Chalco seeks to skip yet another deadline

THIRTY-five years after a lease was granted to mine bauxite at Aurukun near Wiepa on Cape York, yet another deadline is set to be missed.

Chinese miner Chalco plans to seek an extension to its June 30 deadline to get a final agreement with the Queensland government to develop the bauxite deposits and build a refinery to turn the bauxite into aluminium.

Chalco has identified Bowen, south of Townsville, as a suitable place for a refinery, but the current low price of aluminium means a it is not viable.

For the Queensland government, this is a major sticking point, and value-adding has been an article of faith for successive state administrations.

Conscious of the state's past as a quarry from where raw materials have been shipped off overseas to be processed into metals, the emphasis has been on doing that processing in Queensland, leading to more jobs and investment.

Queensland Premier Anna Bligh reaffirmed earlier this month that there would not be a mine without a refinery.

But Chalco is believed to be offering other commitments for future expenditure, which would involve local jobs, in the hope of getting approval for the mine.

The current impasse is the latest in a long saga that began in 1975 when the then Bjelke-Petersen government gave exploration leases to a syndicate of international mining companies in which French company Pechiney had a 20 per cent interest.

The Bjelke-Petersen government introduced special legislation to override the rights of the indigenous Wik people, and in return, the miners agreed to build an aluminium smelter by 1983.

At the time it was a major legal and political case, and the Wik people's main defender was young civil liberties lawyer Wayne Goss, who later became premier of Queensland and now, among other things, is chairman of a mining-services company.

But the miners showed little interest in meeting the 1983 deadline, which was put back to 1988.

Again, there was no movement at all internationally and Pechiney's partners dropped off until the French company was left with sole ownership of the leases.

Like many mining companies, it simply sat on the leases through the 1990s and until China began building and creating demand for more minerals.

Consequently, in 2003, the leases that had not been worth much for the best part of 30 years were suddenly looking as though they might be valuable.

This economic development came as indigenous leaders such as Noel Pearson were talking about creating more jobs for indigenous people, especially in remote areas, where there was a concentrated indigenous population.

So the Queensland government cancelled their leases, no small step in a state where mining is crucial and the last thing the government wanted to do was have international mining companies question whether their leases were still valid.

But the government still went ahead with a "contest" for the right to mine what could be $20 billion worth of bauxite.

Although it may have seemed an open field, in practice it attracted 10 companies: a mix of of international mining giants such as Alcan, Alcoa and BHP Billiton, as well as state-run institutions such as Chalco, Russian group SUAL, and India's Hindalco.

Chalco was given the nod.

One of the reasons was its commitment to indigenous employment that included spending $30 million in Aurukun, one of the country's most disadvantaged areas.

Chalco has had a strong presence in Aurukun for two years, while it works on finalising the study. It has a compound at the end of the airstrip.

But another potential bauxite mine on Cape York (that proposed by Cape Alumina, close to Aurukun at the Wenlock River) looks as though it now won't proceed, the miners blaming the Queensland government's Wild Rivers legislation.

Consequently, there is a view in some sections of the state government that a mine is the priority.

One possible option is for a joint venture with Rio Tinto on its Yarwun 2 alumina refinery at Gladstone.

But for a project that has been talked about for 35 years, it is still at the mercy of short-term factors.

If Chalco was making a decision two years ago, when world prices for aluminium were around $US3300 a tonne instead of less than $US2000 as they are at present, there may have been a different commercial decision.

As it turns out, the fate of the Aurukun deposits looks as though it will be a political rather than commercial decision.

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