China is leasing huge tracts of land in Australia to secure a vital source of iron ore and coal, in the latest sign of its formidable hunger for commodities to fuel its economic boom. No longer satisfied with purchasing iron ore and coal from Australia’s giant mining companies, Rio Tinto and BHP Billiton, China is developing its own mining operations and has funded a port with a 2km long breakwater that juts out into the Indian Ocean. The Citic-Pacific Corporation’s Sino Iron project in the Pilbara region in the far north-west of Australia illustrates the scale of Beijing’s ambition. The open-cast mine – which will become fully operational later this year – promises to be the biggest magnetite iron ore mine in the world.
State-of-the-art hydraulic excavators will dig down some 200m below sea level. The ore will be crushed in a processing plant powered by an on-site 450MW power station. The iron ore concentrate will reach China on a fleet of purpose-built container ships. China expects to receive at least two billion tons of iron ore from Sino Iron over the next 25 years.
In return Australia, already China’s biggest overseas supplier of iron ore, is guaranteed a steady stream of royalties and taxes. And the project will generate thousands of Australian jobs – China contributes the finance and the management, not the labour. Mr Palmer regularly commutes between Australia and Beijing by private jet. But the deal’s biggest winner will be Clive Palmer, the larger-than-life entrepreneur who holds the lease on the Sino Iron mine. His partnership with Citic-Pacific is one big reason why he’s now close to the top of Australia’s rich-list. According to Mr Palmer his mining alliance with the Chinese has barely begun.He claims to control the mining rights to territory which contains 160 billion tonnes of iron ore. It’s a mind-boggling figure – 100 times greater than the entire global output of iron ore last year.
If China’s steel mills maintain their current level of demand Mr Palmer is set to become an Aussie oligarch to rival Russia’s richest resource billionaires. A suggestion to which he responds with a smile. “I hope I’m nicer,” he says. Mr Palmer regularly commutes between Australia and his other home in Beijing by private jet. He boasts of friendships at the highest levels of the Chinese government. Chinese banks seem to trust him. Last year China’s Import-Export Bank made available a $5bn (£3bn) loan to finance a Palmer-backed Queensland coal project which is supposed to deliver the Chinese power industry close to a billion tonnes of coal over the next 30 years.
But China’s emergence as a significant long-term player in the Australian resource sector has raised hackles. After Rio Tinto came close to accepting a major investment from the Chinese metals giant Chinalco, Barnaby Joyce, Senate leader of the opposition National Party, railed against “Australia’s prime sources of wealth being hijacked by a foreign government”. Clive Palmer, himself one of the biggest financial supporters of the conservative opposition, dismisses such talk. “China is the only country willing and able to invest the billions needed to develop these projects,” he said. “Three hundred million people are moving from the countryside to the cities. The demand is in the People’s Republic of China.”
But there are good economic reasons for Australians to worry about the long-term impact of the China-driven commodity boom. The windfall from Australia’s minerals exports has strengthened the Australian dollar to a point where manufacturing bosses say their exports are becoming uncompetitive. In Perth, Australia’s mining capital, there are signs of a bubble economy. Restaurants and farms are struggling to find labour as unskilled workers flock to the mines, where the average annual wage is $108,000 (£69,000). A truck driver in the mines can earn more than a surgeon.
China’s thirst for Australian resources also serves to underline an environmental problem facing the Labor government. Prime Minister Julia Gillard is committed to the imposition of a carbon tax and significant reductions in greenhouse gas emissions – goals that sit uneasily with the continued dramatic expansion of the energy-intensive mining sector.
Beijing seems to be increasingly aware of the need to tread carefully. Sinosteel, another state-owned metals conglomerate, has plans to develop a massive open-cast iron ore mine in the Weld Range, a ridge of low-slung hills some 400 miles north-east of Perth. The geologists believe it will yield up to 300 million tonnes of high grade iron ore over 20 years. But it is a sensitive project. The red-tinged rock is not just rich in iron oxide – it is also littered with archaeological evidence of thousands of years of aboriginal life.
Colin Hamlet, an elder of the Wajarri Yamatji people, is at the forefront of a campaign to prevent Sinosteel digging up his ancestors’ sacred places. His own great-grandmother Booreeangoo was buried at a site which Sinosteel surveyors designated as a dump for mine tailings. The plan has since been changed. “This land tells the story of my people, our song lines, our camps, our relics, they’re all here,” he told me. Perhaps aware of the potential for damaging publicity, Sinosteel’s top Chinese executive has personally assured Mr Hamlet that sites of special significance to the Wajarri Yamatji will remain untouched. Too of his list is an unremarkable hill known as Wilgie Mia. Close to the summit is a gash in the rock – it’s the opening to a man-made hole more than 100ft deep. “This is where we get our ochre from,” said Mr Hamlet. “You see it in paintings hundreds of miles from here.” According to archaeologists Wilgie Mia could be the oldest continuously worked mine in the world. Proof that for 10,000 years indigenous Australians have been digging holes in search of mineral riches.
And now the Chinese have arrived on a similar quest.
- Skills Gap / Australia / India: Indians may fill the gap in mining (skillsinfo.wordpress.com)