Towns treated like mushrooms

THE Central Highlands have been left in the dark by mining companies.

After BMA announced that 700 positions would be cut from its seven Bowen Basin mines, Moranbah families and businesses are clambering to recover and adjust to the devastating news.

Moranbah Traders Association president Trehan Stenton said mining companies were happy to be well served by the region in the boom times but the lack of transparency made recovering for job cuts difficult.

“BMA are not giving any information about the nature of the workforce that will be cut,” Mr Stenton said.

“Mining companies need to engage with the community to at least work on a plan for the future.”

Mr Stenton said the state and federal governments needed to unlock funding to help local businesses transition from a reliance on the mining sector to industries such as service and agriculture. “We need short-term help for the wider community,” he said.

Isaac Regional Council Mayor Anne Baker said the job cuts would devastate the region

“The majority of these job losses are coming from BMA’s residential mines in our region, which directly impacts our communities,” she said.

“With six BMA mines is Isaac, many of these job cuts will affect Isaac residents.”

Ms Baker said the cuts would significantly affect every aspect of the communities.

Moranbah, Clermont and Dysart are expected to the most economic damage, with the majority of mine workers under threat living in those towns.

Union representatives used the announcement to launch an attack on BHP Billiton.

Construction, Forestry, Mining and Energy Union general secretary Andrew Vickers said the union was also seeking information about the jobs targeted in the cuts.

“BHP is demonstrating a horrifying disregard for jobs and for the future of central Queensland,” Mr Vickers said.

“BHP has profited enormously from central Queensland resources over many years, but they are showing their true colours as a ruthless multinational corporation.”

On Tuesday, BMA Asset President Lucas Dow said the “stubbornly” high Australian dollar and low coal price were drivers behind the review.

BHP-Mitsubishi mine closure threatens town’s future

Coal communities in central Queensland are reeling after the big job cuts announced by BHP Billiton and Mitsubishi yesterday.

It is the latest blow to the once booming industry and businesses throughout the region are facing an uncertain future.

At shift change on the coal fields some miners are wondering if it will be their last.

Many of these miners live in Moranbah, which is reeling in the wake of BMA’s (BHP Billiton-Mitsubishi Alliance) decision to cut 700 jobs.

At the workers’ club, the news is still sinking in for coal miner Brenton Fry and his wife, Anja Har.

“Obviously it’s bad news for the community, the whole Bowen Basin. It’ll strike a lot of people in the heart,” Mr Fry said.

The mining giant is blaming global cost pressures, but the decision will have a huge local effect and small businesses are bracing.

“We are going to lose a lot of people out of Moranbah, which is going to be quite sad,” said business owner Jo-Anne Foley.

This family-run business says the current downturn is the worst yet.

“It’s a bit like a cancer, I suppose, it’s just chopping you off at the legs slowly and we’ve just got to keep going. Suck it up,” added Shane Foley.

The widespread job cuts have also reignited the debate about fly-in, fly-out (FIFO) workforces. It has been a contentious issue during the boom times and now even more so during the downturn.

The Mayor of Isaac Regional Council Anne Baker says a sense of community will be lost if too many FIFOs stay on.

“There needs to be a review of this work practice. I’m very concerned about our education, our health, our small business,” she said.

Brenton Fry is hoping he can continue to call Moranbah home.

“This is probably the best job I’ve ever come across. So, I hope I get to keep it.”

BHP bullish on iron ore production

BHP Billiton has increased full year iron ore guidance by 5 million tonnes, in a move that will surpass even the most optimistic expectations that were held by analysts.

The miner said today that production of its biggest money-spinner would now reach 217 million tonnes in the 2014 financial year rather than 212 million tonnes.

It is the second time this year that BHP has improved its iron ore production guidance and it came as full year coking coal guidance was also raised.

BHP said the lift in iron ore expectations was enabled by a March quarter that saw a “relatively limited impact” from wet weather and cyclones.

That comment was a surprise after Rio Tinto’s iron ore production from the same region was weaker than expected on the back of weather delays.

