectors of the economy. Unless offset by a rapid increase in imports or other bal- ancing capital outflows, the new funds may well lead to an appreciation of the value of the Australian dollar and/or increase rates of inflation. The results could make some Australian minerals and goods less competitive on the world mar- ket. But this concern is not shared by Government officials, who believe that a strong exchange rate would help maintain a lower overall inflation rate, which would in turn enable Australian indus- tries to remain competitive. Long-term and stable policies on investment, taxa- tion, incentives such as assistance in creating the necessary framework in re- mote areas , and exchange rate stability are factors that investors have to take into account because of the long delay between investment and production in the mineral industry. Equally important are policies of the State governments , which have wide powers in the industries located within their States. In these respects, Australian policies present a favorable climate for investment for min- eral development , including the expansion of processing facilities. Foreign Equity Funding the development of all Austra- lian resources from internal sources has not been possible because of the limited size of Australia's capital markets and the large sums needed. Thus, the Govern- ment adopted a liberal approach in the late 1960 »s and early 1970 's toward for- eign investment, and as a result, sizable 13 foreign capital was injected in Austra- lia's mineral development. Tax policies during this period allowed accelerated writeoffs of development expenditures. The magnitude of foreign capital invested in Australian mineral development dur- ing 1960-80 is estimated at $9 to $12 billion. This permissive policy on foreign in- vestment was changed following the acces- sion to power by the Labor Party in December 1972. While the restrictive policy initiated in 1972 has not been fully followed by the present government, guidelines have been established for for- eign investments. The Foreign Investment Review Board reviews all aspects of for- eign investments and acts in an advisory capacity to the Australian Government. A new minerals' -processing project by foreign interests involving a total in- vestment of $5 million or more would be subject to consideration under the Government's policy on foreign invest- ment. For new mining projects, other than uranium, a minimum of 50% Australian participation, with Australian interests to have 50% of the voting rights on the board, is required. These requirements increase to 75% in the case of uranium mining. However, the guidelines are flexible enough to allow worthwhile projects to be developed if Australian equity is not available on fair and reasonable terms. The foreign investment guidelines are administered under administrative rather than statutory provision (as with foreign company takeovers). The guidelines are based on periodic Government policy announcements, with controls administered case by case. While pragmatic, such arrangements also create uncertainty. Owing to the division of power between the Federal and State governments, neither alone oversees all mineral activ- ities. The need for the coordination of the various State government laws, in order to form a coherent Federal-State policy, has been pointed out by organiza- tions such as the Australian Mining Industry Council. Such a coordination would be helpful to mining companies that face different State laws and discrepancies as to State policies , as occurs when a company mines deposits located in more than one State. With regard to approval procedures, the Federal Government is responsible for foreign investment policy, which aims to encourage partnership between foreign and Australian companies and for the guide- lines for foreign capital participation. The Federal Government also exercises control over the mineral industry through the approval or denial of mineral export contracts. Without an export contract, a company can market only within Australia. Federal control of exports is designed to ensure that domestic producers receive world prices and that no deals are made that would be harmful to other producers of the same commodity. The Federal Gov- ernment also participates in various international commodity groups (e.g., International Bauxite Association and the Association of Iron Ore Exporting Coun- tries), not with a view to fix prices but "...unilaterally with the objective of ensuring world marketing, and establish- ing world prices at equitable and re- munerative levels . " Mineral rights are held by the Federal Government, but the right to exploit min- erals is vested in the States. Hence, once the investment is approved by the Federal Government and an export applica- tion contract is approved, the investor would approach the State government to obtain an exploration right and mining lease, to negotiate royalty payments, which may be a flat rate or a percentage rate of the value, and to provide mining infrastructure including transportation, communication, and utilities. Admin- istration of health, safety, and environ- mental regulations and standards also falls within the State's responsibil- ities. In fact, a mining company's con- tacts during the mining operation are with the State authorities. Energy Australia has large resources of coal, lignite, oil shale, and uranium and is a net exporter of energy in the form of 14 coal. Coal is the dominant energy source. Domestic petroleum and natural gas provide 70% of oil and all of the natural gas consumed. Production of fos- sil fuels in 1979 and 1980 follows: 1979 1980 Coal: 1 Bituminous and subbituminous (salable) thousand tons.. 74,993 76,304 Brown coal do 32,597 32,895 Petroleum million barrels.. 159 140 Natural gas.... billion cubic feet.. 260 378 'Raw coal production was 93 million tons in 1979, 93.4 million tons in 1980, and 111 million tons in 1981. Australia's total primary energy requirements in 1980 were estimated at 75.2 million tons of oil equivalent (about 1,500,000 barrels oil equivalent per day) and are expected to increase to 108.5 million tons of oil equivalent (about 2,100,000 barrels per day) in 1990. The shares of coal, including brown coal and petroleum in the total 1980 primary energy requirements were 39% and 42% respectively and are expected to be 31% and 43% respectively in 1990. Natural gas may have accounted for 13% of primary energy requirements in 1980 and is expected to increase its share in the next decade. Australia's demonstrated (measured and indicated) recoverable re- serves of coal amount to about 29 billion tons, about 5% of the world total. Coal deposits are concentrated in the Bowen Basin in eastern Queensland and the Syd- ney Basin in New South Wales, both near industrial centers and ports, making Aus- tralia's coal easily accessible to domes- tic and foreign markets. With a 1980 output of 93.4 million tons of raw coal (76.3 million washed and salable), Australia ranks eighth among world producers. Australia also ranks as the second world coal exporter after the United States. Of the 1980 production, some 50 million tons was mined in New South Wales (37 million tons from under- ground mines) and 37 million tons in Queensland (33 million tons from opencast mines). In 1980, approximately 48% of Australian coal production was consumed domestically, and 75% of this consumption was for generating electricity. Coal provided about 70% of the energy input for electricity generation. Coal use for electricity generation will increase. Large reserves, favorable location, and new large modern mines augur well for the coal industry's future. Countervailing disadvantages are labor problems (fre- quent strikes), inadequate port and load- ing facilities in New South Wales, and high port charges. Australia's proved, probable, and pos- sible oil reserves have been estimated at a total of 299 million tons of oil equiv- alent (Mtoe) , with remaining undiscovered reserves estimated at between 132 and 529 Mtoe. Proved, probable, and possible reserves of natural gas amount to 1,000 Mtoe, and the Government's esti- mates of remaining undiscovered reserves range between 600 and 900 Mtoe. Oil will continue to be a major source of energy and is expected to provide about one-third of energy requirements in 2000. Because of anticipated increased consumption, self-sufficiency may decline from the present 70%, unless current exploration result in significant discoveries. Another bright aspect of Australian energy is natural gas reserves. Natural gas is expected to have the highest growth among energy sources in the 1980- 90 decade and to contribute to reducing Australia's dependency on oil. It is already a major contributor to the energy needs of Adelaide and Sydney (Cooper Basin), Melbourne (Gippsland Basin), Brisbane (Surat Basin of Queensland), 15 Perth (Dongara Basin) , and other popula- tion centers. Of major importance for future domestic consumption in Western Australia and export is the North West Shelf gas deposit. The project to develop this resource is expected to mar- ket 385 million cubic feet of gas per day for distribution within Western Australia beginning in 1984. Abundant as Australia's fuel resources are, a distinction must be made between resources and installed power capacity to meet the requirements for expanded proc- essing, particularly for alumina-aluminum conversion. It is apparent that power- plant construction has lagged behind requirements. Recent electrical power failures in New South Wales and Victoria gave some indication of how precariously demand and supply are balanced in these key industrial areas. With the creation of major new power-intensive industries such as aluminum smelting, demands on the power grid will mount substantially and delays in implementation of new gen- erating capacity could limit the rate at which some of the new processing indus- tries would come on stream. The Austra- lian Senate Report on the Development of Bauxite, Alumina, and Aluminum Indus- tries 8 states that the State governments will also have to face increasing criti- cism from various groups about the alleged low price some mineral-processing industries are paying for power and whether too much of the new generation capacity is being allocated to export- oriented undertakings rather than to the needs of the general public. In January 1982, a critical power shortage was reported in New South Wales. Information on energy charges for industrial users is not available, and it is not known whether in fact price concessions are given to industrial consumers. The sig- nificant fact is that needed powerplants, for example for the projected alumi- num smelters , have not been built or "Australian Senate Standing Committee on National Resources. The Development of Bauxite, Alumina and Aluminum Indus- tries. Australian Government Publishing Service, Canberra, 1981, pp. 20-21. completed. Escalating construction and equipment costs may result in high power costs when the plants start producing. At this time, it is moot to state whether Australia, in spite of vast fuel re- sources, is or will be a low-cost electricity producer. In this connection the Australian Senate Report states: The price paid for electricity by aluminum smelters has been the single most controversial energy question arising out of the whole development. The controversy has arisen out of the widespread belief that the community at large is subsidizing the provision of electricity either directly, in that the price is less than the cost of production, or indirectly in terms of income foregone in that various factors of production, but particu- larly coal and capital, are not being valued at their opportunity cost. These fears have been exacerbated by the confidentiality surrounding the terms of the contracts between Queensland and New South Wales authorities and the smelters in those states. The same report states that the Treas- ury is generally critical of rates of return on capital achieved by electricity authorities: ...the rates of return earned on the funds employed by electricity authorities are typically low com- pared with those achieved in the private sector. That, in turn, sug- gests that the authorities have been (and presumably remain) prepared to contemplate investments offering low- er rates of return than the average earned elsewhere in the economy. For this situation to change, and new investments by Government authorities to be subject to similar standards of financial evaluation as private sec- tor investments , it would be neces- sary for the authorities to employ real discount rates much closer to the 10 percent or so common in the private sector. 