Queensland Bauxite Mine won’t Require Refinery

The Queensland government is set to put its lucrative Aurukun bauxite leases up for sale, but it will not insist on the building of a refinery as part of the deal.

The fate of the bauxite leases has been unclear since the former Bligh government broke off negotiations with Chinese aluminium giant Chalco 12 months ago because it failed to agree to build a $2.3 billion alumina refinery in North Queensland. Late last year the former government sounded out potential buyers of the leases, which include 500?million tonnes of bauxite, but had not made a decision before its landslide election defeat in March. Deputy Premier and Infrastructure Minister Jeff Seeney said he was likely to ditch the “value-add proposition” proposed by the former Bligh government and go for a straight sale of the leases. Tough market conditions in the aluminium sector, high construction costs and rising electricity costs have all worked against the likelihood of a new refinery in North Queensland. The ore bauxite is the main source of alumina, which in turn is a key ingredient of aluminium.

Mr Seeney is expected to take a proposal to cabinet in the next few weeks, but admitted he had been focusing on the Liberal National government’s main priorities of opening up the Galilee Basin for development and pushing through Rio Tinto’s $1.4 billion South of Embley bauxite mine in Cape York.

The building of an alumina refinery in North Queensland as part of the deal for the bauxite leases would have helped achieve this goal. The retreat comes as the next stage of processing, aluminium smelting, is expected to lose a third of capacity in Australia by the end of the year through shutdowns.

But after detailed studies found construction of a new refinery to be uneconomic, Chalco – the leading subsidiary of the state-owned Chinese group Chinalco, the Aluminium Corporation of China – pushed to instead expand an existing refinery like Rio’s Yarwun operation in Gladstone as part of a $3 billion development deal.

There was even speculation that Chalco offered up to $1 billion in lieu of the refinery, a move that angered other mining companies who were interested in the leases, but this was denied by the former government.

Other potential buyers late last year included Alcoa and Queensland Alumina, a joint venture between Rio and Rusal.

The potential sale of the bauxite leases would be another example of the new Newman government’s shake-up the resources sector in Queensland.

Mr Seeney was highly critical of the federal government decision to re-examine the South of Embley project on the basis of concerns from environmentalists that it would result in a major boost to shipping movements in the Great Barrier Reef Marine Park. He was also critical of Mr Burke’s decision to query the environmental approvals for the Alpha Coal project. After threats by Mr Burke on Friday to initiate his own assessment of the mine and rail project, Mr Seeney agreed to provide extra information to the commonwealth to allow them to sign off on the project.