Value Adding in Australia, The Beginning of the End: A Note from Viv Forbes
Posted by jennifer, May 23rd, 2011 - under News, Opinion.
Tags: Carbon Trading, Climate & Climate Change
News Alert: Smelting and refining of Mount Isa copper in Queensland to cease
The recent Xstrata decision to phase out their world class copper smelting and refining operations in Australia tells us that the taxes, processing, transport and energy costs that Xstrata expects in Australia are already uncompetitive.
The dreamers in the Canberra cocoon always drool about “value adding”. Their carbon tax will surely cause all mineral processing plants in Australia to lose value, and some will surely close. Low cost coal and diesel power will no longer support our high wages. The value adding will take place in Asia.
We are watching a slow tragedy unfold – the end of an era. Once the mineral processing plants leave, they will never come back. We will be back to the pioneering era of mining – dig it out and ship it off.
And the final tragic irony of the Isa story is this – sending partly processed copper concentrate overseas, instead of smelting it at Mount Isa, will about triple the transport burden and do the same to carbon dioxide emissions.
The first industries of Australia were farming and mining and these two have been the backbone of the nation ever since. Both are threatened by the taxaholics in Canberra.
Shorthorn and Brahman cattle arrived with the first fleet and coal was discovered by convicts at Newcastle in 1791, just three years after the First Fleet arrived. The first Merino sheep arrived in 1797 and coal mining started in 1798. Since then mining and farming have earned the majority of Australia’s income.
Wool and wheat, gold and silver, butter and cheese, copper and lead-zinc, leather and tallow, iron and steel, sugar and wine, coal and hydro-carbons, meat and mutton, aluminium and uranium, timber and fish, nickel and titanium – these comprise Australia’s Magic Pudding.
But the Gillard/Green/Garnaut Carbon Tax Coalition hate our primary industries because they all depend on carbon fuels and produce the carbon dioxide that feeds our crops. Our backbone industries are seen as dreaded “polluters” and treated like noxious weeds and serpents to be removed from the green Garden of Eden.
Our pioneering squatters and prospectors blazed the trails which Cobb and Co turned into the roads of Australia. Wool from the merinos, almost alone, carried the nation until the 1850′s when metals started to create wealth – lead, copper and gold were discovered in the 1840′s and 1850′s. Mining started soon after and then cattle raising became profitable to feed the miners. Better roads, towns and then railways were built to move our primary products to the smelters, spinners, millers and tanners in Europe. Ever since, our great primary industries and the industries dependent on them have supported all Australians.
Mining is largely a materials handling operation, and it needs a lot of energy for mining, crushing, grinding, smelting, refining and transport.
The first copper mines extracted only high grade surface ore. They mined it selectively using human muscle power, packed it to the coast using camels, donkeys, horses and bullocks, and shipped it on sailing clippers to smelters in Europe. All stages used politically correct “green” energy.
But “green” transport moves slowly. Some loads of ore that looked profitable when they left the Peak Downs Copper Mine in central Queensland on donkeys, were sold at a loss, months later, when they landed at the copper smelter in Wales. Mining was thus an intermittent business – booming when metal prices were high, closing when prices fell.
But the high grade surface ores never last long, and the deeper primary ore is generally much lower grade. It was OK to send 40% copper ore from Cloncurry to the coast using horses and drays, but ore containing just 2% copper would not cover the costs.
So the first metal processing started with primitive on-site smelters (often using wood and charcoal, both “green” energy). Smelters removed most of the impurities leaving crude metal with +95% copper which was exported to overseas refineries. Later, Australians developed the flotation process to produce metal concentrates to feed the smelters. And trucks and trains started to carry value-added products to the coast.
The great Mount Isa Mine was discovered in 1923 – lead smelting started in 1931 and metal smelting at Mount Isa has continued ever since – 80 years of value adding in Australia.