16 Discount rates closer to 10% would mean higher energy prices. Available informa- tion indicates that electricity costs to processors would be lower if the State Electricity Commissions made price concessions. Infrastructure Frequently the mineral industry must provide its own infrastructure, such as housing, roads, railways, and various community facilities and services , in re- mote areas where mines, mills, or smelt- ers are located. It is indeed the gen- eral policy that infrastructure should be provided by the mining company, and it has been estimated that infrastructure items have averaged close to 65% of the total capital outlay for Australian min- eral developments. Providing transporta- tion facilities from mine to ports or consumption points is the most onerous infrastructure cost. One area of concern is the adequacy of existing or proposed port handling facilities. Low-interest loans to mining companies for the devel- oping infrastructure, not otherwise available, have been suggested to assist the industry. Another is consideration of some kind of a reduction in royalty rate based on the amount of infrastruc- ture that a company must provide. Government borrowing to finance infra- structure projects associated with resource development is being considered, subject to special consideration by a Loan Council on which the Australian and State governments are represented. Such borrowing must meet the guidelines approved by the Loan Council. The guide- lines allow proposals that satisfy three conditions: The loans would be such as could not be reasonably accommodated by the State government or a quasi- government body, would provide services of kinds normally provided by government or public utility enterprises, and, finally would have special significance for regional development. Within these guidelines, the Loan Council in November 1978 approved borrowings to provide rail- ways and water facilities associated with the establishment of a bauxite-alumina project at Worsley, Western Australia, and special borrowings to provide for ad- ditional electrical generating capacity in Queensland, New South Wales, Victoria, and Tasmania. Transportation Much of Australia's mineral production must be transported a great distance from an inland processing plant to a shipping port or by coastal shipping to a process- ing plant such as the Cockle Creek smelt- er, Port Pirie refinery, or Risdon refinery. The movement of ores and con- centrates to principal destinations is shown in table 4. Information on land transportation costs and coastal shipping costs is not available, but these costs are assumed to be considerable for com- modities such as copper, lead, nickel, and zinc, with mines and mills at great distances from ports and smelters located at or near ports. For alumina and iron ore, the important nonfuel export com- modities, transportation distances over land are modest and therefore should not prove a competitive disadvantage for Australia in its desire to process these commodities prior to export. The coal industry also has the advantage of proximity to shipping ports. More significant in Australia's com- petitiveness is shipping cost to consumer destinations. Metals are shipped by lin- er ships, and bulk commodities, such as iron ore and bauxite, by bulk shipping. Australia is generally well served by reliable and frequent liner shipping ser- vices. Shipping costs in relation to the f.o.b. price of metal commodities are small, and metals can tolerate small freight differentials. In fact, shipping service may be as important as the freight rate. For bulk commodities, port facilities and the size of ship that can be accommodated are particularly impor- tant in reducing shipping costs. The adequacy of existing or proposed port handling facilities is an area of major concern, especially for coal exporters. There are frequent and costly delays in loading coal. Various projects are designed to overcome port shortcomings, but some port expansions have been delayed. 17 TABLE 4. - Mineral and metal transportation in Australia Commodity and location Destination Approximate dis- tance , km BAUXITE To Gladstone alumina refinery by coastal shipping; direct export as bauxite. 3,000 (sea transport) Gladstone alumina, Queensland. Export from Gladstone as alumina; shipment to Bell Bay smelter in Tas- mania by coastal shipping. 2,500 (sea transport) Gove Mine, Northern Territory. Conveyor belt to alumina plant; export as bauxite and alumina. 19 Jarrahdale mine, Western Australia. Railed to Kwinana alumina refinery for export; some alumina to Point Henry aluminum smelter. 51 Huntly and Del Park Mine, Western Australia. Bauxite from Huntly and Del Park mines by conveyors to Pinjarra alumina refinery. Insignificant COPPER Anode copper from Mount Isa Mine , Queens land . Concentrate from Co bar, New South Wales. Concentrate from Woodlawn, New South Wales. Concentrate from Teutonic Bore, Western Australia. Concentrate from Tennant Creek, Northern Territory. Railed to Townsville copper refinery, Queensland. Railed to Port Kembla smelter, New South Wales. do Trucked to Lenora and railed to Port Esperance 60 km for shipment by sea to Port Kembla smelter, New South Wales. To Mount Morgan smelter, Queensland... 960 600 NA NA 2,500 IRON ORE Mount Newman, Western Railed to Port Hedland, Western Aus- 427 Australia. tralia, for export. Mount Goldsworthy, Shay Mine site connected by 180-km railroad 180 Gap, Sunrise Hill, West- to Port Hedland. ern Australia. Mount Tom Price and Para- Mount Tom Price connected to Dampier 293 burdo, Western Australia. by 293-km rail link; Paraburdo con- nected to Tom Price by 100-km rail 397 link. Pannawonica (Robe River) , 169 Western Australia. LEAD Bullion from smelter in Mount Isa Mine, Queensland. NA Not available. Railed to Townsville, Queensland, for shipment to United Kingdom for refining. 960 18 TABLE 4. - Mineral and metal transportation in Australia — Continued Commodity and location Destination Approximate dis- tance , km LEAD — Continued Concentrate from Broken Hill, New South Wales. Do, Do, Concentrate from Woodlawn, New South Wales. By rail to Port Pirie smelter, South Australia. Cockle Creek smelter, New South Wales, To Risdon refinery in Tasmania by coastal shipping. To Cockle Creek, New South Wales, smelter by rail; concentrate also exported. 500 1,200 1,200 500 MANGANESE Groote Eylandt, Northern Territory. Export as ore; shipment to Bell Bay ferromanganese plant, Tasmania, by coastal shipping. Insignificant NICKEL Concentrate from Kambalda and other mines, Western Australia. Concentrate from Agnew Mine, Western Australia. Nickel matte from Kalgoor- lie, Western Australia. Ore from Greenvale Mine, Queensland. Concentrate from Mount Win- darra Mine, Western Australia. Kalgoorlie smelter, Western Australia. Transported by road to Leonora and then railed to Kalgoorlie, Western Australia. Railed to Kwinana refinery, Western Australia. Railed to Yabulu refinery, Queensland. Road hauled to Malcolm and then railed to Kalgoorlie. Insignificant 130 to 260 640 200 95 TIN Concentrate from Renison Bell, Mount Cleveland and other mines, Tasmania. Shipped as concentrate to smelter in Sydney by coastal shipping. NA ZINC Concentrate railed to Townsville, Queensland, for export; also by coastal shipping to Risdon refinery in Tasmania. 960 Broken Hill, New South Concentrate railed to Port Pirie, 500 Wales. South Australia; concentrate by coastal shipping to Risdon refinery in Tasmania; concentrate to Cockle Creek smelter, New South Wales. Woodlawn, New South Wales.. Railed to Cockle Creek smelter, New South Wales. 500 COAL Moura deposits, Queensland. Singleton, New South Wales. Railed to Rockhampton, Railed to Newcastle, 250 10 - 100 NA Not available. 19 Because of Australia's geographical location, it is well located to supply Japan, Korea, Taiwan, and the Southeast Asia countries. This results from the fact that, whereas prior to the increase in oil prices, the shipping distance was not the major factor in the cost, fuel costs may in some cases account now for 40% of the shipping costs. The best available analysis of the role of shipping in determining the world competitiveness of Australia's ore and metals is provided by the report of the Australian Trade Development Council, ^ whose summary statement follows: In liner shipping, the level of ship- ping service provided can be as crit- ical as the actual freight charged. Comparisons of liner freight rates between Australia's trades and com- peting countries to Australian ex- porters ' markets are extremely difficult. However, from the infor- mation available and evidence studied, it is apparent that the com- petitiveness of Australian shippers for the commodities examined, is not generally being disadvantaged in a significant way by differences in liner freight rates. The effect of increases in fuel costs on the competitiveness of exports particularly for the bulk minerals commodity trades is to constantly reinforce the trend to advantage sup- pliers that are closer to the major trading markets. For Australian ex- porters this may mean relatively higher costs of shipping to Western Europe and the USA compared with say South American suppliers but rela- tively lower costs of shipping to Japan and other regional markets as compared with other suppliers. Simi- lar considerations apply in respect of liner trades. This is encouraging a greater degree of regionalization of trade flows •3 — ■ — 3 Work cited in footnote 3. which should become increasingly apparent in generally benefiting Australian exporters in the Austra- lia/Japan and other Asian trades and in terms of tending to weaken Austra- lia's position relative to other sup- pliers closer to the Western Europe and U.S. markets. However, this needs to be qualified by the extent to which advantage can be taken of economies of scale for specific trades, the cost differentials be- tween trades relative to the landed cost of the goods shipped and