Aboriginals receive a greater say in Pilbara mining operations, as Rio Tinto awards iron ore contract that should see increased employment for indigenous Gurama natives.

Rio Tinto (RTP) has awarded a major new mining contract in its Pilbara iron ore operations to a joint venture between native title holders the Eastern Guruma and mining services company NRW.

The $200 million contract to build, mine and transport iron ore from Rio Tinto’s Western Turner Syncline deposit is the first significant mining joint venture for the Eastern Guruma people, and continues the comprehensive Rio Tinto commitment to indigenous contracting in the Pilbara region.

NRW and Eastern Guruma will build a haul road and truck the ore 15 kilometres to the Tom Price mine for processing and blending with other Pilbara Blend stocks. Required regulatory approvals are being finalised and production is expected to start in July 2010, delivering six million tonnes of high-grade (>60% Fe) iron ore per year.

The four-year contract has been designed to increase Eastern Guruma equity in the joint venture from 25 to 35 per cent as the group builds capacity in mining services. Mandated employment levels will rise each year giving an average of 27 per cent Aboriginal employment across the four-year contract. It also includes a $6 million component specifically for training the Eastern Guruma to develop stand-alone proficiency, and there is potential for the project to become a 50/50 JV.

Rio Tinto Iron Ore chief executive Sam Walsh said: “This is a great initiative. It enables a local Aboriginal contractor as part of the joint venture to develop and mine the Western Turner Syncline deposit. It will allow the Eastern Guruma people to develop capacity in mining services, and have increased participation in the resource development taking place on their country.”

“It is also an important production step for us. Western Turner Syncline will provide high-grade iron ore which will be processed and blended using existing infrastructure in Tom Price and, together with upgrades of rail and port capacity, will support an increase in our production capacity in the Pilbara to 230 million tonnes a year.”

In 2009 Rio Tinto will spend more than $110 million through indigenous contractors in the Pilbara, with nearly $50 million of that being directed through companies affiliated with the Pilbara Aboriginal Contractors Association.  A further $10.5 million will be spent on education and training initiatives.

“This new contract helps ensure the wealth from mining is shared among the traditional owner groups of the region. More importantly, it adds to the wealth of knowledge and experience we need to establish among indigenous businesses in the Pilbara to ensure sustainable, successful operations for years to come.”

Rio Tinto employs more than 650 Aboriginals in its iron ore business, making it the largest non-government employer of indigenous workers in the state, with a particular emphasis on attracting and retaining local people in the Pilbara.

“Rio Tinto considers indigenous participation the highest priority, and we willingly acknowledge this involves an educative component to our projects and operations. We have made it clear to all our aspiring partners and suppliers that, along with the highest safety standards and efficiency, a significant indigenous involvement is critical.”

“The Western Turner Syncline project is a major step in delivering on that commitment. There will be more.”

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Mining giant BHP Billiton has announced revised figures that significantly upgrade the reclaimable reserves for its flagship Olympic Dam operation in southern Australia.

New figures released by BHP (NYSE:BHP) point to a 22% increase from 284 thousand tonnes to 347.5 thousand tonnes of of U3O8, due to mineral re-classification as operational drilling taps into larger sources. BHP has correspondingly upgraded the operational lifetime of Olympic Dam from 43 to 54 years.

Olympic Dam is arguably BHP’s most valuable asset, as it is a multi-mineral source combining the world’s 4th largest copper deposit, 5th largest gold deposit & significant amounts of silver. It is also currently the world’s largest single uranium ore deposit.

With a production level of 3344tU last year, Olypic Dam is placed 4th in extraction levels for uranium, BHP are now looking to expand the size of their operations on this site. At present, all mining activities are conducted underground, however, BHP has submitted an expansion plan to local government that would see open pit miningf being introduced to the site. With government expected to make a preliminary decion on the expansion project next year, this is a critical time for BHP, as the following chart illustrates.

In an earlier post, we discussed the impact of Sino energy requirements on Australian miners, as the Chinese are heavily commited to reducing pollution & are searching for cleaner energy sources to power their expanding economic requirements. In April this year, Chinese officials announced they would start building five extra power plants this year on top of the 24 already under construction & 11 already in operation.