BHP produced 49.5 million tonnes of iron ore from the Pilbara in the March quarter, slightly better than analysts had expected.

The company enjoyed the benefits of a ramp-up in production from its Jimblebar mine, and its continued focus on incremental gains through efficiency and debottlenecking.

Baillieu Holst analyst Adrian Prendergast said the increased production guidance was a ”great result for a division that represents roughly half of company earnings”.

The iron ore price rose slightly overnight from $US117 per tonne to $US117.10 per tonne.

BHP’s Queensland coking coal mines might be operating in a tough, low commodity price environment, but that hasn’t prevented an increase in production guidance there either.

Guidance had previously been set at 41 million tonnes for the 2014 financial year, but that was a cautious target designed to allow for interruptions during the March quarter, when mines are often affected by wet weather and cyclones.

Having now come through that period largely unscathed, BHP’s leadership felt comfortable increasing full year production guidance to 43.5 million tonnes.

The major negative from the quarterly results was a 2 per cent reduction in petroleum guidance on the back of weaker than expected production from BHP’s US shale assets.

The Hawkville area in the Eagle Ford was specifically named for poorer than expected recoveries.

Full year guidance for copper was maintained at 1.7 million tonnes despite improved performance at Escondida in Chile.

Results were mixed across the division, and both Antamina and Olympic Dam will produce at below optimum levels in the remaining three months of the financial year.

But the miner announced that the official mineral resource at Escondida – which is already the world’s biggest copper mine – has increased by 28 per cent on the back of brownfield drilling.

BHP considers its business to be built on four pillars; iron ore, coal, copper and petroleum, but the company is considering a possible fifth pillar in the shape of the Jansen potash mine in Canada.

But the miner demonstrated it was in no hurry to develop that fifth pillar, having proceeded much slower than expected on development of Jansen thus far.

BHP now expects to spend $US600 million on development of Jansen in the 2014 financial year, rather than the $US800 million that was originally forecast.

“We will continue to modulate the pace of development as we seek to time our entrance to meet market demand,” the company said in a statement, adding that it expects the mine to properly ramp-up after 2020.

There was little further guidance from BHP with regard to the company’s divestment campaign.

Fairfax Media reported earlier this month that a demerger of non-core assets was looming as the main option for BHP to divest of divisions like nickel, aluminium and possibly manganese among other assets.

BHP said further production capacity would be curtailed from its struggling aluminium division, particularly at Alumar in Brazil. The Bayside smelter in South Africa is also likely to close in the near future.

Mr Prendergast said there were few highlights from those non-core divisions in today’s production report.

”BHP’s alumina, aluminium, manganese ore and alloys, and nickel production were all down on the previous quarter in terms of production and mostly down year-on-year,” he said.

BHP shares last traded at $37.78, and Mr Prendergast said the stock was “not expensive” at that price.

The release of March quarterly reports continues on Thursday with Evolution Mining and Sandfire Resources due to report.

BHP Billiton’s $20bn spin-off plan welcomed

Investors have welcomed news BHP Billiton is considering spinning off many of its non-core assets including aluminium, nickel and bauxite in a transaction that could create a new $20 billion resources company that would be handed back to shareholders.

It is understood that a team advised by investment bank Goldman Sachs has been working on Project River, which is examining a number of strategic options for assets that do not provide adequate returns to shareholders including a demerger.

The market reacted positively to the news – broken by AFRcom on Tuesday afternoon – with dual-listed BHP shares finishing Tuesday’s trade in Australia up 5&t at $37.05.

“BHP has a heap of non-core assets that could/should be divested,” said Commonwealth Bank analysts Andrew Hines. “A demerger is a fast way of doing that – makes sense.” BHP chief executive Andrew Mackenzie is determined to streamline the resources gjant as part of his “four pillars” strategy, focusing on iron ore in the Pilbara, US petroleum, copper in South America and coal in Queensland’s Bowen Basin. Potash remains a potential fifth pillar.