day- to-day developments that may alter the balance of trading for shipping companies . Tariffs Tariffs of principal importing coun- tries can have restraining effects on efforts to increase the mineral process- ing of raw materials in countries that produce them for export. Generally, tariffs increase with the degree of proc- essing. For Australia, the tariff struc- tures of the European Community (EC) , Japan, and the United States are important, since these countries are the principal markets for Australian minerals and metals. Imports of ores and concentrates into these countries are free except for lead, zinc, and tungsten into the United States (table 5), and the tariff for metals ranges from zero to 9%. In view of this, the tariff level should not be a major disincentive for exporting metals instead of the ores and concentrates Australia currently exports. Other factors may be more important , depending on the commod- ity, as examined later under the commod- ity sections. However, for metals, Aus- tralia would have to consider whether because of Generalized System of Prefer- ences (GSP), a developing country enjoy- ing GSP from industrialized countries is a competitor to Australia in the export of a mineral or metal. For example, cop- per exports from Zambia or Zaire to the European Community and high-carbon ferro- manganese exports from certain countries to the United States would have tariff 20 advantages vis-a-vis Australian exports because the preferential rate of duty for the former countries is zero. The pref- erential tariff schedule would have a negative impact on copper exports from Australia because a number of countries that enjoy GSP are important copper sup- pliers to the Japanese and EC markets. This would not be the case for lead and zinc concentrates and metals, for which developing countries , with the exception of Mexico and Peru, are not large world suppliers. For bauxite-alumina and ores of iron, tin, and tungsten, which Aus- tralia currently exports, factors other than tariffs are more significant in a shift from concentrate to metals. Tariffs are important for semimanufac- tures such as bars , rods , and tubes , and other metal products because they are much higher — 8% to 12% and more. For ex- ample, the 6.6% (conventional) tariff in the EC on unwrought aluminum increases to 11.3% for bars, rods, etc. The 3.5% tariff for lead (other than bullion for refining) increases to 9.3% for bars, rods and tubes, foils, etc. In Japan, tariff rates increase from 1.6 c/lb, or about 4% in 1981 prices, for unwrought zinc to 8% for tubes and pipes and to 12% for plates and sheets. Furthermore, countries with markets for processed forms have established plants and tech- nological advantages for producing them. TABLE 5. - Tariff levels of European Community, Japan and the United States for selected commodities Commodity United States EC Japan COPPER 1.3% ad val. 1% 8.1% cif value 4.5/lb 1 A LUMINUM 3% ad val. 7.6% 6.6% 6.5% cif value 9% cif value IRON AND STEEL .9% ad val. 3.9% 5.7% - 6.7% 3.9% 5.7% LEAD 0.75/lb 3.5% ad val. 3.5% ad val. 3.5% ad val. 1.6/lb 1 6.9% cif value 2 MANGANESE 1.6% ad val. 4% 11.69% cif value NICKEL 24.48/lb 1 TIN TUNGSTEN 17/lb w 12.1% ad val. NA 5.7% ZINC 0.53/lb zn 1.8% ad val. 3.5% 1.6/lb zn 1 NA Not available. 2 For not more than $697.6 per ton. At the exchange rate of $100 = 230 yen. 21 ENVIRONMENTAL AND SOCIAL FACTORS The Environmental Protection Act was enacted by the Commonwealth Parliament in December 1974. Administrative proposals published in 1975 provide that an Envi- ronmental Impact Statement (EIS) may be required before new mining operations begin and that the responsible minister require that it be made available for public comment. According to information made available in 1980, more than 3,000 proposals for new mining operations that could have an environmental impact had been examined under the provision of the act. Fifty proposals required an EIS, and two inquiries were held, one related to the Fraser Island sand-mining and the other to the Ranger uranium mining site. While the Federal Government has a gen- eral responsibility for environmental protection, the development of standards and the enforcement of such standards remain the responsibility of each State. As a result, standards imposed can vary substantially from State to State. Ef- forts to coordinate standards among the States have not been fully successful. Environmental considerations have be- come important to mineral development in Australia and for the siting of mineral- processing plants. Preparation of EIS's for every new mineral venture causes delays which, as a result of inflation, may significantly increase cost and impact adversely on the profitability of the venture. A plant proposed for loca- tion near a major city would become a special target for environmental criti- cism. This possibility limits flexibil- ity for locating plants at or near prin- cipal ports (which all, except Darwin and Hobart, are major population centers) with a view to treating ores from a num- ber of mines which individually would not find it economical to establish a proc- essing plant. Land use and access to land are of greater concern for mineral exploration and mining than for processing, because processing land requirements are modest. However, large sections of the Australian "outback" comprise reserved areas or other aboriginal land holdings. Unlike most landholders elsewhere in the coun- try, aborigines on the reserves generally hold the mineral rights to their lands. Some portions of the reserves have been closed to exploration or mining develop- ment, while other areas are subject to stringent restrictions on any mining- related activities. According to some reports , over 40% of the Northern Terri- tory is now or soon may be covered by aboriginal land holdings. In late 1980, the South Australian government negoti- ated an arrangement with local aboriginal groups, setting aside a vast area in the northwest corner of that State as a reserve, with only certain sections being available for mineral exploration. While negotiations between mining companies and aboriginal leaders have often gone quite well, in some cases major mining projects have been delayed for months or years while talks continued. IMPLICATIONS OF INCREASED AUSTRALIAN MINERAL PROCESSING FOR THE UNITED STATES The Australian policy of maximum local processing of Its mineral raw materials is of particular significance to the United States from two viewpoints. First, this policy should result in increased U.S. capital investment in the Australian mineral industry. The capital requirements for expanding processing facilities cannot be met entirely from Australian sources. Foreign equity par- ticipation is necessary and envisaged. Judging by the record of the past dec- ade, U.S. sources will have a share in providing the foreign capital needs. U.S. sources would also have a share in supplying such capital goods and technol- ogy as are needed for the expansion projects and which are not currently available in the Australian market. The other aspect is the impact of the policy on the U.S. supply of minerals currently imported from Australia. Of these, bauxite-alumina and rutile are particularly important. 22 U.S. imports of alumina (excluding hydroxide) during 1978-81 averaged 4 mil- lion tons annually, with Australia providing about three-fourths of the total imports. Australia has plans for increasing aluminum metal production to 2.7 million tons, which would require 5.4 million tons of alumina; 7.25 million tons of alumina was produced in 1980. However, simultaneous with the aluminum expansion plan, alumina production is also expected to increase to 15 million tons by 1990. At this level, additional amounts of alumina over that required for the projected aluminum production would be 9.6 million tons. This alumina would be available for export. Therefore, increased aluminum production by Austra- lia should not deter supply of alumina to the United States, especially since U.S. companies account for about 70% of alumi- na production in Australia. However, aluminum produced in the United States would encounter competition from Austra- lian imports because 90% of the Austra- lian metal production is expected to be exported during 1990-2000. During 1978-81, U.S. imports of natural and synthetic rutile from Australia aver- aged about 80% of U.S. rutile imports. Sierra Leone and the Republic of South Africa are other U.S. suppliers, but they have limited production capacity. Production of titanium metal in Austra- lia, currently planned at 5,000 metric tons annually, would not adversely affect the Australian supply of rutile because production of rutile concentrate, at 312,000 tons in 1980, exceeds consider- ably the estimated 10,000 tons needed for production of 5,000 tons of titanium. Doubling or trebling the titanium sponge production would still leave considerable surplus for export. A more important factor in the rutile picture is environ- mental restsraints production. on mineral sand For nonferrous metals other than aluminum — copper, lead, tin, and zinc — the Australian policy of maximum domestic processing would not adversely impact U.S. metallurgical industry and mineral supply. U.S. import needs for these commodities are substantially as metals rather than concentrates. Furthermore, the United States has alternate sources for the modest tonnages of ores and con- centrates of these metals that it imports for processing. Among the ferrous metals, if Australia switches from exporting manganese ore to exporting ferromanganese, it would adversely impact the production of ferro- alloys in the United States , aggravating a situation that has resulted primarily from the South African ferromanganese exports. It is expected that Australia will increase its exports of nickel. In the U.S. market, it would have to dis- place nickel from Canada. This may prove advantageous to the United States, as it provides an additional source of supply. As discussed later, Australia may not find it economically advantageous to opt for processing its tungsten to ammonium paratungstate for which the United States has a well-established position. Developments in the Australian iron ore and iron and steel industry would not be of immediate concern to the United States. U.S. imports of Australian iron ore are insignificant. Australia will remain a substantial world exporter of iron ore regardless of the expansion of the domestic steel industry, which is expected to be modest because of excess world capacity. COMMODITY REVIEWS BAUXITE, ALUMINA AND ALUMINUM Commodity Profile Australia has abundant and readily ac- cessible bauxite resources. According to the Australian Bureau of Mineral Re- sources, identified resources total about 6,200 million tons. Of this, 2,700 mil- lion tons are classified as demonstrated economic resources and occur in the Weipa area of Cape York Peninsula, in the 23 Darling Range and Mitchell Plateau, and in the Gove Peninsula. Inferred economic resources in the Weipa area and in the Darling Range and the Kimberley dis- trict would add 1,700 million tons. Subeconomic resources total an addi- tional 1,700 million tons. In some cases, inferred reserves could be two or three times more than those published. Australia is also the world's leading bauxite