By Emma Young
Chinese-owned mining companies could skip a $529 million bill for environmental damage caused by an iron ore mining project in Cape Preston, in WA’s Pilbara, a report from Clive Palmer’s mining company Mineralogy has found.
Mr Palmer signalled “urgent legal action” in the WA Supreme Court to halt mining at the Sino Iron and Korean Steel projects until environmental obligations were met.
Sino Iron site.Credit: Glenn Hunt
Mineralogy was to act as trustee of the $529 million fund to ensure the site could be restored at the end of the mine’s estimated 25-year life.
But it has commissioned from mining rehabilitation expert Mike Slight that it says confirms rehabilitation funds have gone unpaid.
Mr Palmer said Citic’s recent statement signalling it was considering abandoning the project meant the matter was now “pressing and urgent”.
The project is now well into production phase and Mineralogy operations executive Nui Harris estimated it was causing more than $1 million in environmental damage per day of operations.
“Serious questions must be asked why foreign government-owned companies are being allowed to exploit the wealth of Australia unchecked,” he said.
But a Citic Pacific spokesman said Sino Iron was in compliance with its environmental obligations under the State Agreement and relevant legislation.
"Provision for rehabilitation has been made according to applicable accounting standards," he said.
The mine is already the subject of a long-running royalties dispute in the Supreme Court.
Mineralogy in November won a claim for $US150 million in unpaid royalties, but Citic appealed in January.
In the same statement used to announce the appeal, it signalled the possibility it would abandon the mine.
The mine cost about $US10 billion but its value has dropped substantially since it entered production in 2013, with another writedown of $US800 million to $US1 billion in 2017. It is running at a loss.
Citic Ltd took an impairment of $800 million to $1 billion in 2017 after Sino Iron dropped in value. Credit: Zhong zhenbin, AP
It stated to shareholders that “one or a combination of factors including the outcome of the [royalty] dispute, commodity prices or the inability to secure vital life-of-mine expansion approvals could lead to project suspension".
“Our parent company has been very patient. They are conscious of the project's progress to date and understand the potential long-term benefits, if we can overcome these challenges,” Citic Pacific Mining chief executive Chen Zeng said in a statement.
“But they’ve made it very clear that, like every other asset in the group, we must demonstrate financial sustainability. If we’re not commercially viable, we don’t have a future. Right now we’re focused on this goal.”
The mine provides about 1500 full-time jobs in WA, with additional contractors employed.
At a Senate inquiry in March, West Australian mining industry representatives struggled to point to even a single instance of a mine site rehabilitated to a high standard.
There are about 200,000 abandoned mining "features" across WA, including storage facilities, pits, shafts and tailings.
Some pits are so large is is beyond the technical capacity of mining rehab experts to backfill them, let alone restore them to support a functioning ecosystem.
Legal loopholes still exist that allow mining companies to skip out on these costs by going into liquidation.