“There are not enough uranium resources in China to support the aggressive nuclear power development plan for the next 20-30 years,” said Professor Liu Deshun, of China’s Institute of Nuclear and New Energy Technology. “Australia has the uranium resources that could be exported and in China we have the demand”

Earlier this year, BHP managed to successfully expand into the Yeelirrie deposit in Western Australia, which is estimated to  have a 10 to 12-year lifespan and a resource of 35,000 tonnes of uranium,  as a result of the Western Australian government lifting a six year old ban on uranium extraction in the state. With this prescedent & also the ability to secure long term supply contracts to China, Australian Minister for Resources, Martin Ferguson, has indicated the Federal Government was unlikely to stand in the way, subject to environmental and investment tests.

In the short term, this could also have a large knock on effect on the share price of some of it’s key competitors, namely Freeport McMoRan & Rio Tinto. Rio is also a top producer of uranium ore, with it’s Ranger Mine in Kakadu, which currently supplies 10% of global requirements, any uplift in BHP’s production capacity is sure to impact that figure.

More interestingly for me, there has been much speculation that BHP could be looking to acquire Freeport McMoRan (NYSE:FCX)  in order to bolster their gold & copper production, however, referring to the anticipated production uplift in both of these commodities if the expansion plan is successful, why would BHP Billiton look at dishing out more than $27 Bn, when they could integrate on an existing site?

The Australian government is also more likely to sponsor the expansion project in my point of view, as it will keep the majority of that cash pile invested in the country & help to secure more than 15,000 jobs directly & indirectly for the lifetime of Olypic Dam. Perhaps readers of the WSJ should think a little more on geo-political terms when voting on nonsensical polls.

Original editorial at MyStockVoice.com

A total of A$40 million has been raised by Toro Energy Ltd as the emerging uranium project developer forges ahead to have first production from its key Western Australian uranium project by 2012.

Proceeds from the capital raising will be sufficient to fund all approvals and completion of a bankable feasibility study by 2011 for Toro’s Wiluna Uranium Project in Western Australia along with other project and consolidation opportunities. The funds were raised via oversubscribed placements at 15 cents per ordinary Toro (ASX:TOE) share to a raft of Australian and international institutions and professional investors.

Toro’s major shareholder, Oz Minerals Limited (ASX:OZL), also elected to contribute nearly half of the total raised to maintain its 49.9% shareholding in Toro, which is also developing the Napperby uranium project northwest of Alice Springs, and uranium prospective ground in South Australia and the African state of Namibia. A Share Purchase Plan has also been announced by Toro to allow its retail shareholders the same opportunity to participate at the placement terms.

Toro’s Managing Director, Mr Greg Hall, said today the increasingly strong support from the senior end of the equities market was a vote of confidence in the momentum and strategies behind the Company’s drive to develop a near-term Australian uranium mining and project development business.

“To have a further expression of support from our major shareholder, OZ Minerals, also reflects the underlying potential within the portfolio of uranium assets assembled to date and we may look to add to that as we move our flagship projects towards production,” Mr Hall said.

“Significantly, the proceeds announced today will now enable Toro from next month, to commit to and fully fund a bankable feasibility study and the approvals process for our wholly owned Wiluna uranium project so that we anticipate being able to make a development decision in 2011 to stay on track for first production in 2012.”

“The proceeds also provide Toro with the opportunity to advance our other project and exploration work elsewhere in WA as well as Napperby in the Northern Territory, and to take advantage of consolidation opportunities in the sector.”

However, Newmont (NYSE : NEM), will only be asked to relinquish 17% of its subsidiary, PT Newmont Nusa Tenggara (PTNNT), as 20% of this entity is already held by a local partner. An international arbitration panel on March 31 gave Newmont and minority partner Sumitomo Corp. a 180-day deadline in which to divest 17% of PTNNT to local buyers, ruling that the companies were in default of their contract of work for failing to meet divestiture schedules in 2006-2008.

With the Indonesian government estimating the total value of PTNNT at $4.9Bn , Newmont & Sumitomo are locked ina valuation battle with the governmet & local companies, who are keen to pick up a share in the companies gold & mining concerns. Some 10% of PTNNT is earmarked for regional governments in Sumbawa, the location of the company’s Batu Hijau copper and gold mine, and the central government will have first right of refusal on the rest of PTNNT.

“We are still discussing the pricing formula” for the stake in PTNNT, with other government departments” Bambang Setiawan, director general at the Department of Energy and Mineral Resources “the department is also conducting preliminary negotiations with Newmont over the sale of the unit as yet it is unclear when a deal might be reached.”

