Junior miner Atlas Iron to restart production at Mt Webber

Junior miner Atlas Iron will restart production at its Mt Webber mine in Western Australia’s Pilbara in July.

It expects the Mt Webber project to produce 6 million tonnes of iron ore per year for more than eight years.

In a statement issued by the ASX, Atlas said it would pay its contractor BCG Contracting between $17.1 million and $19.6 million in shares and cash to cover the termination costs of its Wodgina mining contract.

It will also cover the suspension, remobilisation and other costs for the Mount Webber mine.

Under the revised agreements, Atlas and BCG are aiming for cost savings of between 10 and 12 per cent, meaning the company’s break-even price would be approximately $US50 per dry metric tonne of iron ore.

That is compared to today’s market ore price of $US61.50.

Last month, Atlas announced it had reached a deal with its contractors to allow it to bring its three Pilbara mines back into production, after the tumbling iron ore price forced the company to halt production in April.

It also accepted a royalty relief package from the West Australian Government worth $12.5 million.

By Irena Ceranic


Notice to remove illegal dongas issued in Pilbara mining town Paraburdoo, WA

Illegal accommodation is to be removed from the mining town of Paraburdoo, in WA’s Pilbara, and other towns – including Onslow and Tom Price – have been given notice they will also be audited.

The workers’ dwellings, called dongas, were developed on some industrial sites in recent years due to a lack of accommodation and residential land, according to the Shire of Ashburton.

A recent council inspection showed that 11 out of the 22 lots in Paraburdoo’s light industrial area had unauthorised accommodation, ranging from two to 12 rooms per lot, with rooms containing various combinations of bed and bunk provisions.

Paraburdoo was set up by miner Rio Tinto, which still provides some of the town’s main infrastructure, such as power and water.

Ashburton Shire chief executive Neil Hartley said the council would liaise with land owners and lessees to remove illegal dongas and other accommodation.

He said they would be given until the end of March next year.

“When there was no accommodation available, there was a real dilemma as to how to address it,” he said.

“This has been something that has been occurring for a number of years, and particularly during the boom times of mining where construction or production is key and staff are critical.”

Illegal accommodation widespread in Pilbara

Mr Hartley said Paraburdoo was not the only town affected.

“This occurs in every industrial area across the Pilbara as far as I am aware,” he said.

Mr Hartley said the council had been in contact with Rio Tinto.

“The unusual situation for us in regard to Tom Price and Paraburdoo is that the vast majority of the land in those towns is owned by Rio Tinto, and the water and sewerage supplies and electricity supplies are also provided by Rio Tinto, so it’s not normal when you consider it against many other towns in WA,” he said.

“Rio Tinto have said they are happy to endeavour to offer vacant blocks they have in Paraburdoo, and they have about 40-odd, I understand.

“So they have said we are happy to make available some of those blocks for either businesses or investors to build residential accommodation on for these people, and that will allow them to move out of the industrial area.”

Mr Hartley said the offer could be a solution.

“When there was no accommodation available there was a real dilemma as to how to address it, now there appears to be a solution, in that land is there and we just need to now link the industrial land owners to the land and/or investors, and we should be able to address this problem over the next several months,” he said.

“In Paraburdoo there were virtually no other options left for the industrial people to take, other than to not engage in the business of a contract with whomever they were contracting to, to provide that service.”

Land offer may resolve issue, but time lag involved

Mr Hartley said any change to the housing situation would take time.

“It doesn’t make it right that this has ever happened but we have now got a solution to the problem and there will be obvious repercussions here; somebody has to build a house, somebody has to rent a house, time has to be taken, costs will be incurred, but it’s simply not appropriate for people to live on an industrial piece of land,” he said.

“There was a risk taken by the council of the day to try and find that solution, because you know if an accident did occur there would be some liability perhaps sheeted home to the shire and the council.

“But they were keen to try and work with all of the various parties to find a workable solution and, in Paraburdoo’s case, hopefully we have found it in that Rio Tinto has offered some of its land.”

A Rio Tinto spokeswoman has confirmed the company has had preliminary discussions with the shire regarding the matter, but says the talks are at an early stage.

Yara Pilbara chooses families over FIFO

Yara Pilbara has announced a new recruitment drive aimed at attracting workers and their families to WA’s north-west with sweeteners that include free housing, international training and a family friendly roster.

In direct contrast to the fly-in-fly-out phenomena, Yara Pilbara is constructing 60 homes in Karratha for new employees and their families.

