Welcome to the June 2015 edition of the Australian Mining Sector Update, a publication prepared by Corrs Chambers Westgarth for clients and contacts who are interested in the Australian mining industry.
This publication brings together a brief summary of information about recently completed deals, market rumours, potential opportunities and relevant regulatory updates.
On 6 May 2015, BHP Billiton announced that the demerger of South32, a spin-off entity which will own and operate BHP's non-core assets, has received overwhelming shareholder support, with the demerger resolution achieving 98.05% in favour. South32 will be a globally diverse metals and mining company, with a portfolio of cash generative assets producing thermal and metallurgical coal, aluminium, nickel, silver, lead, zinc and manganese. BHP Chairman, Jacques Nasser, said that the "demerger of South32 simplifies BHP's portfolio while retaining the benefits of scale and diversification". The move is part of BHP's broader strategy to focus on its core iron ore, copper, coal and petroleum assets.
Recently completed deals
Indian multinational, Adani, has reportedly signed offtake agreements for approximately 70% of the coal produced at its proposed 40 Mtpa Carmichael Mine in Queensland's Galilee Basin. According to a Reutersarticle on 21 May 2015, the offtake agreements place Adani in a stronger position to secure funding for the A$10 billion Carmichael project (which includes the construction of rail and port infrastructure). Adani Australia's CEO, Jeyakumar Janakaraj, reportedly told Reuters that the company has "signed contracts for most of the production. Financial close is tied to dredging approval [at the Port of Abbot Point]".
Once operational, the Carmichael Mine will be Australia's largest thermal coal mine.
Market rumours and opportunities
Japan's Sumitomo Corporation, one of the world's largest general trading companies, is rumoured to be considering selling its 50% interest in Queensland's Isaac Plains Coal Mine, according to a recent report from Mergermarket on 12 May 2015. Chinese and Korean strategic investors, including steelmakers, have been touted as potential buyers of a stake in Isaac Plains, which is currently under care and maintenance.
Brazil's Vale, the global diversified mining company, holds the remaining 50% stake in Isaac Plains. According to a report in The Australian on 27 April 2015, Vale has engaged Barclay's Capital to explore options for its Queensland coal mines. As well as Isaac Plains, Vale currently operates the Carborough Downs Mine in Queensland's Bowen Basin and the Integra Mine in New South Wales.
PAYROLL TAX REBATE, REVENUE AND OTHER LEGISLATION AMENDMENT BILL 2015 (QLD) – FARM-IN CONCESSIONS FOR EXPLORATION
One of the first bills from Queensland's new Palaszczuk government, the Payroll Tax Rebate, Revenue and Other Legislation Amendment Bill 2015 (Qld) (Payroll Bill), was passed by the Queensland Parliament on 2 June 2015. The Payroll Bill contains stamp duty concessions for the transfer of interests in exploration authorities under farm-in agreements. These concessions were previously tabled by the former State government but lapsed when the election was called. A copy of the Payroll Bill can be found here and the Explanatory Notes (which provide detailed worked examples) can be found here. The Payroll Bill is currently awaiting royal assent.
SUSTAINABLE PORTS DEVELOPMENT BILL 2015 (QLD)
The Sustainable Ports Development Bill 2015 (Qld) (Ports Bill) was introduced to the Queensland Parliament on 3 June 2015, only a few days after the World Heritage Committee recommended that the Great Barrier Reef not be placed on the "in danger" list.
The Ports Bill is designed to both protect the Great Barrier Reef and boost economic development at the State's four major bulk commodity ports – Abbot Point, Gladstone, Townsville and Hay Point/Mackay (Priority Ports).
The Ports Bill will, amongst other things:
- prevent disposal of capital dredge spoil from ports in the Great Barrier Reef World Heritage Area;
- stop development of new ports in the Great Barrier Reef World Heritage Area
- mandate "master plans" for all four Priority Ports.
The Minister for State Development and Natural Resources and Mines, Dr Anthony Lynham, said that the Ports Bill delivered on the government's election commitments "to protect the Reef by banning sea-based disposal of capital dredged material from ports in the Great Barrier Reef World Heritage Area and restricting port-related dredging". At same time, Dr Lynham said the government is "supporting economic development, investment and job creation by master planning these Priority Ports and their precincts." Dr Lynham said master planning would make the port precincts more attractive to potential developers and investors.
The Priority Ports reportedly represent trade worth $32 billion and transported 77% of the total throughput of all Queensland ports in 2013-2014. A copy of the Bill can be found here.
On May 6 2015, Queensland's Minister for State Development and Natural Resources and Mines, Dr Anthony Lynham, announced that an expert panel of resource community and sector leaders will examine the impact of the State's existing 100% fly-in, fly-out (FIFO) mines near regional communities.
According to its terms of reference, the review will investigate the use of FIFO during the operational phase of resource projects in Queensland including:
- identification of 100% or predominantly (90% or higher) FIFO resource projects in Queensland;
- existing approvals and approval processes for FIFO workforces;
- the characteristics of the current workforce for predominately FIFO projects;
- the workforce profile of resource towns or regional communities near predominantly FIFO resource projects;
- the economic impacts of FIFO work practices to resource towns, regional communities, source communities, companies and individuals;
- circumstances where predominantly FIFO workforce arrangements may be appropriate; and
- policy or legislative options in relation to 100% FIFO resource projects located near a resource town or regional community.
Findings from the review are expected to inform the Queensland Government's current inquiry into FIFO and other long distance community practices in regional Queensland. The four-person panel is chaired by the former Chair and Chief Executive Officer of Gladstone Ports Corporation, Leo Zussino, and is due to submit its final report and recommendations to the Minister for State Development by August 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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