producer, accounting for about 31% of world production in 1980. By some Australian projections, production could double to 55 million tons by 1990 and almost triple to 76 million tons by 2000. The increased production of bauxite will be exported unprocessed, or upgraded to alumina for domestic refining into alumi- num or export. According to these pro- jections, about 20% of the bauxite, over 60% of the alumina, and 90% of the aluminum are expected to be exported during 1990-2000. In 1980, approximately 20 million tons of bauxite was converted to 7.25 million tons of alumina, which corresponded to 22% of the world's output. Alumina production is projected to increase to 15 million tons in 1990 and 21 million tons in 2000. Although with 303,500 tons of aluminum production in 1980, Australia accounted for 2% of the world's total, a dramatic increase is projected to 1.0 million tons in the 1980' s, 2.7 mil- lion tons in 1990, and up to 4 million tons by 2000. The production of bauxite, alumina, and aluminum in Australia is controlled by large multinational companies. The five major participants and the respective shares of the participating companies in percent are shown in table 6. TABLE 6. - Principal Australian aluminum companies Company and location Ownership Alcan Aluminium Limited (Canada) Public Aluminum Company of America Western Mining Corp. Holdings, Ltd BH South Ltd North Broken Hill , Ltd , Other , Kaiser Aluminum & Chemical Corp. Conzinc Riot into of Australia Ltd , Public , Swiss Aluminium Australia Pty., Ltd , Gove Aluminium Ltd. (51% GSR Ltd., 13% Peko- Wallsend Ltd. , 36% Australian insurance companies and banks). Comalco Ltd , Kaiser Alumina Australia Corp , Alcan Queensland Pty . , Ltd , Aluminium Pechiny Australia Pty., Ltd , Percent Alcan Australia (Kurri Kurri smelter, New South Wales). Alcoa of Australia Ltd. (Jarrahdale, Del Park and Huntly Mines, Pinjarra and Kwinana alumina plants, West- ern Australia, Point Henry smelter, Victoria). Comalco Ltd. (Weipa Mine, Queensland and Bell Bay smelter, Tasmania. Gove Joint Venture (Gove Mine and alumina plant , Northern Territory). Queensland Alumina Ltd. (Gladstone refinery). 70.0 30.0 51.0 20.0 13.1 12.0 3.9 45.0 45.0 10.0 70.0 30.0 30.3 28.3 21.4 20.0 24 Analysis of Pertinent Factors Of all Australian mineral commodities, bauxite is most favored for achieving the Australian Government's goal of maximum processing. Much of the large bauxite reserves are in deposits close to the sea. Large coal and lignite deposits are available for power generation. The very energy intensive nature of aluminum production and current and anticipated high energy costs limit future expansion to countries with relatively low energy costs. High energy costs and environ- mental restraints may also cause capacity shutdowns in some industrialized coun- tries (e.g., Japan). These favorable factors are offset by high labor costs in Australia and its distance from consuming countries. Overriding all the above factors is the anticipated increase in demand for aluminum metal, which is the principal factor determining the future level of world bauxite-alumina produc- tion. Forecasts published by the U.S. Bureau of Mines in 1980 10 indicate a probable world demand for primary alumi- num of 31 million tons in 1990 and 50 million tons in 2000, compared with installed capacity of about 20 million tons in 1980. These estimates indicate a gap of 11 million tons over the next decade. It would be reasonable to assume that Australia would provide a portion of the required new capacity and possibly as much as 2.7 million tons of the gap fore- cast for 1990, if other factors are favorable. Bauxite-Alumina The cost of transporting Australian bauxite to Europe and the United States, where it would meet competition from bauxite exported by Guinea and Jamaica, is the most important factor favoring refining bauxite to alumina in Australia before export. As already mentioned, transport of bulk commodities is sensi- tive to fuel cost and distance. With an alumina-bauxite weight ratio of 1 to 2, the transportation cost advantage of shipping alumina to distant markets is evident. Furthermore, alumina is priced substantially higher than bauxite: Aver- age value of crude and dried bauxite delivered to U.S. ports in 1980 was $32 per ton, whereas that of alumina was $196 per ton. 11 Energy consumption for the conversion of bauxite to alumina, including crushing and grinding and energy content of lime and sodium hydrox- ide used in digestion, is modest and estimated at 42 x 10 6 Btu per ton of alumina produced. Bauxite refining is not labor intensive and therefore the high Australian wage scale is not prohib- itive for alumina refining. The economic advantages of this processing are clear from the dramatic growth of alumina production in Australia from 2.7 million tons in 1971 to 7.25 million tons in 1980. By 1983, 1 million tons of new capacity can be expected from the new refinery of Worsley Alumina Pty., Ltd., and 360,000 tons from the expansion of the Gladstone plant. Alumina-Aluminum Reduction of alumina to aluminum is highly energy intensive. Energy require- ments per ton of aluminum for electroly- sis of alumina to aluminum, including energy needs of cryolite, the fluxes, carbon anode, and carbon cathode manu- fature, are estimated at 196.5 x 10 6 Btu, considerably higher than energy require- ments for other basic metal industries such as steel, copper, lead, and zinc. Energy accounts for one-third of the production cost of aluminum ingot. Com- pared with energy costs, labor trans- portation costs are modest because alumi- num refining is not labor intensive and ocean freight is a fraction of aluminum price, which was 66 to 76 cents per pound in 1980, as listed by U.S. producers. Information on the price of electricity for aluminum smelters is incomplete. In a paper presented in October 1980 to the International Aluminum Congress, J. A. ^Kurtz, H. F., and L. Baumgardner. Aluminum. Ch. in Mineral Facts and Prob- lems 1980 Edition. BuMines Bull. 671, 1981, pp. 9-34. '^Baumgardner, L. H., and R. A. Hough. Bauxite and Alumina. Ch. in Minerals Yearbook 1980, v. 1, 1981, p. 118. 25 Cook of Comalco Ltd. stated 12 that it is possible to produce electricity from Aus- tralian coal for 1.25 to 1.6 Australian cents (1.42 to 1.83 U.S. cents) per kilowatt-hour (kwhr). One does not know if these rates reflect actual production costs, what value is ascribed to the coal used, and what are the profit margins. There are, however, a number of indica- tions that electricity is cheaper in Aus- tralia than in many industrialized coun- tries. It has been stated that electricity prices for residential and commercial use are lower than in other member countries of the Organization for Economic Co-operation and Development. The average price of electricity in October 1981 in the United States for industrial consumers, but not for alumi- num smelters, was 4.4 cents per kwhr. In Japan the average price in 1979, not dif- ferentiated by consumers, was 5.9 cents per kwhr. For the Federal Republic of Germany the gross production value of electricity is about 9 cents per kwhr. The price of electricity in Australia is set by the Electricity Authorities of the States, which are knowledgeable about the industry's requirements for compet- itively priced and stable electricity supplies. Lower costs to smelters are justified because of a number of techni- cal factors. The smelters constitute a desirable form of a continuous base load with the highest thermal efficiency. Transmission and operating costs and transmission losses are also lower for electricity supplied to smelters. One may assume that, because of the lower costs, negotiated prices for aluminum smelters are lower than for other con- sumers. According to the Australian Senate Report, 13 the authorities' unwill- ingness to provide information on actual prices has caused public criticism. The public has been concerned about the pos- sibility of smelters being charged rates lower than those of other consumers, thereby giving the smelters a subsidy. -1 O 1 ^Cook, J. A. Australia's Changing Role in the World Aluminum Industry. Proc. Internat. Aluminum Cong., Madrid, Oct. 1, 1980, pp. X(I)-X(VI). 13 Work cited in footnote 8. The supply contracts make provisions to escalate the price in line with inflation. Provided inflation in Aus- tralia is not too much out of line with that in other industrialized countries, electricity costs to the smelters should remain competitive. Besides inflation, another factor that would increase future electricity costs is the capital cost of the additional powerplants that need to be installed and phased in over the next decade. For New South Wales four new powerplants with a total capacity of 1,700 megawatts are planned to be commissioned in 1981-87. Queensland and Victoria will also in- crease installed capacity. The escala- tion in the cost of such plants would change electricity rates , which at present reflect historical cost of supply. Reviewing these factors, it is reason- able to state that, at least for the next decade, Australia would have a compara- tive advantage for producing aluminum. COPPER Commodity Profile During the past decade, Australian cop- per mine production has remained remark- ably steady, fluctuating only slightly from an average of about 220,000 tons of contained metal annually. The industry is currently dominated by one mine, Mount Isa in Queensland, which accounts for 70% of the total mine production of copper and 85% of the country's copper refining capacity. 14 Other important producers include Mount Lyell in Tasmania, Mount Gunson in South Australia, Cobar and Woodlawn in New South Wales, Teutonic Bore in Western Australia, and Tennant Creek in the Northern Territory. Copper is recovered by leaching broken ore at the Gunpowder Mine in Queensland. Copper is also produced as a byproduct from the Rosebery lead-zinc mine in Tasmania, operated by E. Z. Industries Ltd., as a byproduct of tin mining by Cleveland Tin at Luina, Northwest Tasmania, and as a ' 4 Work cited in footnote 8. 