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Published On: Wed, Nov 21st, 2018

Labor’s Mark McGowan and the Liberals’ Mike Nahan join forces to save Pilbara mining jobs

After years of legal battles between mining tycoon and Clive Palmer and Hong Kong-listed CITIC Group over the Sino Iron mine in Western Australia, Premier Mark McGowan has publicly proposed changing the State Agreement governing the Sino Iron project in order to allow the mine to stay open and prevent the loss of over 3000 jobs and billions in tax and royalty payments to the State and Federal Governments. 

WA opposition leader, Liberal Mike Nahan photo/ Gnangarra

Last month, WA premier Mark McGowan stated he was examining changing the State Agreements to make sure the mine and its employees are not harmed, and asked Clive Palmer to stop interfering in CITIC’s operation of the Sino Iron mine.

“I urge Mr Palmer to resolve the issues with CITIC as soon as possible to ensure CITIC can continue to operate. The State is considering its options,” Mr McGowan said.

Even the WA opposition leader, Liberal Mike Nahan, believes the project is to be saved at all costs. “This is a project of State significance and it is important the Government does all it can to sustain the project including altering the State Agreement,” he said.

The risks are clear: By not changing the State Agreements, the government risks the future operation of the mine, which is losing money as the parties remain locked in litigation for the better part of a decade over its future.  Changing State Agreements, however, is a last result, as tinkering with them could signal instability to investors and developers, who need to know that long-term agreements backed by the state are not prone to alteration following a change of government. 

While the both Mr Palmer’s Minerology and CITIC have been feuding in court for quite some time over a range of issue, in November 2017 Mineralogy won an important court battle over royalty payments from the project. Minerology now earns a handsome royalty that is calculated based on the output of the mine.

But CITIC may not be able to operate the mine much longer unless the state intervenes to support it against Palmer.  According to CITIC “with all six processing lines now commissioned and more than 50 million wet metric tonnes of concentrate shipped since 2013, Sino Iron has reached a stage where further approvals are required to permit mining and processing operations to continue.” In recent years Palmer has blocked CITIC’s access to neighbouring land need for waste rock and tailings storage, and refuses to lodge mine continuation proposals needed to keep the mine operating. 

Mark McGowan, the Western Australian Leader of the Opposition photo/ CPSU/CSA

As a result, in October 2018 CITIC’s lawyers went to Federal Court to force Mr Palmer to hand to the WA Government documents that will allow the miner to expand its operations south of Karratha. According to their claim, Mr Palmer had refused to join CITIC in submitting an environmental report to gain state government approvals for additional land to be used for tailings.

Then, on October 22nd, just days after CITIC started Federal Court proceedings, Palmer launched his own legal action against CITIC, claiming the Chinese group owes him $500M upfront for an environmental rehabilitation fund for the massive project in WA. This remediation fund was to restore natural conditions at Cape Preston, says Mineralogy. Remediation funds are usually paid in instalments over the life of the mine, as such it is unclear why Minerology has demanded this fund be paid immediately while the mine is still operating.

The long dispute between the parties has weighed heavily on the mining community in WA, which views the costly litigation as a deterrent to foreign investment in Australian mining and a direct economic threat to thousands of families.  While CITIC declined to comment on the statements by McGowan and Nahan, sources close to Mineralogy’s Palmer confirmed that he is being cooperative in his discussions with both CITIC and the WA government, adding “Clive will always do the right thing to protect local livelihoods.” 

One thing the politicians, Labor leaders and the mining industry agree on is that without an end to the many court battles underway and a positive resolution to this intractable conflict, one of Australia’s most important iron ore projects is at risk.  “The ultimate effect will be a substantial reduction in the scope of operations of the project” said CITIC chief executive Chen Zeng. “It may result in the suspension of those operations.”

Author: Lee Sadawski

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