Many of the businesses now considered “non-core” became part of the $189 billion company when it merged with South Africa’s Billiton in 200L These Billiton assets, such as energy coal in South Africa and aluminium assets, now account for less than 10 per cent of the combined company’s earnings. It is understood Australian assets such as bauxite, manganese, alumina, Canningtonzinc mineas well as the nickel division purchased during the $9.2 billion acquisi

tion of WMC Resources in 2008 could be spun off.

Itwas widely thought BHPwould continue to sell individual assets as part of

efforts to reduce net debt to $US25 billion.

But sources close to the process said the demerger option “had gathered momentum” with senior BHP executives actively considering potential listings on the Australian, London and South African stock exchanges for the new company. However, the sources said no final decision had been made and stressed the project

had been running for more than a year without a conclusion.

“Wecontinuetoactively study thenext phase of simplification, including structural options, butwillonlypursueoptions that maximise value for BHP Billiton shareholders,” the miner said in response to the AFRcom article.

Up(teted! BHP is considering spinning oft including aluminium nickel and bauxite in How the Financial Review broke the story on at 1.31 pm.

“Any course of action remains subject to detailed review and an assessment of alternatives.” It is understood there are still deliberations about what assets would be included in any sale or demerger process if it were to go ahead. Some observers argue the company’s energy coal assets in the NSW Hunter Valley should be included.

“This work quite rightly should be Continued plO 7-7 Chanticleer back page

Base metals Andrew Mackenzie has made it clear his ideal BHP is sustained by top ! tier, long-life

resources with product and geographical diversity.

Matthew Stevens p34

A name for the new group could be Billiton Mark 2.

, Many of the assets I being discarded by BHP are the ones it acquired in its 2001 merger with Billiton.

Jamie Freed p!0

Dumped How BHP Billiton could split into core and non-core assets Cannington WA iron ore Likely to keep Likely to shed Escondida copper Manganese Gulf of Mexico Colombia Coal North West Shelf Cerro Matoso Earnings 2013 (SUS) Bass Strait UK Petroleum $19.82bn Olympic Dam South Africa Coal US shale gas NickelWest Other petroleum Aluminium Brazilian iron ore Alumina NSW coal

From page I BHP Billiton’s spin-off plan welcomed buyers are harder to come by therefore listing them as an alternative to a trade sale becomes a real possibility,” said Tim Schroeders, a resources fund manager at Pengana Capital.

“Even if you don’t realise the price you want, if you are selling to your existing shareholders they can’t complain that you have sold them something too cheap.” Mr Schroders said Australian investors would not miss the fact a spin-off of BHP’s aluminium, manganese and nickel assets would create a listed company that was similar to the structure of Billiton prior to the 2001 merger.

“It would rightfully call into question the validity ofitandsomeof thekudos people got for it at the time,” he said.

“It would also put a big spotlight on the terms that were struck at the time which in hindsight would appear to have clearly disadvantaged BHP shareholders.” While the likes of Rio Tinto have struggled to attract genuine interest during some assets sales over the past 18 months, there are signs the investment cycle could be turning.

An investment founded by former Billiton executive Mick Davis, X2 Resources, this week raised $US2.5 billion of committed equity capital, and a further $US1.25 billion of conditional equity capital to invest in mid-tier mining and metals assets.

Mr Davis was briefly chief financial officer at BHP Billiton before leaving to set up Anglo-Swiss miner Xstrata.

“We believe the timing for this venture remains very opportune and we will now focus increased attention on starting the investment process,” Mr Davis said.

Mr Davis has identified BHP’s Nickel West division and some of Rio’s Australian coal projects as potential targets.

According to Deustche Bank analyst Paul Young, BHP has the potential to make $US25 billion of asset sales.

Chief financial officer Graham Kerr and Graeme Devlin, who is BHP’s UKbased head of mergers and divestments, are two of the executives involved in Project River. Paul Perry, a former Goldman banker based in Australia for BHP, is also involved.

It is believed the findings of Project River could be put to the board at its April or May meetings. Directors met

last week in London.

Mr Hines has long argued that a

demerger would make sense for BHP.

