Coal over gold

COAL has overtaken gold as the key resource produced in Victoria and is driving that state's economic growth. By Charles Amery
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Victoria's Latrobe Valley

Staff Reporter

The discovery of gold more than 150 years ago and the subsequent gold rushes transformed the colony of Victoria and since then its economic development has been largely built on its minerals endowment.

The new driver to economic growth is brown coal with Victoria having reserves among the biggest in the world.

The Latrobe Valley is emerging as the new future of the coal industry; the Murray Basin offers the opportunity to develop world-class mineral sands resources; there is the potential for the state to be a major world zircon producer; Walhalla in the east could once again be one of Australia’s most important mining centres; and a million ounce a year gold production is being touted.

How much is hype and wishful thinking and how much future potential fact only time will tell.

However, the minerals industry does have a supportive government and it will only gain further from the election of John Brumby, a previous minister for state and regional development, as premier.

Exploration expenditure is at an all-time high, increasing every quarter, and Victoria has about 60% of the state covered by exploration licences.

The signs are encouraging and there is momentum in the minerals industry, Minerals Council of Australia Victoria executive director Chris Fraser told Australia's Mining Monthly.

"We have exploration expenditure running at an all-time high and are expecting the June result will show we spent in excess of $80 million in 2006-07 [2005-06 was about $74 million]," he said. "It is showing a great deal of support for Victoria.

"We have a huge percentage of Victoria covered with exploration licences and in excess of $2 billion of investment is in process at the moment in the mineral sands area, gold and brown coal. That is also significant.

"We are supportive of what the Government has been doing. They are behind the industry. They recognise the minerals industry is one of the few with the ability to create new employment opportunities and wealth in regional and rural Victoria outside the agricultural industry.

"Investment is cranking up but Victoria is a tough place to get new projects up because of the environmental controls and pretty inefficient approval procedures.

"That makes it tougher than it needs to be. We must work to make sure that all of those capacity restraints that detract from investment in Victoria and Australia are removed so we do not create hurdles that create unnecessary delays and penalise our potential.

"It's not just a Victorian thing but national. Environmental approvals is the main one in Victoria but our aim is not to reduce standards. We are trying to get better environmental outcomes but we need to have procedures implemented better.

"Many good things are happening. There is a lot of exploration. There is huge potential out there but nothing will be served up on a platter."

The coal industry has passed its "potential" stage.

The state's mineral resources are dominated by brown coal. It holds about 20% of the world's reserves, the feedstock for the electricity generating industry and thus the basis for much of the state's industrial development.

The Latrobe Valley contains an estimated resource of 394 billion tonnes of brown coal with an estimated useable reserve of 50Bt with production dominated by the electricity generating companies in the Latrobe Valley.

Loy Yang's opencut brown coal mine is the largest in Australia and its power station the largest in Victoria with one providing an annual output of 30 million tonnes and the other supplying a third of the state's electricity needs.

The Latrobe Valley has four power stations with International Power, which owns the Hazelwood integrated mine and power station complex, spending $400 million redeveloping the mine.

The other major miner, Alcoa Australia, produces brown coal at Anglesea.

One of the massive potential investments is the Monash Energy project involving Anglo American and Shell in a joint venture with millions being spent on an advanced feasibility study for what could be a $US5 billion project to convert brown coal to diesel fuel and sequester carbon dioxide (CO2) in the Gippsland Basin.

Energy and Resources Minister Peter Batchelor said a scientific report identified the Gippsland Basin as having the potential to permanently store large volumes of CO2 - more than half of which emanates from power stations - allowing Victoria to make deep cuts in greenhouse gas emissions.

Batchelor said the Government was investing heavily in clean coal technology and the Latrobe Valley.

Fraser said the future of the coal field development depended on satisfactorily meeting all the environmental controls related to climate change.

Gold is second to coal in Victoria when it comes to contributing to the balance of trade with almost two-thirds of mineral exploration and mining development money spent on it.

However, 2005-06 production of 203,352 ounces for $142.3 million falls way below brown coal production valued at $850 million.

The Government says gold production is the best it has been for 90 years but it is a long way from both what it was - one of the world's major gold provinces - and its future potential.

Going undercover and back to the future are the keys to the revival.

Gold Undercover is a $9 million government initiative, a geo-mapping program aimed at delivering new data to aid the discovery of gold resources.

The gold industry has struggled somewhat recently with Bendigo Mining redirecting its efforts from production back to exploration and more recently the cash flow development issues at Perseverance.

For Bendigo a major shift in strategy led to deferral of production and exploration concentrated on the historically richer mines of Garden Gully and New Chum, which were the source of some 70% of historic gold production.

Its strategy is simple - drill beneath the biggest and richest mines that it can access via its underground lines. Also build up a portfolio of reefs.

The shift in strategy is to build reserves in the more productive areas in the south of the gold field with the goal of delivering reliable production of 150,000-200,000oz a year from the Kangaroo Flat mine.

"Exploration is progressing very well in many of the more prospective areas of the Garden Gully and New Chum lines," Bendigo managing director Rod Hanson said.

"The good news is that our targeting is continuing to be successful with the discovery of two large reefs on Garden Gully. We are on the right track."

He believes the field has a multi-million ounce potential.

Perseverance Corporation with its Fosterville and Stawell mines produced 189,192oz of gold in the year ended June 2007, but its June quarter production was lower than expectations impacting financially on the company, which announced a $26.5 million placement to investors in July.

The two mines have been major contributors to turning round declining gold production in the state. Leviathan Resources-owned Stawell and Perseverance-owned Fosterville produced all but 1700oz of the more than 201,000oz produced in 2005-06 before Perseverance bought Leviathan earlier this year.

PNG-based Lihir Gold this year finalised a merger with Ballarat Goldfields, which is developing the Ballarat East Project in an area that historically produced more than 12 million ounces of gold.

Exploration activities by Article continues, click here.