Chief Executive of Yara Pilbara, Mark Loquan says the practice of “living local” is better for workers as well as the company.

“We believe having our people here in Karratha, in close proximity to our plants makes sense for us. It promotes continuity in our operations, and for those of our team members with families it means they can be together and share in being part of a larger community,” Loquan said.

Yara Pilbara is the operator of one of the world’s largest ammonia production facilities located south of Karratha.

The company is also currently building an $800 million technical ammonium nitrate (TAN) plant on the neighbouring site.

The joint venture operation, run with Orica and Apache, is expected to begin producing around 330 000 tonnes of AN annually by mid 2015.

Yara will be the operator of the plant while Orica will manage sales and distribution.

Site preparation works at the plant began in November 2012.

In addition to providing housing for the plants employees, the Norwegian-owned company will be offering overseas training opportunities to some of the new hires in countries including Spain, Chile and Sweden.

Twenty-nine year old father of three, Jonathan Luck moved his family to Karratha from Western Sydney to work on Yara Pilbara’s ammonia plant about twelve months ago.

“I couldn’t do fly-in-fly-out. Working for Yara, I’m fifteen minutes from home, I’m home every night and home on the weekends. You just can’t beat the lifestyle” said Luck.

Luck signed on with Yara Pilbara after being retrenched by Shell when the company shut its Sydney refinery.

He says the closure of Shell, in addition to the slowing manufacturing sector in NSW, meant that job opportunities were drying up in Sydney, prompting him to look for work in either Queensland or Western Australia. He says moving to Karratha was the right decision.

“We’re five minutes to the beach here, whereas in Sydney we were over an hour and a half away. We used to be half an hour from Woolworths and Coles, but here we are five minutes away. We just love the lifestyle, we are so close to everything” Luck said.

Yara said Karratha is quickly becoming a destination of choice for families due to significant investment in the town’s infrastructure in recent years.

It says the Karratha Leisureplex is popular with locals for its swimming pools, gymnasium and aqua-play facilities.

While the town has also invested in new schools, childcare facilities, sporting clubs and cafe’s, and is in close proximity to a number of pristine beaches.

Jonathan’s wife Vanessa is a stay-at-home-mum to four-year-old Genevieve and two-and-a-half year old twins William and Josephine. She says they are happy in the town.

“It’s a great place for families. There is so much to do up here and it’s a brilliant place to raise kids. It has a real community spirit. Genevieve goes to dancing and swimming lessons and the twins go to aqua-tots” Luck said.

Yara is currently seeking to hire fifty people in its next wave of recruitment, to work on the TAN plant, currently under construction. The company is looking for shift superintendents and operational staff.

Some of the new recruits will visit Madrid in Spain for four weeks of theoretical training, Chile for two weeks and Sweden for two weeks of plant operational training.

“Yara is part of a global company which has developed stringent and continuously increasing safety standards over a century of experience which are applied to each location around the globe” Loquan said.

Yara Pilbara is the subsidiary of Yara International ASA, which is the world’s largest producer of ammonia and a world leader in the production of TAN. The company has had significant experience in operating TAN plants since 1965 and has an excellent track record in safety and innovation.

Yara International ASA has operations and offices in more than 50 countries and sales to more than 150 countries across the globe.

Despite Yara International ASA being well recognised overseas, Luck had never heard of Yara Pilbara before he was approached by a recruiter. He encourages others to apply for the positions on offer.

“Definitely come and have a look and you’ll be pleasantly surprised.  There’s boating, fishing, four-wheel-driving, there are so many activities and fantastic facilities. Once you get here you realise Karratha has a strong community and is a really great place to live” Luck said.

Anyone interested in finding out more information or applying for a position can visit www.yara.com


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: http://www.smh.com.au/business/bhp-takes-full-control-of-its-iron-ore-mines-20140225-33fqw.html

Pilbara’s tantalum project proves positive

PERTH (miningweekly.com) – A feasibility study for junior Pilbara Minerals’ Tabba Tabba tantalum project, in Western Australia, has estimated that the project could be in production by the third quarter of this year, subject to funding.

At a capital cost of some A$3.9-million, of which A$1.5-million had already been spent, the project was expected to deliver 256 000 lb of tantalum in its first full year of production.

Life-of-mine production over the 19-month mine life was estimated at 365 000 lb.

The project would have a net present value of some A$14.4-million and an internal rate of return of 162%.

“The completion of the feasibility study is a significant milestone, with the positive results clearly demonstrating the Tabba Tabba project’s high grade and quality concentrate will deliver a technically and financially robust project,” said Pilbara Minerals executive and chief geologist John Young.

