Frequently Asked Questions

What is the difference between magnetite and hematite iron ore? How does this affect greenhouse gas emissions?

Hematite, or Direct Shipping Ore, has a different chemical make-up (Fe2O3) than Magnetite (Fe3O4). Magnetite contains less iron than hematite and is, therefore, of little value in its raw state.

In order for magnetite to be used in steel production, the magnetite ore needs to be processed (beneficiated) in an extensive jobs and energy-intensive process. This requires the construction of very expensive processing infrastructure at or near the mine site.

Expert researchers, The Crucible Group, conclude that the production of a tonne of magnetite concentrate in Australia produces significantly more carbon emissions compared to DSO, which requires a very small amount of onshore processing.

But, magnetite concentrate consumes less energy than DSO in steel production. Magnetite concentrate used for iron-making in steel production is higher in iron and purer than processed DSO fines. As a result, the net greenhouse gas emissions per tonne of magnetite concentrate used in steel production is about 108 kg less than emissions produced by a tonne of DSO fines. (For more go to Public Reports.)

Does the emerging magnetite industry deserve concessions under any Emissions Reduction Fund or Scheme?

The development of the magnetite industry will drive the creation 
of new long-term jobs all over Australia. Deloitte Access Economics estimates the development of just a few new magnetite projects would deliver $4.5 billion to Australia’s GDP per year. By processing magnetite in Australia, the industry delivers employment and revenue, while helping to reduce net global greenhouse gas emissions in steel production.

The magnetite industry would enjoy a competitive advantage if there were an established global carbon trading scheme. It is currently eligible for some jobs and competitiveness program assistance but supports the need for global carbon pricing. It seems perverse to penalise the emerging magnetite industry given its economic, regional and net environmental benefits.

The current Carbon Pricing Scheme aimed to ‘support jobs and competitiveness as Australia moves to a clean energy future’. Under the Coalition Government’s new Emissions Reduction Fund – Direct Action Plan it is reasonable and equitable that new magnetite projects are recognised as an energy-intensive, trade exposed industry until any mandated international scheme starts. MagNet continues to work with all political parties to seek an additional and equitable level of industry assistance for new projects.

MagNet continues to lobby for recognition of the unique needs of new producers. (For more go to Objectives – Carbon Tax.)

Why does MagNet welcome the repeal of the Minerals Resource Rent Tax (MRRT)?

MagNet supports the repeal of the Minerals Resource Rent Tax (MRRT).  The prior Federal Government’s stated objective was to tax the value of the resource at the point it is extracted from the ground. Magnetite ore is of very low iron content and therefore of little value in its raw state. The former Federal Government stated that it expected to recover little or no tax from magnetite miners under the MRRT, yet compliance costs and perception of increased sovereign risk are massive investment disincentives.

The announcement of the current Federal Government to repeal the MRRT will help attract extra investment for the expansion of a new industry that is jobs-intensive and part of the global carbon solution for steel-making.

Further information outlining draft legislation to repeal the MRRT is available at the Australian Government The Treasury website.

How can you demonstrate that the industry is good for regional jobs and development?

Deloitte Access Economics estimates the development of WA MagNet member company projects would deliver $4.5 billion to Australia’s GDP per year. Current MagNet members estimate they will create more than 10 000 direct jobs in the construction of just 5 key WA projects alone and create more than 3 600 permanent direct jobs over the life of the operations. (For more go to Magnetite Facts & Figures.)  The development of new mines in South Australia, Tasmania, New South Wales and Queensland offer similar prospects.

The current price on carbon has damaged the international competitiveness of the Australian magnetite sector, given that several other jurisdictions where magnetite is mined or could be mined have not mandated carbon pricing mechanisms at this time. A punitive tax such as the MRRT threatens to undermine investor confidence at a time when producers are making decisions critical to the industry’s timely development. Without investor support, Australian producers are unable to develop necessary regional infrastructure, such as railways, desalination plants, processing machinery, power supply and port facilities.

How is the magnetite sector contributing to regional development and employment?

Magnetite requires value-adding processing to prepare it for export: this demands development of infrastructure and people to build and run the mines and operations.  Already, Grange Resources’ Savage River operation in Tasmania has provided 400 ongoing jobs over 45 years and is the largest private employer in the state’s north-west  Member projects in WA represent an initial investment of some $19 billion, permanent direct jobs for more than 3 600 Australians, plus more than 10 000 direct construction jobs. (For more go to Magnetite Facts & Figures.) The development of new mines along the Braemar Iron Formation linking NSW and SA offers similar prospects.

In addition, the projects are driving the long-term development of transport infrastructure, such as railways and ports, as well as power and water supply networks. MagNet members support the expansion of power sources and upgrading of existing power grids to improve stability of supply and efficiency and also enable access to cleaner energy sources, primarily natural gas, wind and solar. As a result, MagNet has supported the concept of a solar hub in Mid-West WA, as well as an integrated North West Interconnected System in the Pilbara region. (For more go to Objectives – Infrastructure & Gas Supply.)

Experts, Deloitte Access Economics, have assessed the economic credentials of developing key MagNet member projects in WA and estimate that CITIC Pacific Mining’s Sino Iron project alone would contribute more economic benefit and create more jobs in Australia than a benchmark DSO project.

Why do new magnetite projects deserve a special exemption from mining royalties?

Collectively, MagNet’s members will contribute up to E$350-525 million in estimated annual royalty revenue to WA alone if all of their projects can secure investment. All magnetite producers are required to commit considerable capital to the expansion and construction of port facilities, rail lines, power and water supply networks. Investment support is crucial in getting these projects underway and driving the infrastructure development to serve regional communities for the long-term.

In return, it is reasonable for government to encourage investment in the emerging magnetite industry by providing some early or limited relief by way of concession on mining royalty imposts. MagNet considers that this will favourably impact on the sentiment of future investors.

The announcement by Premier Barnett in April 2013 to reduce royalty rates for start-up magnetite projects has been welcomed by MagNet’s five member companies.  As well as benefitting the Gindalbie AnSteel Joint Venture Karara project and the CITIC Pacific Mining Sino Iron project, the decision to reduce royalty rates for a set period demonstrates the Western Australian Government’s support for the emerging magnetite industry.  It also sends a strong message to potential investors that the WA Government is serious about attracting new large scale investment to this State.

An extract from the WA Government State Budget Papers 2013 – 14:

 

An amount of $15.9 million will be spent in 2013-14 to provide assistance to eligible companies in the start-up phase on new magnetite iron ore projects.

Eligible companies can apply for a rebate of up to 50% of actual royalties paid for the first 12 months of magnetite production, before returning to the full royalty rate.

Assistance can apply from the first shipment of magnetite after 8 April 2013, or from the point the project reaches commercial production.

In recognition of the challenges faced by the magnetite sector, MagNet continues to support the position of extending of the concession period for start up projects from three years to five.

Detail of the concessions and implementation dates are now finalized by the WA Government and available online.