Early in World War II, Australia found itself short of copper and Mount Isa was asked if it could produce copper. A crash program took place to convert the lead smelter to producing copper and the first blister copper was poured at Mount Isa in1942. Refining of blister copper started in Townsville in 1959.
Mines can only be where the deposits are found. But smelters and refineries can be located anywhere between the mine and the ultimate customer for the metals. And just three factors dictate where metal processing is located – political costs, processing costs and transport costs. The political cost (tax burden) depends on the common sense of the electorate and their knowledge of where the real wealth is created. The processing and transport costs depend mainly on the local costs of wages and energy.
The first trains and power stations all used steam engines burning low cost local coal. Then came cheap diesel transport for trucks and trains. Now electric trains are again running on cheap Australian coal. This low cost carbon energy supported our high wages and ensured that mineral processing became a big business in Australia – iron and steel, lead-zinc-silver, copper, nickel, aluminium, gold, uranium, limestone, coal, oil and gas are all processed to some extent in Australia.
There is no point introducing a carbon tax that does not increase the cost and thus reduce the use of coal and diesel energy. Mining and mineral processing and transport probably consume over 50% of Australia’s electricity, which is mainly coal powered with minor gas. And they are huge users of diesel for utes, trucks, shovels, dozers, scrapers, mobile power and drilling rigs. Therefore, no matter what they say, all of Australia’s mineral processing advantages are threatened by their carbon tax.
Viv Forbes
May 2011
Viv Forbes is a geologist, mineral economist and farmer. He has spent a lifetime working in government, mining and farming in Queensland and Northern Territory, from field geologist in the Bowen Basin, to uranium exploration at Rum Jungle, to mill clerk at Mount Isa, to mining investment analyst in Sydney and Brisbane and to company director of gas, oil and coal companies. He should be retired but refuses to. He and his wife Judy live at Rosevale harvesting solar energy from natural pasture using beef cattle and meat sheep.
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Reference – Xstrata to phase out copper smelting and refining:
http://au.ibtimes.com/articles/147308/20110518/xstrata-to-phase-out-copper-smelting.htm
Thanks for the info Tony – there’s no way the greens would allow us to add further hydro power.
I noticed the big new chimney at the Condong Sugar Mill biomass generator was quiet when I drove past it yesterday.
Luke – that ABC article is verging on the criminal.!! sure they are getting cheaper, but NOT better. If all the 110,000 houses in NSW with government subsidised 1.5kW solar panels are operating at full power they will contribute a measly 165 megawatts to the grid’s 14GW capacity.
It’s a joke!! – I was checking all the solar panel setups at Byron Bay yesterday, there were houses with their solar panels on the roof facing SW!!
JS…someone should tell those householders, we need all the megs we can muster.
“So, mindlessly calling for China to cut back its emissions is effectively denying one billion people something that we take so utterly for granted, access to electricity.
And that’s no agenda on my part”
Agreed, Tony.
I spend about 40% of my professional time in mainland China now, so I’ve observed the development process in detail since 2004
And anyone in Aus who has delusions that the Chinese Govt will stop developing their electricity grid because Greenies in Aus want them to in order to save the planet is genuinely both abysmally ignorant and utterly stupid … like Brown, who professes to think that if Aus stops selling coking coal to China, the Chinese will not purchase the coal from somewhere else. In every mainland Chinese city (and there are > 1.3bn people in a geographic area about 10% larger than Aus), there are literally hundreds of thousands (collectively) of high-rise apartment blocks being built. The skylines are choked with cranes EVERYWHERE – this needs steel and power. End of story
BTW, both myself and my wife viewed an Obama oracle about 7 months ago on the TV, wherein he opined that the mainland Chinese cannot be allowed to attain our standard of living because this would destroy the planet. The stench of hypocrisy here achieves depths I had previously believed unachievable by any politician – I was wrong, of course
Hi John Sayers; you say “If all the 110,000 houses in NSW with government subsidised 1.5kW solar panels are operating at full power they will contribute a measly 165 megawatts to the grid’s 14GW capacity.”
