The skills of Australia (and indeed most western governments) today are firmly in applying layer after layer of regulatory interventions. The eyes of govt in Canberra will be lighting up with excitement with the number of state employees that will be required to regulate, inspect, scrutinise, etc. Folk lore has it that toward the end of the Vietnam war there were around 7 REMF’s for every combat soldier. Fear not Craig I have no doubt that between the State and central govt they can comfortably exceed this ratio of those working in the kitchens to state “supervisors”. We are dealing with energy and pollution, the favourite targets of your rapidly expanding govt. Let us not mention the interminable negotiations that will have to happen with the aboriginal peoples. The delicious irony of this is that China is supposed to be communist.
I'm a bit confused about the reference to bauxite being processed in the pilbara. Afiak all the bauxite mined in wa is south east of perth and mostly refined locally at Alcoa and Worsley up to alumina oxide. Alcoa is looking at extracting the gallium with it looks like a bit of tax payer money probably because it's otherwise not commercially viable or because why not when someone else is paying. Worsley produce gallium as a by product since the 80s.
Boodarie although still in WA is literally half way to China from the darling range where bauxite is mined.
Port hedland predominantly ships iron ore typically 50-60% and most isnt refined before it's put into a blast furnace I doubt there are many by products from the slag. We have local steel makers, all seem to run on welfare. I suspect having a steel works in port hedland and karratha has been assessed and deemed not competitive by all major iron ore companies who'd otherwise have significant competitive advantage in this space.
There is some appreciable lithium tonnage going through port hedland too, you can read insights from them around whether it's viable to refine that past 6-8% locally. They also separate their byproducts and sell them..
Assuming ive missed something here and there is something potentially profitable to refine in the Pilbara locally that otherwise isnt. There are a number of other challenges to realizing the hubs you're talking about.
Energy is 1 of the largest costs of production in refining and despite what people tell you, you cannot run a 24/7 refinery on 'green' energy, nor is green energy green or particularly energetic, nor are we that good at producing it cheaply without murky accounting. No one who says this has costed a project. Those that do pass rely heavily on subsidies.
If you can run your plant steady and avoid significant loads starting and stopping or requiring significant reactive power and you have free land, 40% renewables is about where ROI starts to look very unpalatable. If you want to optimize for minimizing carbon and have a steady load and have had, then run a large ccgt - not a joke do the numbers.
Interestingly the swis, the energy grid both wa's alumina plants are connected to actually achieves renewable penetration close to these levels. Ignore that this requires pushing conventional generation to operate very inefficiently including switching off the steam gen on the ccgt on the grid.
The pilbara's cost of energy is higher than the swis and the actual publicly available grid is very limited. Every major miner runs their own private grids. China's costs are much lower as they use coal and have large well connected grids with lots of diversity. They run on a lot of Australian coal which makes you wonder why we don't burn it ourselves saving the energy to ship it and would support local refining and mamufacturing instead of worrying about what the best form of energy for us is. The short of it is we aren't having any energy intensive industries unless we embrace coal.
Areh's power when I last looked at it as an option to power a process plant was not remotely competitive and I suspect it will fade away.
Commodities are commodities. People generally don't care where it comes from which is how australians can hold virtuous green beliefs while simultaneously buying loads of plasticy stuff we don't need from china made from Russian and Iranian oil using coal power (some from Australia) and the DRCs cobalt.
Most importantly though as I suspect there'll be ideas about x byproduct from y at lower energy cost or green lmnop. China's attention span and desire to develop an economy at all costs is incomparable to Australians. They break ground while we're deciding who'll should get the butchers paper and who should do the invites for the stakeholder wishlist consultation. It's not even worth thinking about these things.
As a result I've concluded that the best future for Australia involves redrawing the Adelaide Brisbane line and letting the south east go.
You’re right about the rant :) Yes bauxite is Alcoa they’ll be announcements about that shortly . I agree with you energy rant ( I think) the west Perth basin is good for geothermal province -geothermal has significantly changed technology . New drill tech coming means drilling can go 3 times deeper at 70% less cost https://www.ipulse-group.com/
It's an unfortunate reality that modern day Australia seems unable to see the forest for the trees, but those few who are still capable of envisioning a better future for this nation know the potential is limitless. Really good breakdown, despite the short sightedness, minerals industry is still the best place to work in Australia and WA is the place to be.
Easy to read & even I can understand. Having possession of the refined REE is obviously necessary to accomplish what you are advocating here, but I'm pretty sure I have been made to believe it's the actual refining process itself which throws a monkey wrench into the machinery. Has that part of the equation been circumvented somehow or is China going to voluntarily teach everyone?
Craig, once again, good analysis. I’ve spent a decade beating the byproducts drum. There are no gallium, germanium, indium, hafnium or molybdenum mines. And in more bulky ores and concentrates we send those critical metals to China.
Government is responding, but perhaps too late. Western smelters are on life support and need subsidising to get into the game. The R&D is largely done. Patient capital is required.
The Hubs idea is not new to government. But they need that clustering of private capital and business intentions to make them work. And someone responsible for mustering the participants. So often you can ask “who is in charge” and it turns out, nobody. Perhaps one of our benevolent billionaires should be given the job?