It’s not all grim news for Newmont though. This week, Indonesian officials met regards mining rights in areas of protected forest. As we have written before, (Indonesia the long road back), The country has vast natural resources that Indonesia is keen to exploit, using the above formula to develop modern facilities in the country. Now ministers are expected to pass a decree that will allow mining companies to carry out underground mining activities in areas of protected rainforest.

“The presidential decree will give legal basis so that underground mining is allowed in protected forest areas.The existing law only forbids open-pit mining in protected forest areas,”  said Setiawan.

Information from the mining & energy ministry show that Indonesia has mineable nickel reserves of 547 million tonnes, 112 million tonnes of bauxite and 43 million tonnes of copper,  tin stand at 336,911 tonnes, measured in terms of refined tin, while gold reserves were 4,341 tonnes,

Two other mining majors that will also look to profit from this law change are Rio Tinto (NYSE : RTP) & Freeport-McMoran (NYSE : FCX).

Rio Tinto is currently looking to develop a new nickel operation on the island of Sulawesi, Rio estimate that the mine could produce up to 46,000 tonnes of nickel metal a year, estimated investment costs stand at $2 Bn. Sulawesi is densely forested & the change in law should mean that the company can expand its operations significantly.

Meanwhile, Freeport-McMoran has been active in Indonesia for a much longer time. PT Freeport Indonesia has operated the Grasberg mining complex since the early 70’s, Grasberg is one of the world’s largest single producers of both copper and gold & as Freeport claims, contains the largest recoverable reserves of copper and the largest single gold reserve in the world. Grassberg will continue surface mining until 2015, at which time it will then begin sub-surface mining, according to Freeport’s website.

Indonesia looks to be well on the way to attracting large amounts of FDI into its commodity sector, providing an economic boost to local populations spread across this vast country. India & The Emirates have already committed to investing $4Bn into an aluminium smelting plant, with fully integrated power & logistics last year, with the relaxation of the rules governing mining concessions, the country could well benefit from China’s projected expansion.

Chinese officials this week announced they would start building five extra power plants this year on top of the 24 already under construction and 11 already in operation. Australia could add A$17 billion ($12 billion) to gross domestic product by 2030 by maximizing suppliers to meet rising global demand for nuclear energy, the Uranium Association said last month.

The acceleration of China’s nuclear programme stems from mounting concerns about climate change, energy security and the more immediate task of kick-starting the economy as part of the Government’s 4 trillion yuan stimulus plan.

Vice-Premier Zhang Dejiang announced at a Beijing conference this week that China would “accelerate the development of nuclear power and increase the ratio of clean energies like nuclear power”.

Analysts say the country’s dearth of uranium is “the tiger in the road” to fulfilling its nuclear power ambitions and that Australia is the most obvious solution.

“There are not enough uranium resources in China to support the aggressive nuclear power development plan for the next 20-30 years,” said Professor Liu Deshun, of China’s Institute of Nuclear and New Energy Technology. “Australia has the uranium resources that could be exported and in China we have the demand,”

Chinese companies are lining up to invest directly in Australian uranium mining & exploration companies and have begun signing long-term supply contracts with Australia’s established mining companies, betting on the expansion plans receiving Government approval.

Australian Minister for Resources, Martin Ferguson, indicated the Federal Government was unlikely to stand in the way, subject to environmental and investment tests. Today, ERA (Energy Resources Australia), a Rio Tinto (NYSE : RTP) subsidiary, is expected to say more about a new plant to extract uranium from low-grade ore and an exploration pit for the expansion of its Ranger Mine in Kakadu, which already produces 10% of the world’s uranium.

Next week BHP Billiton (NYSE : BHP) will move a step closer to a massive expansion of its Olympic Dam mine in South Australia, the world’s biggest proven uranium reserve , with the release of an environmental impact assessment. Extending into the Yeelirrie deposit in Western Australia, which is estimated to  have a 10 to 12-year lifespan and a resource of 35,000 tonnes of uranium, will put BHP at the head of the pack, when it comes to talks with the Chinese buyers. This as a result of the WA government lifting a siy year ban on uranium extraction in the state.

Chinese analysts have said the country’s nuclear power expansion plans will not succeed unless China secures the necessary uranium supplies. Australian analysts say the local mine expansions are unlikely to proceed without the certainty provided by long-term supply contracts to China.