“Based on the results of the study, Pilbara Minerals and its joint venture partner Nagrom intend to fast-track the development of the Tabba Tabba project, subject to the completion of project financing.”

Young said that the project would deliver a steady source of cash flow for at least the next two to three years, with the potential for future growth from a number of sources, including the development of the nearby Strelley project.

The Tabba Tabba project currently has a Joint Ore Reserves Committee-compliant resource of 133 000 t, at 1 290 parts per million tantalum.

Fortescue’s $1.15bn deal gets Pilbara project up and running

Fortescue Metals closed a $1.15 billion deal on Friday with Taiwanese steel firm Formosa Plastics which will see its FMG Iron Bridge project get off the ground.

Formosa will join a partnership agreement, created 14 months ago when Fortescue struck a deal with Chinese steel major Baosteel.

FMG Iron Bridge was scheduled to float on the Hong Kong Stock Exchange last year, but was put on the back burner when iron ore prices plummeted in late 2012, SMH reports.

Under the new deal, Formosa will dish out $123 million to secure 31 per cent of a new partnership with FMG Iron Bridge, and will fund the first $US527 million ($576 million) to construct the stage one of the Pilbara project.

The project, located about 100 kilometres south of Port Hedland in WA includes the North Star and Glacier Valley iron ore deposits, estimated to have a combined iron ore resource of 5.2 billion tonnes.

Formosa has also agreed to purchase 3 million tonnes of iron ore a year from Fortescue at market prices and if stage two of the FMG Iron Bridge project is approved it will participate.

The company has also agreed to make an upfront payment of $500 million to Fortescue to secure access to its port and rail assets in the Pilbara. The prepayment demonstrates customers are will to pay substantial sums to access the company’s infrastructure.

Fortescue has been considering selling off its stake in its Pilbara port and rail assets, but is also battling smaller miners who are attempting to gain access to its railway under third-party access laws.

The asset sales were earmarked amidst a high Australian dollar and low iron ore prices, a situation which sparked debt issues for the company.

But the company’s financial position has since been assisted by the Aussie dollar dropping below parity with the US and the stabilisation of iron ore prices.

Fortescue chief executive Nev Power said the deal will strengthen the company’s balance sheet and when asked it The Pilbara Infrastructure (TPI) sale would go ahead he remained non-committal, SBS reports.

“TPI transactions will only proceed on the basis that we get full market value for those assets and get it on terms that allow us to continue to operate our network efficiently,” he said.

He added that the sale of “non core assets” is helping the company meet its debt obligations with increasing speed.

Power explained that granting Formosa access to the infrastructure is completely separate to the third-party access processes, but the move does send an important message.

”What I think it does do very clearly is demonstrate the tremendous value that is in the infrastructure we built, it’s world-class infrastructure, it’s highly efficient and highly productive,” he said.

Power added that additional joint venture partners could be brought into the project, flagging Fortescue is aiming to lower its 61 per cent stake in the assets.

”We want to maintain a minority interest in the project, but with an interest now effectively at 61 per cent we do have some further opportunity, and of course we are 88 per cent within FMG Iron Bridge so there is certainly an opportunity for further investment by others in the project,” he said.

Stage one of the project is expected to take 12 months of construct, with first production expected in early 2015.

The first stage will see 1.5 million tonnes of hematite exported, with the second stage ramping up to see 9.5 million tonnes of magnetite concentrate piped to Port Hedland for export.

The deal is subject to approval from both Australian and Taiwanese regulators.


Rio Tinto to Go Ahead With $5B Pilbara Expansion Despite Weak Price for Iron Ore

The world’s second-largest miner, Rio Tinto (ASX: RIO) will push through with its $5 billion plan to expand the Pilbara iron ore mine despite the lower price of iron ore in the international market. The mining giant has planned the expansion in 2011.

The decision to push through is because of Rio’s target to produce 360 million tonnes of iron ore per annual. Although shareholders had been pushing Rio to preserve the money and hold expansion, Rio Chief Executive Sam Walsh told analysts in London the Pilbara mine expansion Is inevitable, but the mining giant still needs to specify the timetable under the current plan which the Rio board will deliberate for approval in November.

He said Rio could be flexible with the planning in terms of timetable for the completion of the venture.

“What will drive the expansion will be what the market demands physically. We are going to be very rational and logical about this to ensure we are delivering value to shareholders and not just proceeding with something because it’s on the books,” Mr Walsh explained.

