Australia’s Paydirt, Issue 329
As is traditional with our August edition, we dedicate the larger part of this edition to previewing Africa Down Under (ADU), to be held in Perth on September 4-6
As long-time readers will know, ADU has been at the vanguard of not just Australian-African relations but actually the entire future of the African mining sector for more than two decades.
What started as a platform for Australian companies to raise their profile in a market which didn’t care for – or even really understand Africa – has grown into a forum now allowing for as much policy development as market spruiking.
Over two decades, ADU has provided a unique platform for African governments to share experiences, policy ideas and ambitions with peers on the continent and in Australia. Several national resources policies have been developed on the back of visits to ADU and as convenor, Paydirt is proud to have contributed to those developments.
Economic and social growth is never linear anywhere in the world – just ask the voters in the UK, France or the US this year – but if you were to chart development on the African continent over the 22 editions of ADU, you could not argue that progress has been made. International investments are generally more protected, governments are more sophisticated in their understanding of the sector and host communities, employees and other stakeholders are receiving far more rewards than in previous generations.
We look forward to another successful ADU, one where partnerships between governments, communities and Australian investors continue to mature and deliver the benefits every citizen deserves.
Turning back to the domestic mining scene, it is difficult to work out exactly where it all went wrong for the West Australian nickel sector.
Sure, the arrival of low-cost Indonesian product has upended the supply-side dynamics of the market and it feels like the towel is being thrown in this time with BHP Ltd’s decision to close its Nickel West division and Andrew Forrest’s Wyloo Metals Pty Ltd shuttering its Kambalda operations.
However, the industry has survived such ructions before and continued fighting. It may look grim at the moment but Australia’s nickel industry has shown a remarkable propensity to bounce back.
The sector faced a similar situation in 2000 when WMC chose to divest its Kambalda portfolio, but that decision actually seeded the creation of a new generation of junior nickel miners. Most have been subsumed in the intervening years but one, IGO Ltd grew into a $15 billion company, after starting its production life with the marginal Long nickel mine bought from WMC.
Nearly a quarter of a century later, a few optimists are seeing similar silver lining again.
While Nickel West sold the Kambalda mines, it kept a pre-emptive offtake right over all production, requiring it be processed through its Kambalda concentrator. Its closure could free up the Kambalda juniors, including Wyloo and Lunnon Metals Ltd to pursue their own offtake strategies.
Lunnon managing director Ed Ainscough has discussed the potential to go it alone with Paydirt before and in an announcement following BHP’s decision, he said the company was already considering options, including buying or leasing the Kambalda concentrator from Nickel West or building a new standalone facility.
It may sound an outlandish concept to build a new nickel plant when an existing one is being put on care-and-maintenance, but as the gold sector in the region has shown, the presence of existing infrastructure has never proven a barrier to building new facilities.
Speaking of big companies making big calls, the retreat of Fortescue Ltd from the energy space has been little short of remarkable.
Forrest has always confounded the critics to pull off masterstrokes, but his venture into green hydrogen is starting to look more like the ill-fated Anaconda Nickel venture than the remarkable Pilbara iron ore success.
Having signed MOUs with governments on almost every continent to pursue local green hydrogen projects, Fortescue had set itself up as the leader of technology which remains unproven at scale.
Fortescue signalled its shift away from the project last month, announcing 700 jobs would be cut in its energy division.
It blamed high energy prices and policy settings in Australia and said it remained committed to its overseas projects in Norway, US, Brazil and Morocco but, given the amount of recent redundancies, it would appear whatever competency was building in Fortescue Energy has now been gutted.
The intriguing part is how Forrest’s international reputation will survive the turnaround. He has spent the last three years wooing governments around the world with the idea Fortescue can bridge the gap between traditional extractives and new green technologies but will now have to negotiate a diplomatic retreat if he is to keep this reputation intact.
Although no means the victim in this situation, the entire Fortescue farrago has caused me some uncomfortable moments as well.
I was in Morocco when Australian media published images which it alleged involved Forrest and a senior Moroccan Government official in an embrace, causing mild scandal in the North Africa country. Suddenly I wasn’t so comfortable explaining I was a visiting mining journalist from Australia.
Fortescue’s investment in green hydrogen and ammonia in Morocco was to feature extensively in my coverage of the trip, demonstrating the opportunity which exists given the country’s distinct advantages. However, the axing of large parts of the programme scuppered any opportunity we had to delve into Fortescue’s plans in detail.
Fortunately for Morocco, there is clear evidence that it has all the attributes needed to fulfill its potential as a rising middle economy in the coming decades, regardless of whether Fortescue is there to play a role.