26 byproduct of nickel mining by Western Mining Corp., Western Australia. Copper ore is processed to anode at Mount Isa, smelted to blister at Mount Morgan and at Port Kembla, and refined at Port Kembla and Townsville. Between 75% and 80% of all copper production is processed domestically into blister or refined copper. About 60% of the metal- lic copper produced is consumed domesti- cally; the remainder is exported. Prin- cipal export markets include Japan, the United Kingdom, other EC countries, the United States, and New Zealand. Significant data on mine and metal production for 1980 are summarized in tables 7 and 8. The Cobar Mine has an expansion project underway that will increase its ore production capacity (currently 8,000 tons per day) by 50%. A new zinc-copper mine at Teutonic Bore, 80 km southeast of Leinster, began production in mid-1981 at a rate of 10,000 tons per year (copper content). Australia has a number of deposits that may be mined. These include Golden Grove Prospect south of Yalgoo in Western Australia with reserves of 15 million tons grading 3.4% copper, with a cutoff grade of 1%, the Olympic Dam deposit in South Australia, the Benambra deposit in Victoria, and the Goonumbla deposit in New South Wales. The copper-uranium-gold prospect at Roxby Downs in South Australia is con- sidered the most promising copper pros- pect in Australia. A feasibility study is underway and is expected to be com- pleted by 1983. The extent of the ore body is still unknown, but some informal estimates indicate reserves of at least 500 million tons with 1.5% to 2% copper, 0.05% uranium oxide, and 0.5 gram of gold per ton. If the project proves to be feasible and the companies decide to move ahead, Roxby Downs could begin produc- ing by the end of this decade at a rate of about 160,000 tons of copper annually. TABLE 7. - Australian copper production by company, 1980 (Metric tons of metal content) Company Mines : Mount Isa Mines Ltd , Mount Morgan Ltd..... , Cobar Mines Pty . , Ltd , Mount Lyell Mining & Railway »Co. , Ltd Peko-Wallsend Ltd , Smelters: Mount Isa Mines Ltd , Mo • Mt Morgan Ltd... Electrolytic Refining and Smelting Co. of Australia Ltd. at Port Kembla (smelting concentrate from Cobar and Wo od lawn Mines ) Refineries: Mount Isa Mines Ltd. at Townsville Electrolytic Refining and Smelting Co. of Australia Ltd. using blister produced from Cobar ore Quantity 158,732 3,302 6,593 19,835 11,974 148,260 6,393 18,754 132,091 12,737 27 o 00 ON «0 S-i 4-1 CO 3 CO 00 w 4-1 CO 43 CU G CO 43 CJ T> Pi •H 1 1 ••> 4J tH rH S 1 CU CJ rH 4J •0 43 «0 43 -0 d CO «H CO CU O !* G o 4-1 CU •0 •H CD *0 4-1 O 4J pi cu £ 4J o 4J OH d a * d o- cu o Pi u M d cu o "0 "O >s M 4JH •H CO Cu CU CU 00 Cu 43 O CU h • CU CO 44 CO TJ 1 •H 4J M rH >s rH U-l 00 CO cu • CO u CJ 4-1 Cu tH O 4-1 CO O d 4-» T3 CU M CU •H M-4 d iH 4J •H Pi CU •H ►* CO CU CU Cu 4J O cu CO IH M-l 1 u O 43 CU d -o M 4-> CO Cu Cu u •H CU O CO •H 4J CO ■JJB 4-1 l-l HftO CO g •0 P O Cu 4-» P) d o O CJ Cu^. . 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This important segment of the industry is fully integrated through production of electrolytic refined copper. Only about 20% of the Australian copper ore produc- tion is not processed to the blister stage but is exported as concentrate. This share of the ore production comes from a number of mines, and production from each operation is not sufficiently large to justify establishment of a smelter-refinery complex. While the cur- rent pattern of ore production would not make the establishment of additional smelters cost effective, the development of the Roxby Downs deposit would alter the picture. The reserves of this mine and the envisaged scale of production would justify an integrated operation. Any large investment in a new copper mine-smelter complex, as for Roxby Downs, must necessarily take into account antic- ipated increases in world demand and increase in capacity resulting from proj- ects already initiated. The Bureau's forecast of U.S. and rest-of -world demand for primary copper for 1990 is 12.4 mil- lion metric tons, compared with about 8 million tons of smelter production expected in 1980. This would leave a gap of 4.4 million tons. However, there is evidence of a certain hesitation by com- panies to initiate new projects. For example, Exxon Minerals Chile, Inc., has temporarily delayed the full expansion of the Disputada Mine in Chile, and progress on development of the Colorado deposit in Panama has been slow. The forecast may be on the high side, and an annual growth rate of 1% or 2% in the next decade may be more realistic. Based on a world demand of 8.1 million tons of primary copper in 1978 and a 2% annual growth rate, demand in 1990 would be about 10.3 million tons. With this forecast the gap would be 2.3 million tons. Based on information presented in January 1982, D copper projects under '^Work cited in footnote 3. construction or for which development programs have been prepared may add about 1.3 to 1.5 million tons of copper capac- ity. Based on a 2% rate of growth in demand, the additional capacity under construction and planned does not seem excessive, and the demand gap could be filled by ongoing projects including Roxby Downs, other factors being equal. IRON ORE Commodity Profile In 1980 Australia was the world's lead- ing iron ore exporter, and in 1981 it followed Brazil as an exporter. Austra- lia ranks third after the Soviet Union and Brazil in production. In 1980, Aus- tralia accounted for 11% of world mine production and 23% of world trade of iron ore. Of 95.5 million tons of ore produc- tion in 1980, Western Australia accounted for about 90 million tons (95% of total production) . Principal iron ore produc- ers and their respective production in 1980 and some pertinent information are given in table 9. Three companies oper- ating four mines in Northwestern Austra- lia are the principal producers. The Bureau of Mineral Resources of Austra- lia^ 6 assesses ore reserves to be 18 bil- lion tons (revised to 22 billion tons) of readily usable low-phosphorus ore with another 17 billion tons of high- phosphorus ores in the identified para- marginal resources category. In 1938, a ban was imposed on the ex- port of iron ore because reserves, at about 250 million tons, were considered inadequate for domestic requirements. However, exploration in the early 1960 's established the Hamersley region of Western Australia as a major iron ore province. Starting in 1966, production increased substantially. Prior to this year, iron ore for the domestic steel industry was mined in the Middleback Ranges in South Australia. 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Cu Ou CO rH Cfl W 4-1 4-1 O T3 w 0) 01 4) 4-1 rH rH >% 4-1 cn rH rH Cfl -H 1 Cm U Ph X CO P H CM r> r m 30 Analysis of Pertinent Factors Australia's vast iron ore and coal resources occur a continent apart; i.e., the iron is in the northwestern corner of Western Australia, and the coal is in the southeastern area of New South Wales very close to the eastern shore. The iron and steel plants, with the exception of Kwinana and Wundowie in Western Austra- lia, are also located on the southeastern coast at Newcastle and Port Kembla in New South Wales and at Whyalla in South Aus- tralia. This geographical situation would be an inhibiting factor in any plan to take advantage of the two resources and make Australia an important world steel producer for the export market. Iron ore for most of Australia's steel production is obtained from Mount Newman in Western Australia. Another factor is the current world iron and steel situation (excess capac- ity) and the anticipated trend in demand growth. For the world, other than the United States , demand for iron and steel in 1990 is estimated at 835 million tons, indicating a 2.85% average annual growth rate. For the United States (a mature economy), the growth rate in demand is more modest — about 1.4% — and the probable 1990 demand is estimated at approximately 145 million tons. Compared with total world demand in 1990 of 980 million tons, the 1980 production and capacity were 708 million and 955 million tons, respectively. With these estimates, thp gap to be filled by 1990 would be 25 mil- lion tons. For the year 2000 probable world demand would be about 1,225 million tons, leaving a gap of 270 million tons. In the next decade or so, new steel plants will be built in such emerging industralized countries as Mexico, Bra- zil, and the Republic of Korea and in countries with abundant energy sources such as Venezuela, Algeria, and some of the Persian Gulf countries. The Tubarao steel plant in Brazil is planned for 3 million tons. Between 1981 and 1990 steelmaking capacity in China, India, the Republic of Korea, Taiwan, Indonesia, and Malaysia may increase by about 37 million tons (China 22, India 9, Korea 3, Malay- sia 1, Indonesia 1, and Taiwan 1). These countries enjoy the advantage of low labor cost; in addition, China and India have good raw materials, and Indonesia and F^laysia have abundant natural gas. Taiwan's and Korea's competitive advan- tages lie in low cost and efficient labor and managerial skill. Much of the cur- rent installed capacity is in the United States, Western Europe, Japan, Canada, and Eastern Europe. For the free market economies , one may assume that the investment is substantially amortized and that in spite of current difficulties, there will not be a substantial capacity reduction. Capacity reduction in the EC is part of a rationalization effort to make the industry more competitive. Also plant modernization and/or expansion would be less expensive than building a greenfield site plant. In establishing a steel plant, the existence of a domestic market is con- sidered a more favorable factor than a drive for export, which often proves unreliable. This would suggest that the expansion of the steel capacity in Aus- tralia would be related to the domestic demand. The Australian crude steel capacity was 9.4 million tons in 1980 and fell to 9.1 million tons in 1981. Broken Hill Proprietary forecasts a 3.3% in- crease in Australian steel demand to 1985. Assuming this rate of growth and a current demand of about 7.5 million tons in 1980, the demand in 1990 would be about 10.4 million tons, which is about 1 million tons above the existing capac- ity. It would seem, therefore, that in the short term, Australia would have a domestic market for an additional 1 mil- lion tons of steel capacity. 31 LEAD, ZINC, AND SILVER Commodity Profile Metal mining in Australia started with lead-zinc-silver ores. Since 1841, when lead-silver ores were first mined in Aus- tralia, the industry has been an impor- tant segment of Australian metal mining. In 1980, Australia was the third largest world mine producer of lead and zinc and fourth in silver. Its share of world mine output for these metals in 1980 was 11.5% for lead and about 9% each for silver and zinc. The bulk of the lead ore and much of the zinc production are processed to con- centrates and metals. The world's larg- est smelter of lead ore is at Port Pirie, South Australia. Risdon in Tasmania is one of the world's three largest zinc refineries, excluding any in the Soviet Union. Australians consume only a small share of the production — 68,200 tons in 1980 for lead, of which 49% was from secondary sources, and 100,450 tons in 1980 for zinc. Thus, Australia is a large world supplier for these metals. The principal destination for lead bul- lion, for which Australia is the world's largest exporter, is the United Kingdom. Refined lead and zinc are exported principally to a number of Asian coun- tries, as well as New Zealand, the United Kingdom, and the United States. Whereas lead exported as a concentrate is rela- tively small (58,450 tons with lead con- tent of 12,850 tons in 1980), Australia exports a substantial share of its mine production of zinc as concentrate (524,270 tons in 1980 with a zinc con- tent of 260,970 tons), with Japan as the largest market (309,370 tons in 1980). Mount Isa in Queensland, Broken Hill and Woodlawn in New South Wales, and Read-Rosebery in Tasmania are the Principal producing lead-zinc mines in Australia (table 10). Mount Isa and Broken Hill acount for 90% of Australian mine lead and about 70% of mine zinc production. With the exception of Victoria, all Australian States and the Northern Ter- ritory have lead-zinc mines in develop- ment or promising deposits. Besides the Mount Isa Mine in Queensland, there are three other producing mines as follows : Aberfoyle, Que River, Tasmania. Teutonic Bore, West- ern Australia. Elura, New South Wales . To treat