Analysts believe Rio would approve the Pilbara expansion before the end of 2013.

However, the plan by Rio to mine the Koodaiden deposits would likely be opposed by environment groups because it lies next to the Karijini National Park. The mine is about 100 km west-northwest of Newman, and has the potential to produce 35 metric tonnes per year which could even rise to 70 by 2030.

Rio plans to mine the area with a sequence of open cuts. Most of the puts are above the water table with only minor dewatering needed.

Iron Ore Holding gets project approval in Pilbara

Australian Mining reported that Pilbara iron ore junior Iron Ore Holdings has been given the go ahead for its Iron Valley Project mining proposal.

The WA Department of Mines and Petroleum approved the proposal for above water table mining in the central Pilbara area, along with the water licence needed for long term operations at Iron Valley. The approvals make up IOH’s responsibilities as stipulated in an agreement with Minerals Resources in February this year.

IOH announced an upgraded resource of 160 million tonnes at its Valley Project in 2009. This was 80% over the company’s earlier announcement of 88 million tonnes.

Mr Alwyn Vorster MD of IOH said that the two approvals are an important step towards the company generating revenue through the mine gate payment structure. The Iron Valley approval is the second approval for mining operations, which IOH secured in a relatively short period with the Phil’s Creek development currently under way by MIN. It is further evidence of IOH successfully executing its find, de risk and monetize strategy at relatively low risk to its shareholders.”

Mr Vorster said that “With the Iron Valley Project now advancing towards development, the next key focus for IOH will be securing Buckland Project funding solutions with a selected project partner and finalizing the Cape Preston East port lease agreements with the Dampier Port Authority.”

Source – Australian Mining

Australia’s Waning Boom Saps Mining Area Home Demand: Mortgages

After slashing the price of three planned townhouses by a third in the coal-mining town of Moranbah in remote northeastern Australia, agent Ricardo Baggio still can’t find buyers.

“No one’s got confidence,” said Baggio from broker Ray White Group’s Townsville franchise, about 550 kilometers (341 miles) north of Moranbah in Queensland state. “There are a few mines around the town but they’re not hiring or they’re downsizing.”

Home prices in Australia’s isolated mining towns, which outpaced increases in the rest of the nation over the past decade, are falling as companies such as Glencore Xstrata PLC (GLEN) and Peabody Energy Corp. delay projects and lay off workers amid a slowing resources boom. The percentage of homeowners more than 30 days behind on their mortgage payments in Gladstone, a Queensland coastal town near more than $60 billion of gas projects, was 0.94 percent in March, according to Fitch Ratings, a 71 percent increase in six months.

The Moranbah townhouses, which will be built on a flat, sparsely landscaped street about 1 kilometer from the center of town, are on the market for A$525,000 ($478,485) each, down from an initial price of A$750,000, said Baggio. The median price of a home in Brisbane, the state capital, is A$425,000.

Prices in mining regions could fall as much as 30 percent from a first-quarter peak, real estate-data company SQM Research Pty forecasts.

Demand for housing in central Queensland and Western Australia state’s arid Pilbara region, the nation’s two biggest mining areas, is waning as record investment in resources peaks even as property developers keep building more homes. About A$150 billion of mining and energy projects have been canceled in the past year as commodity prices declined, according to government figures.

Population Drops

“We expect we’ll see an abrupt dropoff in population flows in mining towns,” Sydney-based Matthew Hassan, senior economist at Westpac Banking Corp. (WBC), said in a telephone interview. “How that plays back to housing is extremely complex. But we know the direction: down.”

In Western Australia, while only 1.6 percent of borrowers were late on their home-loan payments in March, “vulnerability in the mining sector and associated projects could result in an increase in arrears during the year,” ratings company Standard& Poor’s said in a March 31 report.

Significant Fluctuations

In Queensland’s Isaac region, which includes Moranbah, home prices tumbled 43 percent in the year to April, and rents slumped 69 percent, according to Sydney-based Australian Property Monitors.

Moranbah, about 1,000 kilometers inland northwest of Brisbane and home to more than 8,000 people, is near coal projects owned by BHP Billiton Ltd. (BHP), Anglo American Plc (AAL) and Rio Tinto Ltd. (RIO) BHP last year closed part of its Gregory coal mine, south of the town, and in February said it wants to sell the mine. Anglo American Chief Executive Officer Mark Cutifani said June 26 that the outlook for coal mining is “grim.” An index of hard-coking coal has more than halved since January 2011, when it peaked at $365.83 a metric ton, according to data from Energy Publishing Inc. compiled by Bloomberg.