“BHP continues to own a number of assets that we would consider ‘noncore’ and has reasonably well flagged that the new Aluminium, Manganese and Nickel division is a warehouse for assets that it is running for cash, and would willingly divest if a reasonable offer was made,” he wrote in October.

“At the time of the merger, the rela

tive value of the two businesses was 56 per cent BHP and 44 per cent Billiton. Today, the Billiton assets only contribute 6 per cent to group earnings and all of mem could be considered non-core.” Demergers are often well-received by the market. BHP chairman Don Argus was backed by shareholders

when he decided to spin-off his steel businesses, OneSteel and BlueScope Steel, in the early 2000s.

A recent UBS study showed the past 13 significant demergers had outperformed the benchmark index by 8 per cent in the one-year postthesplit It is understood the Project River team also considered unwinding BHP’s dual listing structure – the company is listed in Australia and Britain – but decided the process, known as “unification” would be too complicated.

“As we have said previously, the simplification of our portfolio is a priority and is something we have pursued for several years,” BHP said on Tuesday.

“In the last two years alone, the Group has announced or completed divestments in Australia, the United States, Canada, South Africa and the United Kingdom, including petroleum, copper, coal, mineral sands, uranium and diamonds assets.

“We continue to actively study the next phase of simplification [but] any course of action remains subject to detailed review and an assessment of alternatives.” Mr Mackenzie has also promised an update on the future of BHP’s massive Olympic Dam uranium, copper and gold mine in South Australia in the fourth quarter of this year.

It is understood Olympic Dam remains a core asset for BHP and is not part of project river.

In the last two years alone, the Group has announced or completed

divestments in Australia, the United States, Canada, South Africa and the United Kingdom.

BHP Billiton

BHP’s 100% FIFO policy poisoning support for Coalition

FURY over Central Queensland mines recruiting entirely from beyond their regions could poison support for the Coalition, as Federal MPs turn on their state counterparts.

The fight is over two BHP Billiton Mitsubishi Alliance coal mines – Caval Ridge and Daunia near Moranbah – which will not hire local workers, using 100% fly-in, fly-out commuters instead.

The now-operating Daunia mine and soon-to-be finished Caval Ridge hired about 1000 workers, but only if they lived within 100km of Brisbane or Cairns.

>> Read BMA’s Letter to the Editor disputing claims about their FIFO arrangements.

Although the former Bligh Labor Government opened the door to the arrangements, the industry downturn and subsequent job losses are increasing local frustrations.

There are reports of would-be workers moving to the Sunshine Coast in the hope of commuting back into their home towns.

Labor state member for Mackay Tim Mulherin on Tuesday described the arrangements as “postcode apartheid”.

Coalition member for Dawson George Christensen and Capricornia’s Michelle Landry represent the towns of Mackay, Rockhampton, out to Collinsville, Moranbah and Dysart – each directly affected by the recruiting policies.

They have met with Queensland Acting Premier Jeff Seeney to ask for action, although nothing was promised.

The two will now meet with BMA top brass a week from now (MAR 17) to discuss their concerns.

Ms Landry said there was a lot of voter anger about the issue which was not going away.

“I think that (the state government) needs to understand this 100% fly-in, fly-out is having a very negative affect on our communities in Central Queensland,” she said.

Mr Christensen said allowing companies to recruit only from certain areas – as supported by Mr Seeney – amounted to “geographic discrimination” and ought to be illegal.

“I have nothing against FIFO workers,” he said.

“But what (BMA) have done is say no one can apply who lives locally and regionally – it’s crazy”.

Mr Seeney said with the Coordinator-General’s approval already given to BMA on Caval Ridge and Daunia, there was little that could be done.

It was not the government’s place to tell workers where they needed to live, he said.

“Mr Mulherin is just the next in a long line of agitators who have tried to make political mileage out of this complex issue,” Mr Seeney said.

If that was true, Mr Mulherin said, why not allow workers to apply from all over Queensland?

Mr Mulherin pointed to changes made by the LNP-appointed Coordinator-General Barry Broe to protect the future of a mining camp in Moranbah last week.

