Report from Australia Uranium policy review

A special Labour Party committee was authorized in mid-1988 to review the policy, but members of the committee were not named until the end of the year and its report has now been delayed until 1991.

The initial sense of urgency for the review has clearly been lost. The committee was established by the Labour Party in response to industry pressure to remove restrictions on uranium mining that limit production to the three mines already operating when labor took power. Several additional commercial grade uranium deposits in the Northern Territory and Western Australia are awaiting government approval for development.

Profits earned from gold mining have been exempt from corporation tax in Australia since the depression. However, a bill was passed late in 1988 making such profits taxable, starting on Jan 1, 1991. The gold mining companies have started a major publicity campaign aimed at having the introduction of this tax stopped, or at least postponed.

They argue that gold production has been rising steadily to an estimated 200 tonnes in 1989, which makes an important contribution to Australia’s balance of payments. However, the price of gold has fallen and mining costs are increasing, so that profits are declining in the industry. If the new tax is imposed, production is likely to level off and then decline drastically with serious impact on employment and the balance of payments.

Proponents of the tax, of course, point out that the gold price is now set in the free market like that of any other mineral, so it no longer merits the special tax treatment that it enjoyed when the price was fixed by governments.

Spending on mineral exploration is declining, according to the Australian Bureau of Statistics. The industry spent about $130 million in the first quarter of 1989, compared with over $180 million in the same period last year.

Most of the money — about $80 million — was spent in the search for gold, although a significant swing back into base metals exploration was noted. Industry spokesmen attributed the decline in exploration to the falling gold price and the prospect of a tax on gold mining profits, coupled with a higher Australian dollar. The renewed interest in base metals is of course caused by the generally higher prices prevailing over the last 18 months.

A new name has recently been added to the list of Australia’s dividend paying miners. The company is Nicron Resources which has paid an initial dividend of 2 cents per share. Its prosperity is based on the Woodcutters zinc-lead-silver mine about 80 km south of Darwin, in the Northern Territory, which it purchased in 1983. Mining commenced late in 1985, when a small open pit began to mine near surface ore. This ore proved to be a mixture of sulphide and oxide minerals, which led to metallurgical difficulties and poor recoveries, so that profits in the first years were disappointing.

However, the company moved to underground mining of high grade sulphide ore late in 1987. Recoveries improved, and the price of zinc moved upward, so that the company earned over $7 million in the last six months of 1988 and was able to declare its maiden dividend.

Proven ore reserves stand at 740,000 tonnes containing 17% zinc, 8% lead, and 180 grams of silver per tonne, but deeper drilling has recently intersected ore grade mineralization over good widths at a depth of 400 m below the lowest developed ore, so Nicron looks set for a long life. Near term outlook will depend largely on the price of zinc. The concentrates are shipped to customers in Japan, Korea, and Europe at LME-based prices.

East-West Minerals of Sydney, recently announced that it is seeking additional bank funding to cover a cost overrun at its Caribou mine project in New Brunswick. East- West bought the Caribou deposit for $1 million(US) from ARCO Inc. in 1986.

The company arranged project financing of $45 million, in the form of a $30-million debt facility and a $15-million silver debenture issue. The company said that production began in January, and the first concentrate was shipped in February. However, ore grades have been lower than expected, as have concentrate grades. Also, mining problems have resulted in lower production levels than anticipated.

The funding problem was revealed when the company responded to an enquiry from the Sydney Stock Exchange about the reason for a recent sharp fall in its share price.

Agip Australia, the local subsidiary of the Italian resources group, is planning to develop a small nickel-copper deposit in West Australia at an estimated cost of $30 million. The deposit, known as Radio Hill, is about 30 km south of Karratha. It is a plunging massive sulphide orebody with proven reserves of just over a million tonnes grading 2.2% nickel and 1.7% copper. Development will take about a year and a half. Annual production is estimated at 7,500 tonnes of nickel, 6,000 tonnes of copper, with significant byproduct credits in gold, silver, and palladium.

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