“The two go hand in hand,” said John Wilson, uranium analyst at Resource Capital Research.

Uranium was trading at $41 per lb yesterday & now analysts are benchmarking the yellow cake as being able to reach the $70 per lb mark in the near future.

Image via Wikipedia

China has embarked on an ambitious spending spree in order to help stave off recessionary pressures & attempt to maintain a growth target of  8% in 2009. Following on from its massive $585M stimulus package, announced in early November, news of deals in energy & metals has been flowing over the last week. When the stimulus package was originally announced, we heard this from our friends at RBS :

“Whats important here is just how quickly that money hits the street,” said Ben Simfendorfer, chief China economist for Royal Bank of Scotland, speaking on CNBC

Well it would seem not to have taken too long, as we have news that apart from pulling forward the long anticipated 3G rollout, as reported on MyStockVoice in an earlier post, China is beginning to stockpile oil & gas via imports whilst building an inventory of  aluminium & other metals from domestic producers.

Zhang Guobao, the head of the National Energy Administration, said in remarks published on Monday that China would actively push forward the construction of the second phase of state strategic oil reserves after having largely completed the first phase. China has completed the planning of the second phase of government storage facilities that would be able to hold up to 26.8 million cubic metres of oil, or some 170 million barrels, but has not disclosed whether construction has begun. Nor has the government disclosed if the tank farms set up in four locations in the first phase, with total capacity of some 102 million barrels, have been fully filled.

The world’s second-largest oil user will also take advantage of opportunities resulting from the financial crisis and weak energy market to expand energy cooperation with neighboring countries and major energy producers, Zhang said.

State controlled Sinopec (NYSE – SNP) recently completed the construction of oil storage tanks with a capacity of 3.8 million cubic metres in the coastal province of Zhejiang & has also announced a mutual supply agreement with fellow oil giant CNPC . Similarly, rival PetroChina (NYSE – PTR) has begun to fill a new facility of 1 million cubic metres in the northwestern Xinjiang region in partnership with Kazakhstani oil firm KazMunay. Zhang also confirmed that China will push forward the construction of the proposed China-Myanmar oil and gas pipelines while also proceeding with the China-Central Asia gas pipes and the second phase of the China-Kazakh oil lines.

Meanwhile, counterparts at the State Reserve Bureau (SRB), have announced that will buy 300,000 tons of aluminum at 12,300 yuan (about $1,750) per ton in January 2009 to push up prices and support producers, as reported by Rednet. China’s aluminium producers, like their competitors worldwide and their peers in other base metals, have been forced to shut down some production to cope with the impact of the global economic crisis, which has crippled demand.

“Aluminium prices were encouraged on the reserve purchase news,” said analyst Jia Zheng at Southwest Futures. “The decided purchase volume seems to be lower than expected but we are looking forward to more movement by the reserve bureau.”

Chinese officials have said they plan to buy up resources and materials to support producers, who are smarting from prices that have fallen below the cost of production, rumours abound that this buy up on aluminium could reach a total of 1 million tons by April 2009. The major recipient for this windfall will be state controlled Chinalco subsidiary Chalco (NYSE – ACH), who is reported to be receiving 50% of the order, whilst the remainder will be shared by seven regional producers.

On the same day as the SRB announced the procurement plan, Bao Steel Group, China’s top steel maker, raised its February steel prices by 100 yuan/ton to 300 yuan/ton, this is widely believed to be in response to a previous SRB announcement that  another 3 trillion yuan ($400M)would be set aside for railway infrastructure construction projects and post-quake reconstruction efforts, the investments are expected to increase steel demand by 200 million tons in 2009. This could also be potential good news for other steel majors, particularly Mittal Steel (NYSE – MT), which acquired a 37% stake in government owned  Hunan Valin, Mittal  already has a $100 million steel plant under construction in the northeast China port city of Yingkou, Liaoning province.

Update 1 (30/12/08) : Myanmar signs gas deal with SKorea, India, China as reported in The Times of India

Military-run Myanmar has signed a deal with South Korean and Indian companies to pipe natural gas from the energy-rich nation’s offshore fields to China, state media reported Monday.

“The agreement was signed to export natural gas to China from Shwe natural gas project at Block A-1 and A-3 at Rakhine coastal region through pipelines,” the New Light of Myanmar newspaper said. The paper gave no other details of the project, but Beijing media reported last month that China was planning to start construction on a gas pipeline to Myanmar in early 2009.