The skills of Australia (and indeed most western governments) today are firmly in applying layer after layer of regulatory interventions. The eyes of govt in Canberra will be lighting up with excitement with the number of state employees that will be required to regulate, inspect, scrutinise, etc. Folk lore has it that toward the end of the Vietnam war there were around 7 REMF’s for every combat soldier. Fear not Craig I have no doubt that between the State and central govt they can comfortably exceed this ratio of those working in the kitchens to state “supervisors”. We are dealing with energy and pollution, the favourite targets of your rapidly expanding govt. Let us not mention the interminable negotiations that will have to happen with the aboriginal peoples. The delicious irony of this is that China is supposed to be communist.
I agree -
It's a long rant so buckle up.
I'm a bit confused about the reference to bauxite being processed in the pilbara. Afiak all the bauxite mined in wa is south east of perth and mostly refined locally at Alcoa and Worsley up to alumina oxide. Alcoa is looking at extracting the gallium with it looks like a bit of tax payer money probably because it's otherwise not commercially viable or because why not when someone else is paying. Worsley produce gallium as a by product since the 80s.
Boodarie although still in WA is literally half way to China from the darling range where bauxite is mined.
Port hedland predominantly ships iron ore typically 50-60% and most isnt refined before it's put into a blast furnace I doubt there are many by products from the slag. We have local steel makers, all seem to run on welfare. I suspect having a steel works in port hedland and karratha has been assessed and deemed not competitive by all major iron ore companies who'd otherwise have significant competitive advantage in this space.
There is some appreciable lithium tonnage going through port hedland too, you can read insights from them around whether it's viable to refine that past 6-8% locally. They also separate their byproducts and sell them..
Assuming ive missed something here and there is something potentially profitable to refine in the Pilbara locally that otherwise isnt. There are a number of other challenges to realizing the hubs you're talking about.
Energy is 1 of the largest costs of production in refining and despite what people tell you, you cannot run a 24/7 refinery on 'green' energy, nor is green energy green or particularly energetic, nor are we that good at producing it cheaply without murky accounting. No one who says this has costed a project. Those that do pass rely heavily on subsidies.
If you can run your plant steady and avoid significant loads starting and stopping or requiring significant reactive power and you have free land, 40% renewables is about where ROI starts to look very unpalatable. If you want to optimize for minimizing carbon and have a steady load and have had, then run a large ccgt - not a joke do the numbers.
Interestingly the swis, the energy grid both wa's alumina plants are connected to actually achieves renewable penetration close to these levels. Ignore that this requires pushing conventional generation to operate very inefficiently including switching off the steam gen on the ccgt on the grid.
The pilbara's cost of energy is higher than the swis and the actual publicly available grid is very limited. Every major miner runs their own private grids. China's costs are much lower as they use coal and have large well connected grids with lots of diversity. They run on a lot of Australian coal which makes you wonder why we don't burn it ourselves saving the energy to ship it and would support local refining and mamufacturing instead of worrying about what the best form of energy for us is. The short of it is we aren't having any energy intensive industries unless we embrace coal.
Areh's power when I last looked at it as an option to power a process plant was not remotely competitive and I suspect it will fade away.
Commodities are commodities. People generally don't care where it comes from which is how australians can hold virtuous green beliefs while simultaneously buying loads of plasticy stuff we don't need from china made from Russian and Iranian oil using coal power (some from Australia) and the DRCs cobalt.
Most importantly though as I suspect there'll be ideas about x byproduct from y at lower energy cost or green lmnop. China's attention span and desire to develop an economy at all costs is incomparable to Australians. They break ground while we're deciding who'll should get the butchers paper and who should do the invites for the stakeholder wishlist consultation. It's not even worth thinking about these things.
As a result I've concluded that the best future for Australia involves redrawing the Adelaide Brisbane line and letting the south east go.
You’re right about the rant :) Yes bauxite is Alcoa they’ll be announcements about that shortly . I agree with you energy rant ( I think) the west Perth basin is good for geothermal province -geothermal has significantly changed technology . New drill tech coming means drilling can go 3 times deeper at 70% less cost https://www.ipulse-group.com/
Id further add
Mineral sands - almost entirely near Perth and little if any Rio/bhp ownership
Bauxite - Alcoa and south32 (literally divested by bhp as a non strategic asset)
Rio Tinto I don't think operates in port Hedland / boodarie at all so they'd be at a significant disadvantage here
So I don't know how bhp or Rio anchor this
It's an unfortunate reality that modern day Australia seems unable to see the forest for the trees, but those few who are still capable of envisioning a better future for this nation know the potential is limitless. Really good breakdown, despite the short sightedness, minerals industry is still the best place to work in Australia and WA is the place to be.
Easy to read & even I can understand. Having possession of the refined REE is obviously necessary to accomplish what you are advocating here, but I'm pretty sure I have been made to believe it's the actual refining process itself which throws a monkey wrench into the machinery. Has that part of the equation been circumvented somehow or is China going to voluntarily teach everyone?
Craig, once again, good analysis. I’ve spent a decade beating the byproducts drum. There are no gallium, germanium, indium, hafnium or molybdenum mines. And in more bulky ores and concentrates we send those critical metals to China.
Government is responding, but perhaps too late. Western smelters are on life support and need subsidising to get into the game. The R&D is largely done. Patient capital is required.
The Hubs idea is not new to government. But they need that clustering of private capital and business intentions to make them work. And someone responsible for mustering the participants. So often you can ask “who is in charge” and it turns out, nobody. Perhaps one of our benevolent billionaires should be given the job?
That requires patient capital, we don’t do patient capital anymore, we need to show a quick balance sheet return when doing our due diligence.
Agree, and the consequences will be absolute