annually 150,000 to 200,000 tons of high-grade, lead-silver-zinc ore per year. Reserves 3 million tons. Anticipated to treat 300,000 tons of zinc-copper ore annually. Ultimate capacity to treat 1.1 million tons of zinc-lead ore annually. Production start 1981 1981 1982 Sorby Hills in Western Australia is an attractive deposit that may be ultimately developed into a producing mine. The Sorby Hills deposit reportedly has 14 million tons of ore reserves contain- ing 5.4% lead, 0.6% zinc, and 60 grams of silver per ton. In addition, Mount Isa is boosting ore production by 20%, to be achieved in 1982-83. Broken Hill Associated Smelters Pty., Ltd. (BHAS), at Port Pirie, South Austra- lia, with a production capacity of 230,000 tons per year, is the sole pro- ducer of refined lead. The Mount Isa smelter, located at the mine, smelts most of the mine concentrate to bullion. Primary refined zinc is produced in three plants: Risdon of the EZ Industries Ltd. in Tasmania with a rated annual capacity of 210,000 tons, Cockle Creek of Sulphide Corporation Ltd. with a rated capacity of 75,000 tons of zinc in New South Wales, and Port Pirie, South Australia, which has an electrolytic zinc refinery with a rated capacity of 45,000 tons per year. 32 TABLE 10. - Lead-zinc mines in Australia Mine and location 1980 mine production, tons of metal content Ownership Comments Mount Isa, Queensland Lead Zinc Silver Broken Hill, New South Wales North Broken Hill: Lead Zinc Silver Broken Hill A: Lead Zinc Silver Broken Hill B: Lead Zinc Silver Total 2 : Lead Zinc Silver Woodlawn, New South Wales: Lead Zinc Silver Cobar, New South Wales: Lead , Zinc , Read/Rosebery, Tasmania: Lead , Silver , Zinc , 141,300 113,000 403 50,150 40,600 85 75,800 75,750 66 71,850 124,400 60 209,600 250,350 242 27,400 65,700 54 3,600 11,300 15,500 53 57,270 ) Mount Isa Mines Ltd. , a subsid- ary of M.I.M Holding Ltd. North Broken Hill Ltd. Zinc Corp. Ltd. 1 New Broken Hill Consolidated Ltd. 1 A consortium of Conzinc Riotinto of Australia, St. Joe Minerals Corp. , and - Phelps Dodge. Cobar Mines Pty., Ltd. E. Z. Industries Ltd. Lead concentrate is smelted at mine to bullion, which is sent to Townsville by rail and then exported to the Brittania Lead Company Ltd. (an M.I.M. subsidiary) for refining. Zinc concentrates are railed to Townsville for export and occasionally to the Risdon refinery of E. Z. Industries Ltd. in Tasmania. Lead concentrates from the three Broken Hill mines are shipped principally to the lead smelter-refinery at Port Pirie, South Australia, and some to Cockle Creek smelter. Zinc concentrates are shipped to the zinc re- finery at Risdon. 1 Owned by Australian Mining and 2 Includes production by Minerals Woodlawn was inaugurated in December 1978. When oper- ating at capacity, the mill will produce 120,000 tons of zinc concentrate, 40,000 tons of lead concentrate, and 35,000 tons of copper concentrate annually. The concentrates will be mostly exported by participating companies . Concentrates shipped to Cockle Creek and some lead concentrates exported. All lead and copper-lead con- centrates exported. Zinc concentrates probably shipped to the Risdon refinery. Smelting Ltd. Mining and Metallurgy Ltd. of Adelaide, South Australia. 33 BHAS accounts for three quarters of Australian refined silver production, as a byproduct of the company's lead smelt- ing and refining operations. The Elec- trolytic Refining and Smelting Co. of Australia Ltd. is the other major silver producer, recovering the metal from cop- per concentrates from Mount Lyell, Cobar, and other sources treated at the Port Kembla refinery in New South Wales. Sil- ver is also recovered as a byproduct of zinc refining at Risdon. The Perth Mint produces silver from gold buillion from Western Australian mines and buillion scrap of overseas origin. Silver is also refined, mainly from scrap material, by Johnson Matthey Pty., Ltd., in Sydney, Englehard Industries Pty., Ltd., in Mel- bourne, and Harringtons Pty., Ltd., in Sydney . Analysis of Pertinent Factors The Australian Bureau of Mineral Re- sources projects growth in lead produc- tion, in metal content of ore, to 525,000 tons in 1990 and 600,000 tons in 2000. The corresponding figures for zinc are 650,000 and 735,000 tons respectively. The forecast for lead would involve the growth of lead-smelting capacity by about 100,000 tons and con- siderably more for zinc refining, e.g., about 325,000 tons. In considering such an expansion, two factors need to be examined: (1) anticipated world demand by 1990 and (2) competition from other producers that have low labor cost and/or enjoy the Generalized Scheme of Prefer- ences (GSP). The Bureau of Mines fore- cast of probable world demand for primary lead in 1990 is 4.4 million tons, almost 1 million tons more than the maximum production of 3.4 million tons during the 1970-80 decade. Actually, during this decade, world smelter production ranged from 2.9 million tons to 3.5 million tons, with the variance attributed to the cyclical nature of the industry. A con- sistent growth trend in production is not discerned. In view of this, it is quite likely that the probable 1990 demand is high. Assuming a world primary demand of 3.2 million tons in 1978, the demand in 1990 with a 1% growth rate would be 3.6 million tons compared with primary smelter capacity of about 4.1 million tons in 1974. Clearly some of this capacity would require replacement because of either antiquated technology or environmental restraints. Assuming that 10% of the present capacity would need to be replaced, the world lead de- mand for 1990 would necessitate additions of 400,000 tons of capacity. Since only a few small primary lead smelters are being built, Australia may well have a significant share of the anticipated addition. Australia, with its excellent resources of high-grade lead with by- product values, with its facilities reasonably well located in terms of vicinity to ports, and with considerable experience in the industry, is favorably situated to expand mine and smelter production. Japan and Belgium have been the major importers of Australian lead concentrate in recent years, and the United Kingdom, the Netherlands, and the Federal Republic of Germany are Australia's largest customers for lead bullion. The United Kingdom, the United States, and India are the major importers of Australian lead. In the European Communities market, Aus- tralia will compete with Canada for sales of lead metal. Since neither country enjoys GSP tariff advantages, other things being equal, Australia should not have difficulty in maintaining its share of the EC market. For markets in India and South Asia, Australia has a geo- graphic advantage. Since developing countries, by and large, are not lead producers, Australia would not be at a competitive disadvantage because of the low labor costs and GSP advantages these countries would have. Australia's competitive situation in expanding mine output of zinc smelting and refining facilities may not be as favorable as for lead. Probable 1990 world demand for primary zinc is esti- mated by the Bureau of Mines at 8.1 mil- lion tons, compared with 1978 primary metal production capacity of 7.7 million tons. There have been significant addi- tions to zinc smelting and refining 34 capacity. In Peru, the Cajamarquilla refinery with 100,000 tons of refined zinc capacity started operation in 1981. In Mexico the San Luis Potosi zinc re- finery has been completed with an annual capacity of 113,000 tons of refined zinc. Industrial Minera Mexico plans to increase mine production by 33,000 tons of zinc per year by 1983. Arvik Mines Ltd. in Canada plans to produce 100,000 tons per year of zinc from the Polaris Mine. The Energoinvest and Trepca Mines in Yugoslavia expanded pro- duction of lead and zinc ore during 1978-79. Thailand plans to produce about 60,000 tons of zinc in concentrates and to smelt it within the country. Offsetting these additions have been clo- sures of some smelters because of envi- ronmental restraints, antiquated technol- ogy, high energy and labor costs, and low metal prices. Nonetheless, the antici- pated slower growth in consumption of about 2% for primary zinc may not provide the market for the planned expansion in Australian zinc production. Australia's markets for zinc concen- trate are Japan, the Netherlands, and the United Kingdom. Of these, Japan is the largest. Should there be a shift in Japan's imports from zinc concentrates to zinc metal because of environmental restraints, the market outlook for Aus- tralian zinc would improve. This is not anticipated in the short run to 1985 because Japan, presumably to assure sup- ply of zinc concentrates, is partici*- pating in the development of lead-zinc mines in Canada and Peru and in the exploration of some deposits in the United States. Also, Australia competes with Canada and Peru in the Japanese mar- ket for zinc concentrate sale and to some extent with Mexico in the Netherlands. Australia may have a tariff disadvantage vis-a-vis Peru and Mexico to the extent that these countries are eligible for preferential access to Japanese and European markets. MANGANESE Commodity Profile The Groote Eylandt open pit manganese mine, operated by the Groote Eylandt Min- ing Co. Pty., Ltd. (GEMCO), a wholly owned subsidiary of the Broken Hill Proprietary Co., Ltd. (BHP), accounts for almost all of Australia's manganese ore production. The deposit is located in the Northern Territory, on an island in the Gulf of Carpentaria. GEMCO produces some 2 million tons of manganese ore annually. Australian manganese reserves, as of December 31, 1980, were estimated at 490 million tons of high-grade ore, almost all in the Groote Eylandt deposit. In addition, subeconomic lower grade material in scattered deposits, princi- pally in the east Pilbara and Peak Hill regions of Western Australia, totals 400 million tons. But much of the West- ern Australian material is manganiferous iron. Exports account for 65% of the output. Of the 1980 production of 2,020,000 tons, 1,328,000 (66%) was ex- ported. In 1974 Japan was the market for 47% and the United States and the Repub- lic of Korea each for 10% of the ton- nage exported. The remainder was exported principally to West European countries . Consumption was about 479,000 tons of ore in 1980. The domestic steel industry is the principal consumer of manganese, as ore and as ferromanganese. Ore is shipped to the Bell Bay plant, operated by the Tasmanian Electro Metallurgical Co., Ltd. (a wholly owned subsidiary of BHP) for the production of ferromanganese at a level of about 100,000 tons per year. In the year ending May 31, 1981, the company produced 122,000 tons of fer- roalloys (principally ferromanganese) , despatched 72,000 tons to its steel plants, and exported 48,000 tons. 35 Analysis of Pertinent Factors BHP established the plant at Bell Bay to supply the needs of its steel indus- try. But the company completed a major expansion at the plant in 1977 and is exporting some of its production (23,000 tons of ferromanganese in 1980). Australia has substantial reserves of high-grade ore, and the producing company has modern technology for ferromanganese production. 