South32 shares tumble on warning over future of Worsley alumina refinery
South32 has warned the long-term viability of its Worsley alumina operations is in doubt due to ‘beyond reasonable’ environmental conditions.
Western Australia’s green-tape regime is again under scrutiny after South32 warned on Monday that the long-term viability of its Worsley alumina operations was in doubt after a five-year environmental approvals process resulted in “beyond reasonable” conditions for the extension of its mining rights in WA’s southwest.
South32 shares tanked on Monday after the company slashed $US554m ($831m) from the value of the Worsley complex, before tax impacts, cutting its carrying value to $US2.03bn, in view of the threat to the long-running bauxite mining operations in the state.
South32 submitted the environment approval applications five years ago, seeking to extend mining at its WA operations into new bauxite deposits within state forests that would give Worsley another 15 years of life.
The application was opposed by environmental groups because of threats to remnant jarrah forest and concerns that WA’s drying climate could make it impossible to fully rehabilitate land cleared for mining.
In 2019 the company warned its current approvals to clear native vegetation under existing approvals would run out within three years, forcing the company to rely on lower-grade zones with existing approvals areas.
But despite South32 cutting the amount of vegetation it wished to clear by about 45 per cent since the original 2019 proposal, WA’s Environmental Protection Agency recommended imposing a host of conditions on any extensions to South32’s mining areas in a July 8 decision.
South32 said on Monday some of the conditions, if imposed by the WA government, would “create significant operating challenges for Worsley Alumina and impact its long-term viability”.
“In Worsley Alumina’s view, several of the recommended conditions go beyond reasonable measures for managing environmental risks of the proposal, based on scientific assessment and decades of operating experience,” the company said.
South32 did not specify the conditions it was most concerned about. But the EPA recommendations include rehabilitating land at least equal to the area mined each year, limiting carbon emission from its mining operations, and protecting areas with only 30 per cent of native vegetation left.
The mining major plans to appeal the EPA decision recommendations, and hopes to win approval for its revised approvals by the end of 2024.
South32’s appeal comes amid growing criticism of WA environmental regulations by mining companies and other major industrial developers.
Facing a rising tide of criticism that “green tape” was damaging the state’s biggest industry, last year WA Premier Roger Cook commissioned a “short, sharp” review that found the state’s environmental approval processes had become “overly complex, time-consuming, and costly – holding back economic development without any benefit to the environment”.
The review made 39 recommendations, including a new recruitment campaign to help reduce the backlog in the system and improve internal technical skills, refreshing the EPA board, and creating stronger timelines to reduce the time approvals spent being bounced between the EPA and the Department of Water and Environmental Regulations.
The review also recommended measures to reduce the inbound workload of the EPA, including removing the need for local government planning schemes to be automatically referred for assessment.
A spokesman for the state government said the overwhelming majority of the review’s recommendations had been accepted, and it was making good progress on implementation.
“In just six months, the state government has already completed 14 parts of the recommendations from the review, including removing the need for planning schemes to be automatically referred to the EPA,” he said.
“In the next month, the Environment Minister will introduce legislation to address a further six of the review’s recommendations.”
The state government declined to comment on South32’s announcement on Monday as the company plans to lodge an appeal against the EPA recommendations.
South32 is only the latest miner to raise concerns about WA environmental approvals processes, which are being blamed for a slowdown by both major miners and the junior explorers that have been the lifeblood of the state’s mining sector for decades.
Association of Mining and Exploration Companies chief executive Warren Pearce said South32’s predicament made it “crystal clear” that the current process was not working for the sector.
“The WA state government is attempting to fix a complicated regulatory framework. But ultimately, the test is how those changes are implemented by the agencies responsible for it,” he said.
“And it’s crystal-clear that the current approach taken leaves industry and investors in a very uncertain position. It raises the question that if existing operations struggle to receive environmental approval for extensions, what hope do new projects have?”
South32 will also take a $US264m hit to the value of its Cerro Matoso nickel mine in Colombia as a result of the dire conditions in the nickel market, with the company saying it expects to make a decision on the future of the mine in the second half of the current financial year.
The company also delivered its full-year production figures on Monday, missing output guidance at both Worsley and its Sierra Gorda copper operations.
It also flagged lower production in the current fiscal year across a range of its operations, including Worsley, its Cannington base metals mine in Queensland, Sierra Gorda and its Mozal aluminium smelter.
South32 said it had begun a “phased mining restart” at its Northern Territory manganese mines, hit badly by a tropical cyclone in March, and said it still believed it could resume exports from the damaged wharf at the mines by March 2025.
South32 shares closed down 12.6 per cent to $2.99 on Monday.