Do you have accurate information about how many NSW homes are getting the maximum 60c per Kwh, and what is the total they produce so a comparison with coal’s ~ 5c per Kwh can be done to see how much the NSW taxpayer is actually funding this scheme?
Tony, I’m interested to know if you have an opinion on the potential value of a hydro scheme on the Franklin and Gordon Rivers. I realise that the rivers’ special fetish status, world heritage listing etc would make this a political no-go, but I’m curious as to whether it is a good idea from a technical point of view. Sorry to add to your overload of questions, but you’ve made this a very interesting thread. (I’m biased: I love the sight of a great engineering feat in a great wilderness setting, but I want to keep a cool head and learn more about the viability.)
I got it from radio, they argued about it for a day or so but seemed confident it was around 110,000 – there were another 50,000 waiting connection.
http://www.australiancoal.com.au/the-australian-coal-industry_coal-exports_coal-export-details.aspx
Brown and other commentators should stop fretting about China burning most of our exported coal, because they are not our biggest customers.
Japan and Korea are…and we the majority of Australians are grateful for their custom, despite what the Brown eyed Greens et al may think.
Gillardis shaping up to be the most incompetent PM and Govt of any in 100 years
Robert; “I want to keep a cool head and learn more”.
I recommend you first visit Tasmania and see the place by river and air then contemplate where the scheme’s designers, builders, lenders and customers should come from today as all the old HEC work force have retired or moved on.
My guess is you would be hard pressed to find any of these pre recqusites just floating around so why not start another hydro power development up in say North QLD, WA, NT or something else directly water driven near Tully where the rain likewise pelts down much of the time?
Tony, are there many suitable sites for hydro in your opinion? And which ones, if any, stand out as having potential for a major scheme?
Gee, any talk of new Hydro is a little academic really, because it has virtually no chance whatsoever of getting up.
In Tasmania, luckily they got the Gordon Dam in, but any talk of a Hydro on the Franklin is just dead in the water. Gordon Dam Hydro at 430MW supplies around 15% of Tassies power, so had they got in earlier and got Franklin done, maybe Tassie would have least CO2 emissions of any State.
As to anything that could be done now, again, moot, because nothing ever will.
Perhaps some foresight might have included hydro at Wivenhoe, well, larger anyway, Fairbairn and Burdekin if Burdekin 3 every gets done, again all too late now.
A really prime site would be on the Mitchell, and kill 3 birds with the one rock. Water supply, flood mitigation and hydro to replace brown coal plants, but again moot, as Vic Labor killed that off by declaring the site, well, whatever they declared it to be.
Maybe salt water pumped storage for Peaking Power but you’d need cliffs close to Ocean for that.
We can only thank heavens they started Snowy Hydro after the War, because there would be snowballs trying to get that up now.
Consider this.
16 Dams, 2 huge pumping Stations, 7 major power plants and 12 tunnels, and those tunnels are the real engineering marvel.
2 of them are 15 miles THROUGH mountains, 26 feet wide. All done in the 50′s and 60′s with what they had available at the time.
Now someone is laying fibre optic in existing trenches with 2011 technology, and Federal Labor compares the NBN to the Snowy Scheme.
Its like comparing the Pyramids to Lego.
Naah! New Hydro’s a dead duck in Australia, and gee, have you noticed a pattern here.
Reliable 24/7/365 Coal fired power – Poison.
Reliable 24/7/365 Nuclear Power – Poison.
Reliable Hydro Power – Poison.
Wind and Solar – great.
It would seem the ‘loonies’ really have taken over the asylum.
Tony.
Malcolm
“… China burning most of our exported coal, because they are not our biggest customers.
