South Australia : In the midst of a resources sector bloodbath, Arrium has signed a deal with the South Australian government to use spare capacity at Arrium’s Whyalla port and encourage investment in the state’s resources sector.
The hard-pressed South Australian government said on Tuesday it had signed a memorandum of understanding with the struggling steel and mining group. The two parties would work to “create a major multi-user port at Whyalla” and “generate new investment opportunities in the Upper Spencer Gulf,” it said.
South Australian Resources and Energy Minister Tom Koutsantonis said the agreement was a “critical first step” that increased the attractiveness of investing in the region.
“The state government is committed to ensuring the Spencer Gulf achieves its full potential, as part of our economic priority to unlock the value of our state’s resources,” he said.
The memorandum of understanding with Arrium comes amid a wave of pain in the resources sector, wrought by the collapse in key commodity prices. Resources investment is dropping sharply in Australia, mining stocks are being hammered by investors, and the International Monetary Fund said this week the commodity slump would weigh on global economic growth.
Whyalla was identified as an opportunity by South Australia’s Resources Infrastructure Taskforce (RIT), which on Tuesday published a report on infrastructure for the export of the state’s bulk minerals. The report highlighted three key regions, Eyre and Western, Far North, and Yorke and Mid North, for potential resources projects.
The Iron Road, Centrex Fusion, Centrex Kimba Gap, and Hawsons iron ore projects could possibly use Whyalla’s capacity. In 2015 the RIT began developing a South Australian iron ore strategy to promote the development of iron ore magnetite resources. The strategy is scheduled for completion in 2016.
Arrium has just gone through a restructure of its South Australian iron ore business to stem cash losses as the price of the steel-making raw material plummeted. Arrium booked $1.9 billion of write-downs in 2014-15, primarily against its iron ore assets, and shuttered its higher-cost Southern Iron mine, with 500 job losses, in January.As a result Arrium’s annual iron ore exports dropped from 13 million tonnes to 9 million tonnes, resulting in excess capacity at Whyalla.