17 The plant is located in Tasmania, which has good hydropower pro- duction, and may be assumed to have low- cost power. Apparently the cost of the coastal shipping of the ore from the deposit to the plant in Tasmania has not been so onerous as to make the ferroman- ganese uncompetitive in world markets. In view of these advantages , the industry would like to increase ferromanga- nese production and increasingly export this commodity instead of manganese ore. The demand for ferromanganese is re- lated to steel production, which will have a slow rate of growth in the decade to 1990. It seems any substantial increase in ferromanganese production and export must be at the expense of other world producers and suppliers. South Africa dominates the trade in ferroman- ganese and produces about 17% of world production of ferromanganese (blast fur- nace and electric furnace) . It has low- cost manganese ore (reportedly at a lower cost than manganese ore produced else- where) , low energy cost, installed capacity, and established markets. It has shorter distances to the European market than Australia. Foreign suppliers of the U.S. market are South Africa and some European and Western Hemisphere pro- ducers. U.S. imports from Australia were about 25,000 tons in 1979, 18,000 tons in 1980, and 5,500 tons in 1981. In view of the above factors and the low rate of growth in demand, the prospect for Aus- tralian ferromanganese displacing tradi- tional suppliers is not favorable. How- ever, because of high power costs, production in Japan and some Western T7 Work cited in footnote 3. European countries may decline as hap- pened in the United States. Any decline in domestic production in Japan would benefit Australian producers. Japanese imports of ferromanganese and silicoman- ganese increased from 2,000 tons in 1976 to 19,000 tons in 1979 with 1979 imports principally from India. Even the higher import in 1979 is very small compared with an estimated production of about 670,000 tons in 1980. However, the trend for increased imports may continue. Expansion of the Korean steel industry may also create a market for Australian ferromanganese. In 1979, the Republic of Korea imported 225,829 tons of manganese ore and concentrate, of which 88,059 tons was from Australia. In 1979 Korea's production of crude steel (excluding casting) totaled 5.2 million ton. 18 The expansion of Pohang Iron and Steel, re- portedly completed in 1981, will increase capacity from 5.5 to 8.8 million tons. This with the capacity of independent producers increases the total capacity to 11.6 million tons. Korea also plans to build another 6-million-ton steel com- plex. While this expansion means a large market for Australian manganese ore, im- ports may continue to be substantially as ore because Korea already produces fer- romanganese (53,000 tons in 1979). How- ever, because of high energy costs, Korea may find it advantageous to import part of its consumption needs as ferroman- ganese instead of ore. NICKEL Commodity Profile Commercial production of nickel ore in Australia started in 1967 at Kambalda, Western Australia; at the Greenvale Mine, Queensland, in 1974; and at the Agnew Mine, Western Australia, in 1978. Producing mines and the respective producers are shown in table 11. In 1980, the mines in Western Australia (sulfide type) accounted for 59% of 18 Chin, E. The Mineral Industry of the Republic of Korea. Minerals Yearbook, 1980, v. 3, 1982, pp. 597-611. 36 total production and the Greenvale Mine (lateritic type) for the remainder. Mine production (content of ore and concen- trate) of nickel was 69,700 tons in 1979 and 74,300 tons in 1980. In 1980 Australia ranked as the fourth world producer, after Canada, the USSR, and New Caledonia. The bulk of Australian mine production is exported as metal, matte, and oxide sinter. the matte is exported, including that from the Agnew Mine, and some is refined in Kwinana to nickel powder and briquets for domestic consumption and export. The refinery also produces a mixed nickel- cobalt sulfide which is exported. Pro- duction from Greenvale is exported as nickel oxide sinter, and mixed nickel- cobalt sulfide is produced at the Yabulu refinery and exported. Western Australian ores are smelted in the Kalgoorlie smelter to matte. Some of TABLE 11. - Leading nickel-producing mines in Australia, 1980 Mine and location Ownership Comments WESTERN AUSTRALIA Kambalda-St. Ives, 55 km south of Kalgoorlie. Windarra, 250 km north- east of Kalgoorlie. Nepean, 16 km south of Coolgardie. Agnew, 300 km northwest of Kalgoorlie. Spargoville, 65 km south- west of Kalgoorlie. Western Mining Corp., Ltd. (WMC). Western Mining Corp. , Ltd. (50%), Shell Co. of Australia, Ltd. (50%). Metal Exploration, Ltd., and Freeport of Austra- lia, Inc. Western Selcast, Ltd., and MIM Holdings, Ltd. Selecast Exploration, Ltd. Ore treated at mill located at mine; concentrate railed partly to WMC's smelter in Kalgoorlie and partly to the company's re- finery at Kwinana. Ore treated at mill located at mine; concentrate smelted at Kalgoorlie smelter and matte shipped to Kwinana refinery. Ore mined at Nepean is sold under contract to WMC for treatment at Kambalda. Ore treated at mill located at mine and concentrate is road- hauled to Lenora and railed from there to the Kalgoorlie smelter for toll smelting to matte, which is exported to the United States. Ore sold under contract to West- ern Mining Corp., Ltd. for treatment at Kambalda. QUEENSLAND Greenvale, about 200 km west of Townsville. Metal Exploration, Ltd. , and Freeport of Austra- lia, Inc. Ore railed 225 km to Yabulu re- finery on the coast to produce mixed nickel-cobalt sulfide and nickel oxide sinter — all for export. 37 Analysis of Pertinent Factors Compared with the 1980 production of 74,300 tons of contained nickel in nickel ore and concentrate, the nickel content of matte was 32,500 tons and of refined nickel metal 17,448 tons. Mixed nickel- cobalt sulfides had nickel content of 3,731 tons and nickel oxide metal content of 17,861 tons. Therefore, Australian producers have the option of increasing refined metal production. The capacity for treatment of nickel concentrates of the nickel smelter in Kalgoorlie was ex- panded from 360,000 tons of ore to 450,000 tons per year by the installation of a new furnace in 1978. As a result, matte production in Western Australia in- creased from 47,825 tons in 1978 to 56,558 tons in 1979, but declined to 51,700 tons in 1980. The smelter capac- ity can be further expanded substantially by adding oxygen to the air supply. The Kwinana refinery has the capacity to produce about 30,000 tons of metal. This capacity sets the limit of refined nickel production from Australian sulfide ores. Were it not for company policy and the fact that the industry is suffering from a worldwide excess capacity and weak demand, all of Australia's nickel pro- duction could come to the world market as refined metal and high-grade nickel oxide. These markets are principally the European Community, Japan, and the United States. EC's imports of nickel are sub- stantially as matte from Australia, Canada, and New Caledonia and as un- wrought metal from Australia, Canada, and South Africa. Imports of ores and concentrates are negligible. Japan's imports are overwhelmingly ores and concentrates, principally from Indonesia, New Caledonia, and the Philippines. Canada is the principal supplier for the U.S. market. Australia provided 11% of U.S. imports in 1980. In 1979 and 1980, the United States imported nickel metal, powder, and flakes and matte originating from the Agnew Mine. Western Hemisphere producers such as Guatemala, the Domini- can Republic, and Colombia are also potential suppliers to the United States. From a tariff point of view in the EC market, Australia is on the same footing with Canada and South Africa, but New Caledonia has GSP access to the EC mar- ket. However, New Caledonia's matte and speiss are exported to France. There- fore, Australia has no tariff disadvan- tages vis-a-vis its competitors for the EC market. But access to the Japanese for nickel as metal would be difficult because Japan is the third largest world producer of smelter nickel, with raw material supplies from New Caledonia and Indonesia. Canada has transportation advantages in the U.S. market. In view of these factors , Australia may have dif- ficulty in substantially increasing nickel metal exports. Australian pro- ducers may find it advantageous to con- tinue exporting matte nickel-cobalt sul- fide as such rather than establishing the necessary refining facilities, which may not be economic. TIN Commodity Profile Tin ore is produced principally in Queensland, New South Wales, and Tas- mania. These three States accounted for 96% of production of contained tin in 1980. Tasmania is the largest producer (54% of total production in 1980). The Renison underground mine (the largest underground tin mine) of Renison Ltd. in Tasmania and the Ar die than mine of Aber- folye Ltd. in New South Wales were the two largest mines. Third was the Cleveland Mine of Aberfoyle Ltd. at Luina, Tasmania. Renison accounted for 41% of Australian production in 1980. Queensland production comes from a number of mines and operations by small miners. Bureau of Mineral Resources of Austra- lia estimates "Australian demonstrated economic resources as 215,600 tons of contained tin and inferred economic resources as 123,600 tons of contained tin. I 9 Australia (along with Brazil) is 19 Work cited in footnote 3. 38 generally considered by the world indus- try as the most promising country for future tin "finds." Consumption of tin during 1976-80 ranged from about 3,000 to 3,760 tons. In 1979 tinplate and templates and sol- ders ranked first and second in consumption: 2,067 and 1,119 tons respectively. The main operating producer of primary refined tin is the Alexandra smelter of Associated Tin Smelter Pty., Ltd., in Sydney, which has a capacity to treat 15,000 tons of concentrate and produce 7,000 tons of refined tin. The smelter of Greenbushes Tin Ltd. at Greenbushes , Western Australia, which produces anti- monial tin, has a capacity of about 1,000 tons. Australia exports tin con- centrate principally to Malaysia, and metal to the United Kingdom, the Nether- lands, New Zealand, and some South- Southeast Asian countries. In 1981 exports totaled 14,910 tons of tin con- centrates (7,353 tons tin content) and 1,256 tons of metal. Analysis of Pertinent Factors Australia could expand tin metal pro- duction to substitute for export of con- centrates. Imports of unwrought and unalloyed tin in the EC, Japan, and the United States are free, and tariffs would not be a factor inhibiting Australia from switching to metal from ores and concenr- t rates. Since the Renison Mine in Tas- mania accounts for almost half of Aus- tralia's mine production, and the mine is relatively close to sea routes , Tasmania offers a favorable location for a new smelter. However, it is reported that the operating company has not found it advantageous to build one. In consider- ing investments in expansion of tin min- ing or a new smelter, the important factor is the low, and perhaps even nega- tive, rate of growth in demand for tin. Furthermore, there is a vast world tin smelter overcapacity. These smelters are eager to obtain concentrate from Austra- lia. But for these factors, which may inhibit investment in a smelter, Austra- lia should be able to process all the tin it produces for the domestic and export markets. TITANIUM MINERALS Commodity