BMA boss Lucas Dow said the company had 4000 workers who lived in Central Queensland communities.

He said rather than advocating changes to the FIFO rules, people should promote Moranbah and other mining towns as worthwhile places to live and work.

BHP takes full control of its iron ore mines

The trend for mining companies to manage their own mines instead of hiring external contractors has continued, with BHP Billiton confirming the last contractor working on its Pilbara iron ore mines will be relieved of its duties.

BHP said it would take full control of an iron ore mine called ”orebody 18” by June, ending nearly seven years of work on the site by mining services company Macmahon.

BHP said Macmahon’s time in charge of the site had been successful and the two companies would work together to ensure a ”smooth transition”.

BHP iron ore president Jimmy Wilson said the change was the final step in making the company’s iron ore division 100 per cent owner-operated.

The past couple of years have seen many mining companies opt to take back control of their own mines rather than use contractors.

Part of the incentive for miners is to lower costs by removing the profit margin that contractors charge, but many miners also believe they are more in control of their safety reputations when they manage their own mines. Over the past six months Fortescue has taken control of its mines in the Pilbara after being concerned about the safety record of one of its contractors.

BHP and Glencore Xstrata have also taken many of their Queensland coal mines in-house in recent years. BHP started the trend in 2011 when it bought HWE Mining, which had been operating some of its Pilbara iron ore mines.

As part of BHP’s move to control orebody 18, the company will suspend operations at the Yarrie mine, which ranks as its smallest in the Pilbara. The move is believed to be linked to productivity and optimisation measures in the Pilbara, where BHP is rapidly expanding its production and exports.

Macmahon shares fell by half a cent to 12.5¢ on Tuesday, but Macmahon chief executive Ross Carroll said his company had a long-standing and positive relationship with BHP, and was already in talks with the miner about other potential contracts in the region.

Macmahon said most of the 200 workers it employed on orebody 18 would be redeployed elsewhere.

BHP shares closed 28¢ lower at $39.10.
Read more:

BMA to slash 230 jobs from Saraji mine in Dysart, central Queensland

ANOTHER 230 jobs from the mining industry will be sacrificed after BHP Billiton subsidiary BMA said it would slash its workforce at the Saraji mine in Dysart, central Queensland.

It adds to about 8000 jobs that have gone from the industry in Queensland in the past two years.

The company said the jobs had to go to ensure competitiveness and the mine’s viability.

BHP Billiton has also been producing record amounts of coal from central Queensland in an attempt to drive down costs.

Just last month analysts were cheering the world’s biggest mining company for “smashing it out of the park” with coal production up 10 per cent. It also claimed it would able to deliver better returns for its shareholders.

But costs have crippled mining companies after many went on a spending spree during the boom.

BMA said an efficiency review found it had too many workers at Saraji.

“There will be approximately 230 employee and contractor roles impacted. Further consultation will occur with employees at the mine to determine how reductions will be achieved,” the company said.

BMA Asset President Lucas Dow said he understood that uncertainty caused by the consultations would be difficult for employees, contractors, their families and the community of Dysart.

Affordable units to house non-mine workers

BHP-Billiton Mitsubishi Alliance (BMA) says new affordable housing properties in central Queensland will be used to lure non-mining workers to the region.

The company, along with the Isaac Regional Council, has built 16 units in Moranbah and Dysart, south-west of Mackay, for low to medium income earners.

BMA asset president Steve Dumble says given the amount of projects his company has in central Queensland, it needs to ensure the local infrastructure can support the demand for large-scale mining.

“We’ve invested a significant amount of money – $100 million over the last two years in a range of community infrastructure,” he said.

“We’re investing on a number of fronts in spite of the tough economic circumstances at the moment because we have a lot at stake.

“We want to make these towns and central Queensland attractive places to work.”

He says the new units will be available for people not working in the mining industry.

“People who are needed to run day care, to perform emergency services functions, to work in the medical area,” he said.

