Olympic Dam deferred: Why the surprise?

THE Olympic Dam deferral got the headlines, but the real story came from Martin Ferguson. The Outcrop by Robin Bromby
Olympic Dam deferred: Why the surprise? Olympic Dam deferred: Why the surprise? Olympic Dam deferred: Why the surprise? Olympic Dam deferred: Why the surprise? Olympic Dam deferred: Why the surprise?


Staff Reporter

The mining boom is over, said Martin Ferguson.

Oh, but the Olympic Dam deferral had nothing to do with government policy.

Well, minister, yes and no.

Sure, the world situation is desperate and getting more desperate by the week. (If the drought in the US doesn’t break soon, expect the Mississippi to dry up further - and then watch what happens to the American economy as its primary transport artery closes). And, yes, Fukushima screwed uranium demand and it looks like copper is about to go down the gurgler too.

And one can also assume with reasonable confidence that Marius Kloppers was very conscious that BHP needs another screw-up like a hole in the head. No doubt memories of the Ravensthorpe laterite nickel mine, the hot-briquetted iron project, its Magma copper mine in the US are alive and well at BHP headquarters.

But - Mr Ferguson - you really can’t be serious in claiming that this is nothing to do with Canberra?

Pull the other one. Your colleagues have been verballing the mining sector for months, your lot changed the workplace laws to tighten the screws on private employers, your treasurer spent like a drunken sailor and your lot is responsible for the gigantic cost blow-outs to which BHP Billiton ascribes much of the cause of the postponement.

To what extent the mining and carbon taxes played on minds at BHP is impossible to say - but they would have been negative factors in that they go to a pattern of anti-resource feeling in the Gillard government.

So it was a mixture.

And had the global economy been booming and all the other global factors not existed, then - yes, I concede - BHP would probably have gone ahead with the Olympic Dam expansion.

Ferguson is also spot-on for saying the mining boom is over.

But why the surprise?

Back in December, Outcrop saw it all coming, the headline summing it up - “Weaker for longer”

And if this correspondent could see it coming eight months ago, someone in Canberra should have too.

But the point I raised just before Christmas is worth thinking about again in light of these latest developments.

I wrote: “For mineral commodities, the world is now turning on its head. The big danger is that the Australian psyche is not equipped to cope with it”

This was all based on a confluence of forecasts that week that attested to something more serious and long-lasting than a few rough months for share prices.

Nobel prize-winning economist Paul Krugman said it was time to start calling the situation what it was: a depression.

Then the well-known US fund manager Bill Gross of Pimco predicted the Euro’s fall would take the US economy with it.

Jeremy Grantham, who manages the $US100 billion Boston-based GMO fund, said we were in for seven lean years and no sunlight would be seen until at least 2016.

Matthew Lynn of London’s Strategy Economics penned a piece headed “The slump won’t end until 2031”

Now ask yourself: has anything significant occurred since December to allow you to dismiss any of these views out of hand?

The evidence, rather, just keeps getting more frightening.

The latest issue of The Nikkei Weekly out this morning in Tokyo headlines that Japan’s growth this fiscal year will be 0.1 per cent.

And the problem is not confined just to Japan. As the article points out, Asian production is falling gradually as a result of sluggish demand in Europe. “Consequently, Japan's exports to China and other parts of Asia have slid. In the April-June quarter, the ratio of foreign demand to real growth fell for the first time in two quarters,” the paper said.

Machine tool orders from China, which account for up to 40% of Japanese exports of those products, slipped by 3% in the June quarter. Not too bad, you say, except in June alone sales fell by 18.5%, suggesting the preceding two months were slightly up, and then there was a sudden plunge.

It’s not looking good.

Yet scan an average day’s announcements on the ASX and you would think it’s carry on as normal time. New drilling, new acquisitions, discoveries and plans for mine start-ups – and that is just from the first two hours this morning.

Denial is not a river in Egypt, as they say. It’s all about that psyche thing.

This article first appeared in ILN's sister publication MiningNews.net.