Profile Australia's share of world production of rutile, ilmenite (including leucox- ene), and zircon are about 60%, 30%, and 70%, respectively. In 1981, Aus- tralia produced 229,251 tons of rutile concentrate, 1.3 million tons of il- menite, and 425,064 tons of zircon concentrate. These minerals are mined in sand depos- its. Currently, the narrow strip of coast of New South Wales and Queensland, between Newcastle and North Stradbroke Island, accounts for about 65% and 47%, respectively, of Australia's rutile and zircon production. About 95% of Austra- lia's ilmenite production, 35% of its rutile, and 53% of its zircon are from mineral sands south of Perth in the Bun- bury region, and near Eneabba, in Western Australia. Production of rutile and zircon from the east coast deposits will decrease in future years, owing to depletion of the higher grade deposits and environmental restrictions now being placed on sand mining in some areas. However, the de- posits of heavy mineral sands that were developed in the early 1970 's near Eneabba on the west coast, north of Perth, contain significant amounts of rutile and zircon in association with ilmenite, and will maintain Australia's position as the world's leading supplier of rutile and zircon. On the east coast, mineral sands are mined at North Stradbroke Island in Queensland, and in the Newcastle area, Myall Lakes, Kempsey, in New South Wales. Capel, Bunbury, Eneabba, and Geraldton are centers of operation in the west coast area. Separation plants at New- castle, Harrington Head, Hawkes Nest, 39 Dunwich and Brisbane on the east coast and plants at the above locations on the west coast produce ilmenite, rutile, and zircon concentrates. According to a reassessment of reserves by the Bureau of Mineral Resources in 1981, identified resources of ilmenite and rutile are 60.6 million tons and 11.6 million tons respectively. 20 About one-third of the ilmenite re- sources, i.e., the bulk of ilmenite on the east coast, is relatively high in chromium or otherwise unsuitable for the production of pigment by the sulfate process. Environmental considerations preclude the mining of 3 million tons of rutile resources on the east coast. and world production capacity for tita- nium sponge in 1981 was 102,000 tons, leaving only a 10,000-ton gap between the present capacity and anticipated 1990 demand. Because of excellent and abun- dant rutile resources, which are geo- graphically well located for sea trans- portation, Australia could be able to become a world supplier of titanium sponge. However, there is a 5% ad valorem tariff for the U.S. market and 6% for the European Community, the two principal markets for titanium sponge. Japan itself is a large exporter of sponge. TUNGSTEN Commo dity Profile Of the 1981 production of 1.3 million tons of ilmenite concentrate, 933,000 tons, or about 72%, was exported. Il- menite is used domestically for produc- tion of titanium pigments by the sulfate process. Initially, all rutile and zir- con production is for export. Analysis of Pertinent Factors In keeping with its policy of encourag- ing more domestic processing of local mineral production, the Australian Gov- ernment has been cooperating with the State governments and the mineral sands industry to study the possible creation of new industries using mineral sands as a raw material. An obvious option is the expansion of titanium pigment for an expanded domestic and export market. There is also considerable interest in the establishment of a tita- nium metal plant. Reportedly, negotia- tions have been completed for the estab- lishment of a 5,000-ton/year titanium sponge plant as part of an offset for the purchase of McDonnell Douglas F/A-18 air- craft. According to the Bureau of Mines estimate, world probable demand for primary titanium metal could be 112,000 tons in 1990, with a probable average annual growth rate of 5%. Tita- nium sponge is currently in oversupply, Australia has emerged as an important tungsten producer. Production of tung- sten concentrates (wolframite and schee- lite) , calculated to 65% W0 3 content, increased from 3,858 tons in 1976 to 6,936 tons in 1980; corresponding tung- sten contents were 1,988 and 3,561 tons respectively. According to the Austra- lian Bureau of Mineral Resources , Aus- tralia' s demonstrated economic reserves are cited as 122,200 tons of WO3 content and an additional 80,600 tons as in- ferred. Tasmania is the leading produc- ing State, accounting for 5% of tungsten production in 1980, followed by Queens- land; there is also some production in the Northern Territory (Molyhil scheelite-molybdenum mine of Petrocarb Exploration NL) . King Island Scheelite Pty. , Ltd. , a member of the Peko-Wallsend group, operating two underground mines, a concentrator, and a synthetic scheelite plant on King Island, is the largest tungsten concentrate producer in Austra- lia. The Mount Carbine Mine of Queens- land Wolfram Pty., Ltd., is the other significant producer (1,775 tons of con- centrate in 1980). Western Australia may also contribute to Australian production resulting from the anticipated develop- ment of the Mount Mulgine deposits in Western Australia. 20 Work cited in footnote 3. 40 Australia's tungsten concentrates ex- ports are currently shipped principally to the Federal Republic of Germany, Sweden, the Netherlands, the United States, and Japan. The Federal Republic of Germany is the leading importer, re- ceiving more than half the total. Further processing of Australian tungsten concentrate must be based on concentrates available in sufficient quantities, pref- erably not from dispersed mines. From this point of view, King Island Scheelite and the Tasmanian Mines are placed favor- ably for a tungsten processing industry. Analysis of Pertinent Factors Any decision for the further processing of tungsten concentrates has to consider the varied end products from this com- modity and their uses, i.e., tungsten carbide for cutting and wear-resisting material and high-speed tool and die alloys, and chemicals for nonmetallurgi- cal uses. Based on U.S. practice, where nearly 85% of tungsten concentrates are processed into ammonium paratungstate (APT), and the Korean practice of processing tungsten minerals, Australian producers may also opt for producing APT. APT is used for making tungsten metal petroleum-powder (part of which is used in producing tungsten carbide powder) and tungsten chemicals. The U.S. tariff on APT is 12.1% ad valorem, and the EC tariff is 5.7%. China and the Republic of Korea are the principal sources of U.S. imports of APT. Taking into account the relatively high tariffs and the high- ly competitive world market, Australian producers may not find it profitable to invest in APT production for export. The production of APT for sale in itself is not very profitable unless it is part of other processing operations of the same company. The added value of APT is only 15% to 25% (and sometimes less), and the cost of production commonly allows little or no net profit. In the production of end products, Australia would compete with long-established production facili- ties in Sweden, the Federal Republic of Germany, the United States, etc., which enjoy technological and market advan- tages. Another factor is that Korea is eligible for duty-free access to the Japanese market under Japan's GSP scheme and would thus have a competitive advan- tage in that market. There may be no advantage for Australia to convert its tungsten concentrate to APT for export. SUMMARY Australia has a policy of maximum local processing of Australian raw materials. In terms of availability and location of reserves and energy costs, the bauxite- alumina-aluminum industry is the prime candidate for execution of this policy. Australia has ambitious plans for in- creasing aluminum production which eventually are expected to be achieved. Such may not be the case for iron and steel, even though Australia has vast reserves of high-quality iron ore and coal. One factor leading to this conclusion is the geographical separation of the large iron ore deposits and the coal mines in Australia. More important, however, are such factors as excess world steel capacity, establishment of new steel plants in the emerging industrialized countries and in some producing countries which have large reserves of natural gas, and the antici- pated low rate of growth in steel con- sumption in the industrialized countries. Expansion of the steel industry in Australia would be in response to its own increasing consumption requirements. The same would also be true for manganese ore, for which the steel industry is the most important outlet. Australian nickel producers are able to increase production of metal because of existing excess capacity. Any additional investment would have to await improve- ment in the industry's situation. Australia is emerging as an important world source for tungsten. Producers have the option of producing ammonium paratungstate (APT) for export instead of 41 concentrates. But production of APT is not considered particularly profitable unless it is used as a material for pro- ducing end products such as metal powder and tungsten carbide. In the export of APT, Australian producers have to con- sider competition from the Republic of Korea and China and in the production of end products, competition with estab- lished production facilities in Sweden, the Federal Republic of Germany, and the United States. For nonf errous metals , the picture is mixed. Much of Australia's copper and lead ores are already smelted in Austra- lia. For copper, production of ore from each of the remaining copper mines is too small at this time to justify a smelting complex. The prospect for additional smelting capacity will depend on the development of a large deposit currently being explored. Except for company policy, Australia is in a favorable posi- tion to expand lead smelting for export as new deposits are developed. A substantial share of Australia's zinc concentrate production is exported as such, and it would be logical to expand zinc smelting and increase zinc metal export at the expense of zinc concen- trate. However, such investment would have to take into account new zinc refineries being built worldwide and tariff advantages that some developing- country producers would enjoy in the mar- ket of industralized countries. Also competitors of Australia have trans- portation advantages in the zinc markets of the United States and Europe. Aus- tralia is well located to export zinc to Japan, but Japan is a very large zinc producer itself and may not allow its domestic industry to suffer. Market fac- tors may also inhibit tin producers in expanding smelting capacity, particularly in view of the very low rate of antici- pated tin consumption growth in the next decade or so. Finally, Australia has a project to produce titanium sponge from rutile. The anticipated capacity is modest and can find a place in the world market . The Australian policy of maximum local processing is of particular interest to the United States for two commodities for which Australia is a prime source, alu- mina and rutile. Anticipated expansion of the aluminum industry will still leave several million tons of alumina available for export to the United States and other markets. 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