“Those sort of critical functions that towns like Dysart and Moranbah can’t do without.”

Isaac Mayor Anne Baker says council will now look to secure more corporate funding for further housing developments.

“It’s a moving beast – affordable land and accommodation will always be high on our agenda,” she said.

“We’ll be actively seeking other industry partners to come on board with us and contribute.”

She says the council has made a significant contribution to the project.

“Council’s contribution with this housing project was the land, which is valued at $1.36 million and we also had a further investment of land and feed capital funding of $6.7 million,” she said.

“It’s been a large chunk of money and revenue from council that’s gone into the project but that has been coupled and assisted by BMA.”

Big miners regaining favour

Tony Featherstone is a Morningstar contributor and a former managing editor of BRW and Shares magazines. This article was originally published by Investor Weekly, a Sterling publication.

What a difference a few weeks makes. In September, newspaper headlines screamed about the meltdown in iron ore prices, and resource stocks tumbled. Commentators called an “end” to the mining investment boom amid fears that China’s economy was heading for a hard landing.

After tanking to US$88 a tonne last month, the iron ore price has rebounded to US$120 a tonne. Fortescue Metals Group (FMG) this week said it expects the iron ore price to stablise at current prices; Macquarie Equities Research sees a floor of US$115 over the next few years.

The big mining stocks have followed the iron ore price higher. Australia’s third-largest iron ore miner, Fortescue, has stunningly rallied from below $3 in September to $4.07. Macquarie has an outperform recommendation on it.

Rio Tinto (RIO) has jumped from a 52-week share price low of $48.37 to $56.05, and BHP Billiton (BHP) has rallied from an annual low of $30.09 to $33.45. Their prices are still well down on peak levels over the past 12 months, but sentiment has improved markedly from a few weeks ago.

Macquarie has outperform recommendations on Rio and BHP. Its 12-month share price targets of $76 and $39 respectively for Rio and BHP suggest considerable upside and a catalyst for a sharemarket rally in 2013 given the high weighting of these stocks in the S&P/ASX 200 index.

Several small and mid-size resource stocks are also starting to rally, after heavy falls this year.

Solid quarterly production reports from the big miners have also buoyed investors, and reports last week of better-than-expected Chinese export data led to calls that its economic slowdown may have bottomed.

A resumption of stronger Chinese growth would support higher commodity prices and potentially higher share prices of leading ASX-listed resource stocks.

Mining services stocks with heavy iron ore exposure, such as NRW Holdings (NWH), also rallied this week after sharp falls in recent months. Tumbling iron ore and coal prices raised fears that more mining projects would be cancelled or deferred, in turn leading to less work for service providers.

Conditions are not as strong as a year ago, but fears about some mining services stocks may have been overstated.

Coal mines sue union for $2.4m

QUEENSLAND’S most powerful mining union is being sued by nine central Queensland coal mines for almost $2.4 million.

The Construction Forestry, Mining and Energy Union’s mining and energy division is facing allegations from BHP Billiton Mitsubishi Alliance that one of its safety representatives abused his post, illegally forcing the mines to halt operations.

BMA claimed the stoppage on February 22, 2010, lasted between six and eight hours at its mines, costing it hundreds of thousands of dollars in lost wages and coal sales.

For Moranbah’s Goonyella Riverside, BMA believes the work shutdown cost more than $144,000 in wages alone.

In documents submitted to the Federal Court in December, BMA alleged CFMEU Industry Safety and Health representative Tim Whyte unlawfully shut down the mines believing a new fatigue plan from BMA was unsafe for its workers.

According to its claim, mine executives and the Queensland Government’s Chief Inspector of Mines asked Mr Whyte to withdraw the orders, but BMA believes those were dismissed.

The documents indicate the chief inspector eventually cancelled the orders himself.

Because BMA’s case includes claims the union’s divisional president Stephen Smyth endorsed the shutdown, Mr Whyte and Mr Smyth are also subject to the case as individuals.

Safety representatives are endowed by the Coal Mining Safety and Health Act with the power to immediately stop work for a “safety and health purpose”.