Mining towns “are prone to significant fluctuations in property valuations, often driven by a combination of changes in the resource market and the shifting need for accommodation for mining workers,” Michael Savery, chief risk officer at QBE Insurance Group Ltd.’s Lenders Mortgage Insurance unit, said in an e-mail. They “require monitoring at either end of the property market cycle.”

Rockhampton Value

In Gladstone, about 500 kilometers north of Brisbane, property prices are falling as buyers find better value elsewhere. The median home price has fallen 4.6 percent in the year through April to A$450,500, while in Rockhampton, 116 kilometers further north in a region that is dominated by livestock grazing, it has risen 5.4 percent over the past year to A$350,000, APM said.

Housing markets in mining towns “have gotten ahead of themselves in terms of fundamentals and we’ve had a speculative market,” said Andrew Wilson, senior economist at APM. “A lot of potential buyers, especially those employed in the region, are looking at less expensive markets, like Rockhampton.”

House and apartment prices across Australia’s major cities rose 3.8 percent in June from a year earlier, according to the RP Data-Rismark home value index, after the Reserve Bank of Australia lowered its key interest rate by 2 percentage points between late 2011 and May to a record low 2.75 percent.

Pilbara Weakness

Australia had 73 committed mining projects under development in April, 14 less than in October, according to a May report by the Bureau of Research and Energy Economics. The number of people employed in Australia’s mining industry was 6 percent lower in May from a year earlier, government data shows.

Glencore Xstrata, the world’s biggest shipper of coal, halted work on the Balaclava Island export terminal, about 40 kilometers north of Gladstone, in May and cut 450 coal mining jobs in June. It said this month it will suspend production at its magnetite iron ore operation near Cloncurry, about 1,300 kilometers west of Gladstone in inland Queensland.

Across the country, more than 5,000 kilometers west by road from Gladstone, in the Western Australian shire of Roebourne, rents have plunged 22 percent in the 12 months to April, while the median house price has slipped 3.5 percent to A$796,000, APM figures showed.

Roebourne includes Karratha, the biggest town in the Pilbara, a 193,000-square-mile area in Australia’s northwest that is the world’s largest iron ore exporting region.

The recent home price declines in the Pilbara follow average annual gains of almost 20 percent for the past 10 years in the two coastal towns of Karratha and Port Hedland, according to data from the Real Estate Institute of Western Australia.

Aspen Group

Aspen Group Ltd. (APZ), a Perth-based property investment company, said July 5 in a regulatory filing that it reduced by 13 percent the valuation of its 180-unit Karratha Village accommodation facility to A$50 million in December, reflecting“a reduced demand for workforce participation.”

Shares in Aspen are 22 percent lower this year and closed at 17.5 Australian cents on July 19.

The price of iron ore fell 31 percent from a 16-month high in February to a low of A$110.40 on May 31.

Pilbara Cities

The Western Australian government introduced the Pilbara Cities initiative in November 2009 to boost supply of land, housing and infrastructure in the region. It seeks to build Karratha and Port Hedland into cities of 50,000 people by 2035. That compares with the 2011 census that recorded 16,475 people in Karratha and 13,772 in Port Hedland.

As part of the initiative, Mirvac Group (MGR), Australia’s third-largest diversified property trust, is proposing to build the Mulataga community in Karratha, containing 2,000 homes.

“We look at Karratha as a sustainable city and the growth of that city over time as a permanent city,” said John Carfi, head of residential at Sydney-based Mirvac, which is working with the state’s land developer Landcorp on Mulataga.

The Mulataga plan received approval from the Shire of Roebourne in May and is awaiting state planning commission approval.

The number of homes for sale in Karratha rose to 265 in May from 219 a year earlier, SQM said.

Further Declines

“We haven’t hit the bottom of the market yet,” said David Hipworth, principal of broker LJ Hooker Corp. in Karratha. “If we keep going the same way we have so far, in 12 months, I expect another 25 percent drop in rents and 10 percent in prices.”

The April median home price in Port Hedland was A$1.1 million, APM data show. That compares with 448,443 pounds ($677,508) in the greater London area in April, according to LSL Property Services Plc and $346,300 in New York City in May, figures from real estate data provider Zillow Inc. show.

“We like to see these prices fall,” said Ken King, chief executive officer of the Pilbara Development Commission, which is responsible for implementing the Pilbara Cities plan. “And we’d like to see the trend continue, even though this doesn’t sit well with a lot of recent investors.”