Japan and Korea are …”
There is a widespread misunderstanding here: Aus sells almost NO thermal coal to China. Almost all of the China sales are coking coal (steel manufacture). Shenua (Chinese miner) has a presence in thermal coal deposits in Aus, but production as yet is not big
Japan, South Korea and Taiwan purchase the bulk of the Aus thermal coal exports. Japan and South Korea also purchase some coking coal
IanI888,
Isnt that what my reference is saying when it separates out the coal exported into
Metallurgical coal and Thermal coal and thereby, I assume.. it covers the full range.
If this is wrong, or there is another twist then please let me know.
Cheers
Luke,
I’m not sure if you’ll come back to this Thread, but thanks to you mate, I think I’ve finally ‘got it’.
I’m most of the way through the ZeroCarbon thing, and as I read each new part, I kept thinking how they made an awful lot of assumptions on not the best case scenario, but the absolute best case scenario.
I wanted to read as much as I could take in before looking at the critique at BNC, because that might have coloured my reading.
However, when I finally did go to the BNC site, they were even more critical than I would have been.
Now I can understand fully how no one’s ever going to believe anything I say, because I’m just a nobody blogger, but surely Luke, you have to believe what these guys say. The actually ‘do’ have ‘cred’.
You’re obviously a clever thinking person, so surely you must believe that BNC critique.
For others not willing to invest the serious time to read the Zero Carbon proposal which comes in at almost 200 pages of technical information, they quote a total cost of $370 Billion, while the BNC reply quotes it as $1,709 Billion with a range of $850 Billion to almost $5,000 Billion, so that $1.7 Billion is indeed conservative.
They use technology not even started anywhere in the World, and then overstate the performance characteristics.
The wholesale electricity price will increase by a factor of 10 times what it is now.
All cars to be electric. No air transport at all.
All freight and passenger movements by rail, all of that electrified, local, state and interstate.
They quote the timeline as having those solar plants starting this year and all of them completed by 2020, when there is not one in existence on the Planet right now, and not expected to be before 2020.
Wind plants of 7.5MW, and the best current is 4.5 to 5MW.
I can see how the ‘average’ punter would be taken in by something like the ZeroCarbon proposal, because they’re not technically trained, but Luke, you’re a thinking guy.
Surely you must see this.
Tony.
Luke from yesterday
“This is bullshit. Everyone is in this together. Big polluters unluckily are merely big energy users. Why are we demonising big industry. What a Robin Hood con act.
Sorry – decarbonising will cost.”
I totally agree, it’s about time the pollies were called an this furfie.
“Investment in new energy systems research is the way forward.”
Agree as well, we have to get around to this sooner or later and current solar and wind technology just won’t cut it. Making inefficient technologies artificially competitive is lazy and actually stifles innovation. We need to quickly build a bunch of nuclear power stations to secure our medium term energy requirements and then get on with the job of real cutting edge research.
Tony
Yes I suspect too good to be true. But my issue is where we might be given some investment in baseload solar as a “partial” contribution. Throw “new” nuclear into that as well.
And I say do you begrudge the fusion researchers having a go?
I would rather see this than a money cycling carbon tax. So take some off the top and invest in these technologies.
For me the long term threat of climate change is real. Need serious solutions. Time starts now.
And very interesting over at BNC – Barry Brooks has done his systems analysis – decided AGW is on – needs addressing – renewables won’t cut it and gone straight to nuclear ! Greenies would be incensed. So his blog is now about serious engineering investigation on alternatives.
Hey what happened to the wave energy guys – remember – http://www.oceanlinx.com/
Luke, both Brooks and Monbiot appear to be on the same page WRT realistic solutions to a perceived problem in direct contrast to hardcore screaming greenies. When I read what they have to say it provokes me to want to read more as I prefer to hear honest, rational debate regardless of someones position on the topic.
You seem to feel that a carbon tax is a non-solution, I wonder what Brooks Steffen and Karoly’s positions on it are?
