Xstrata smelting decision a carbon price warning

first_imgXstrata Mount Isa Mines has announced plans to sustain the future of its Mount Isa operations through expanded mining and concentrate production, while phasing out copper smelting at Mount Isa and refining operations in Townsville by the end of 2016. The future for the north Queensland operations includes the expansion of existing mines and the potential development of new ones at Mount Isa and the broader region. This would also include the continuation of lead smelting and the expansion of port facilities in Townsville and create long-term employment.“The shutdown of Xstrata’s copper smelting and refining operations in Queensland is a timely warning of the fragility of the Australian resource sector’s global competitiveness,” Queensland Resources Council Chief Executive Michael Roche said.Xstrata Copper North Queensland Chief Operating Officer Steve de Kruijff said the plan to phase out the copper smelting and refining operations in north Queensland and focus on further development of copper mining and concentrate production projects had not been adopted lightly, but was a necessary response to changing global market conditions.He said: “Market conditions have been very challenging for copper smelting and refining operations as a result of overcapacity in the global market, low treatment and refining charges and increasing operating and capital costs.  The economic viability of our Mount Isa copper smelting and refining operations has been under increasing pressure for a number of years and cannot be sustained in the long term.  We need to evolve our business to ensure we can secure the future of our operations for the long term.“Our operational plan over the next five years will see significant investment in north Queensland to focus on exporting mineral concentrates, along with the development of the necessary infrastructure to increase rail and port capacity.”“Xstrata Copper has made it clear that the competitiveness of their smelting and refining operations had been ‘hit for six’ by the combination of cheaper, newer Chinese plant and rising costs here in Australia, and not in anticipation of a carbon price,” Roche said. ‘What the Xstrata decision does demonstrate is that even very energy-efficient operations such as those operated by them in Queensland cannot compete against cheaper alternatives.‘My fear is that these closures are a foretaste of what will follow if the Federal Parliament agrees to impose an uncompetitive carbon price regime on our trade-exposed resource sector industries.’De Kruijff underlined Xstrata’s commitment to its workforce and the surrounding communities. “We want to make it absolutely clear that we value our people. Our main priority is to ensure employees remain with the business and we will be working closely with our workforce to deliver retraining and retention packages to support our operations well into the future.”Xstrata holds worldclass mineral resources in Mount Isa which includes 587 Mt of zinc mineral resources and 416 Mt of copper mineral resources (Measured, Indicated and Inferred). These resources are potentially accessible through expanded underground and open pit operations, and concept studies into the further development of these substantial known mineral resources are progressing.Xstrata is currently investing A$63 million to expand its Mount Isa zinc-lead mining operations with four significant development projects currently under construction, and a further A$300 million of potential expansions under evaluation. This includes the A$274 million George Fisher mine expansion that will increase production by 1 Mt to 4.5 Mt by 2013, and the A$113 million Black Star Deeps open pit expansion to extend its life of mine to 2016.In relation to copper operations, Xstrata is currently investing A$589 million in the transformation of its Ernest Henry open pit mine to a long term underground mine and the construction of an associated magnetite processing facility.  It has also recently announced an intention to invest A$175 million in the acquisition of two copper projects from Exco Resources.       In terms of environmental performance, Xstrata has invested over A$275 million on more than 220 environmental initiatives since acquiring Mount Isa Mines in 2003 and is committed to investing an additional A$360 million to further improve environmental performance.Xstrata Mount Isa Mines will soon submit an Environmental Management Plan to the Queensland government outlining and seeking endorsement for Xstrata’s long-term strategy for sustaining its Mount Isa Mines operations. “We take our environmental responsibilities very seriously and we are committed to complying with all environmental objectives as required by the new regulations.”Xstrata will continue to work closely with the Queensland Government, its employees and local communities to implement its long-term strategy for sustainable operations in north Queensland.Roche said that all the evidence pointed to a revived CPRS-style carbon pricing scheme destroying jobs across the Queensland resource sector. ‘It is not too late for the federal government to embrace a better way – one that safeguards our global competitiveness.’He urged the Federal Government to follow Europe’s lead in taking a transitional approach to carbon pricing for emissions-intensive industries competing globally. The EU emissions trading system from 2013 will extend up to 100% free allowances to 73% of EU exports until 2020 to reduce the costs for those deemed to be exposed to significant competition from outside the EU.“At the top of that list are Europe’s mining, minerals processing and metals refining industries.” Roche also called on the Queensland Government to take a stronger position with their federal colleagues over the vital importance of safeguarding trade-exposed industries. “The Premier said recently that her carbon price ‘wish list’ included compensation for trade-exposed industries that was at least as favourable as under the CPRS.“The Premier needs to tell the Prime Minister that a CPRS-style approach to compensation is simply inadequate.” Roche said that under a CPRS-style compensation package the coal mining industry alone would incur carbon costs of A$18 billion by 2020 that would jeopardise investment and jobs in Queensland’s biggest export industry.last_img