About 240 kilometers north along the coast from Karratha, rental vacancies in Port Hedland jumped to 4.6 percent in May from 0.9 percent a year earlier, compared with a national vacancy rate that rose to 2.1 percent from 1.8 percent a year ago, according to SQM.

BHP shelved a A$22 billion harbor expansion plan for Port Hedland in August in favor of a low capital-cost program of improving port and rail operations. CEO Andrew Mackenzie in May said the company plans to cut capital spending 18 percent to $18 billion in fiscal year 2014 and said about 80 percent of construction on its major projects will be completed in the same time frame.

Apartment Buildings

Australia’s resources industry directly employed 261,000 people in May, 2.2 percent of the nation’s total workforce, compared with 12 percent in health care and 11 percent in retail services — the two largest industries by employment, government figures showed.

Outstanding loans in Australia’s mining areas represent about 1.5 percent of all mortgages underlying residential mortgage-backed securities, S&P said in a report in September.

Perth-based developer Finbar Group Ltd. (FRI) is building Karratha’s first high-rise apartment development, Pelago, in the center of town. All but 15 units in the 114-apartment first phase, which was finished about a year ago, have been sold, Robin Schneider of McGees Property, the exclusive selling agent for the project, said in a telephone interview. In the second phase, 81 of the 174 units that are expected to be completed next year were pre-sold as of June 2, he said.

“Obviously the resources sector is getting a lot of attention, which will no doubt have a flow-on effect to confidence and market sentiment,” Darren Pateman, managing director of Finbar, said in an e-mail.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Rob Urban at robprag@bloomberg.net


Iron ore boom town burns homeowners

For years the resources boom made Port and South Hedland one of the tightest property markets in Australia.

Now, the cancellation of big projects could leave the remote West Australian city with a property glut and a lot of burned investors.

Hundreds of homes have been placed on the market in neighbouring towns. For the first time in years rental properties are freely available.

The impending fallout is linked to a pullback in major resources-related construction projects that formerly filled the towns’ private housing, delivering landlords yields above 10?per cent.

Greg and Karen Thompson pulled their home off the market in Hedland after just one viewer inspected the house over three months.

“We had to take it off the market,” Mrs Thompson said. “It’s dead.”

The couple, who have lived in the area since 1996, planned to use the proceeds to help fund their retirement.

Mr Thompson said he would now continue to work as a train driver at BHP for another year before testing the market again. “I am hoping things change after the election is out of the way,” the 55-year-old said.

Even though iron ore exports continue to grow, the end of the construction project boom that requires a large work force means there is less interest in housing and equipment, which now lies idle.

In 2010, Port Hedland residents could expect to pay about $1500 a week for a steel-framed and clad house to secure a property near one of the busiest mineral ports in the world.

The high-risk, high-return market now has about 300 properties for sale in Port and South Hedland, according to property searches.

One of the region’s most active employers, BHP Billiton, has pulled many of its workers out of private housing and into existing work camps after it shelved plans to construct a major outer harbour development at Port Hedland.

John Briggs of Port Hedland Real Estate predicts tough times ahead. “Sales are few and far between,” he said. “Anybody who has bought in the last 18 months is in for a torrid time.”

A banking source said lenders would require potential buyers to have about 50 per cent equity to buy into the former mining hot spot, rather than the 10 to 20 per cent required in stable markets.

Marketing brochures for the region have targeted investors seeking a highBoom towns leaves return through rents, such as retirees.

Economic data last week hinted that the economic and jobs engine room of the country was either experiencing subdued growth or even contracting in the December and March quarters.

“Clearly the economy has slowed from a very, almost over-heated level of activity,” he said.

“We are returning to more normal conditions,” said West Australian Premier Colin Barnett. “There are still major resource projects in construction or going into construction and this economy will continue to be strong.”

The severe cycles of a mining state have been felt in other regions, such as the Geraldton suburbs that were expected to cater for workers on the long-delayed Oakajee Rail and Port project. Suburbs like Drummond Cove, located just south of the proposed Oakajee port site, are saturated with properties for sale.

Gavin Hegney, of valuers Hegney Property Group, said the construction phase of the resources boom that drove property prices higher had clearly subsided. “Anyone looking to buy into towns like Port Hedland is buying at the wrong end of the market cycle,” he said.

“There’s also the threat of a collision of new supply coming on the market and falling demand.”

Jonathan Barrett