Luke, if you’re still there you may remember that my property is off the grid and runs primarily on solar panels with generator backup. It would be interesting to see a cost benefit analysis of household wind and solar generation versus centralised power using the same technologies. Consider a 1MW industrial monolith wind turbine with all of it’s production and transport costs, placement issues and poor upgradability. If instead, 1000 homes each had a 1KW turbine coupled with a solar system perhaps connected to the grid with tariffs at parity, just think about the possibilities. You just have to look at the trouble the eastern states are in now with upgrading existing coalfired power stations, replacements are years away whatever technology is used. With micro power systems you would have off the shelf replacements, a bit like when your washing machine fritzes and you either get it fixed or buy a new one.
Imagine if instead of personal computers, everyone just had a keyboard and monitor and all of the processing was done in a giant warehouse somewhere. We’d still be using 80′s technology because it would be too costly and difficult to upgrade the warehouse every 12 months.
re the proposed Carbon (Dioxide) Tax.
We’ve canvassed here the Zero Carbon Proposal, and the costings. and how they could divert all the money raised from this proposed legislation into something like that and still not have enough, and that’s a proposal that doesn’t stack up.
What is obvious is that this new ‘Carbon Tax’ is just a platform to raise money, money that will not be used to serve any purpose of lowering those emissions.
Let’s face it, the average ‘punter’ in the street has no concept of the scale of those emissions, especially when it comes to emissions from the power plants that provide their staple of life, and from that, no concept of the amount of money this will raise for Government.
The money raised from that CO2 tax will obviously be viewed through different eyes.
The UNFCCC with their original Kyoto Protocol gave an idea where they would like to see it directed, and please don’t get the idea I do this to keep linking into my own Posts, but rather than say it all again, it’s easier just to link to what I have already said, albeit from some Posts dating back more than three years now.
http://papundits.wordpress.com/2010/11/09/bthe-un-and-climate-change-ten-fateful-wordsb/
Now that placing a cost on those CO2 emissions has gained traction, it seems that Politics will find other, more pressing uses for the huge amounts of money that can be raised from this.
It won’t get used to send to the UN for the costs of all those Developing Countries.
It won’t get used to find ways to lower emissions from those ‘big emitters’ Bob and Christine and others keep referring to.
It won’t get used to divert to schemes like this Zero Carbon Proposal.
It won’t get used to drive R and D for new power plants to replace those coal fired power plants.
It will be used here in Australia to help keep the budget back in Surplus, while still providing a war chest for pre election giveaways to shore up the vote to ensure they get re-elected.
Now that Politics has finally cottoned on to just how much money it really can provide, those CO2 emissions become the source of supply, and the Science (that those politicians have no concept of) is being used to justify that grab for the money.
At the bottom of the Post of mine I linked to, you’ll see a further link, where the World Bank is diverting money gleaned from First World Countries to assist those still Developing Countries fight the Climate Change battle.
Trouble is that money is being approved for the construction, and wait for this, of large scale coal fired power plants.
I’ll never stop saying that this really is just about the money. When there is money to be made, the Environment just becomes the excuse!
Tony.
Malcolm
“If this is wrong, or there is another twist then please let me know”
The twist (if it pleases you to label it so, although it’s simply a fact), is that Aus thermal coal exports are much larger in volume than coking coal, so thermal exports to SE Asia are much higher than those of coking coal to China in volume, although not necessarily in $$$
The reason for this is simply the geology of Aus coal deposits – there are many more economic deposits of thermal coal than coking coal, even though the coking deposits that do exist are of very high quality. This is quite important economically: Aus and China were one continent, Panganea, during the Permian (when most of the coal-forming peat was growing across this super-continent), but after tectonic separation Aus finished with almost all the coking coal deposits and China almost none
As I’ve noted, most people are truly ignorant of geology, even though it’s been the prime driver of Aus economic success for about 200 years. This fact used to dismay me, but not any more – because no amount of ignorance alters the geology one bit