When Australian Bauxite, a company chaired by former Tasmanian Labor Premier Paul Lennon, sought approval for the $16 million Bald Hill bauxite mine just outside Campbell Town in northern Tasmania, it claimed there would be up to 180 jobs created and hundreds of thousands of dollars in royalties could be paid into government coffers.
For the Tasmanian Government, there was also the prospect of increased revenue for Tasrail, the struggling state-owned rail freight company. For investors, there was the expectation that the project would deliver a solid cash flow to help launch a new Australian mining company, deliver a steady stream of dividends and boost the share price.
But none of the company’s upbeat claims have come to pass.
The Tasmanian Government has not received a cent in royalties on the almost 120,000 tonnes of bauxite sold so far.
There are currently no full-time jobs at the mine, the company hasn’t paid a cent of royalties to the State Government and Tasrail racked up a loss of just under $2.5 million dollars.
Nor have most shareholders benefited from the project. Australian Bauxite’s share price has slumped since the mine was first opened and no dividends have been paid since 2009, when the company first floated on the Australian Stock Exchange.
How did a company and project which promised so much deliver so little?
The promise of jobs galore
The proposed mining operation was relatively simple: the plan was to excavate 1.5 million tonnes of low-grade bauxite from shallow deposits on just over 40 hectares of mostly sheep farming land. After minimal processing, the company planned to transport it to the Bell Bay port for export to eager global aluminium producers.
It would mine between 300,000 and 500,000 tonnes of bauxite a year and, after five years, the deposits would be exhausted.
Underpinning the company’s pitch to government regulators and investors was the argument that global demand for metallurgical-grade bauxite was growing rapidly as aluminium production in China boomed and was driving prices skywards. Tasmania, the company argued, could secure a small slice of the global market.
Australian Bauxite also held out the prospect that the success of the Bald Hill project could lead to the development of “subsequent bauxite projects”, such as deposits around Conara and to the east of Deloraine, where the company also held exploration licences. All up, the company claimed that it could produce up to 9 million tonnes of bauxite in Tasmania.
For the company, the environmental assessment process was a dream.
Its environmental impact statement (EIS) garnered a few comments, mostly from government agencies, but there was no apparent public opposition.
The project had the support of the two landowners whose farms would be affected and, aside from a series of minor conditions attached to its environmental licence, it promptly won the backing of the Midlands Council.
The Hodgman Liberal Government was also upbeat about the project.
Early in its EIS, the company said that the mine would create 45 full-time jobs but further back in the same document it claimed there would be just 25 full-time jobs. Either way, the company claimed the project would mean the creation of “up to” 180 direct and indirect jobs.
While economists argue the use of job “multipliers” to calculate direct and indirect job numbers grossly exaggerates the real economic impact of projects, the state government cited the biggest number. The Hodgman Government’s March 2015 report card on its first year in office settled on the 180 jobs figure as part of 7000 new jobs it claimed had been created.
A few weeks later the then Minister for Resources, Paul Harriss, went even further, claiming in parliament that the project would “directly employ 60 Tasmanians with another 200 on contract”.
However, the company soon discovered that mining bauxite was far easier than finding customers who wanted to buy metallurgical grade bauxite from a small new producer a long way from their smelters.
Since the mine first opened in early 2015, it has not sold a single tonne of metallurgical bauxite. “The metallurgical-grade bauxite market remains over-supplied by Chinese-owned bauxite mines in Guinea, West Africa, shipping in 200,000 tonne Capesize ships, again, Chinese-owned. Tasmania's northern ports can only take 35,000 to 50,000 tonne shiploads, which is expensive shipping and has made our Tasmanian bauxite uncompetitive since this West African supply commenced in 2015,” Levy told Tasmanian Inquirer.
Five years on, the mine occasionally sputters briefly into life to make intermittent sales to cement and agricultural customers from stockpiles of mostly small batches of low-value bauxite product. “Small tonnages of fertiliser grade bauxite are being sold infrequently - driven by availability of stockpile space at the customers' factory in Hobart and by sales of fertilisers,” Levy said.
Tasrail’s hope of having landed a major new customer evaporated, leaving the struggling railway to carry a $2.48 million dollar loss on the project.
With metallurgical-grade bauxite sales failing to eventuate and the jobs boost proving illusory, the economic spinoff for taxpayers largely evaporated.
The royalty riches which didn’t appear
In its initial pitch Australian Bauxite proclaimed that royalty payments to the Tasmanian Government would be about 80 cents a tonne.
While noting in its 2014 EIS that royalty payments were “not easily predictable” because the state’s part profit-based royalty regime provided for deductions, Australian Bauxite estimated that at a maximum production rate of 550,000 tonnes the royalties payable “should be” between $250,000 and $750,000 a year.
However, the Tasmanian Government has not received a cent in royalties on the almost 120,000 tonnes of bauxite sold so far.
“Royalties from the Bald Hill mine are not payable to the state government,” said Craig Stone, a spokesperson for the Department of State Growth.
Australian Bauxite’s chief executive, Ian Levy, told Tasmanian Inquirer in 2019 that, as the mine is operating on a private land title that pre-dates the Mining Act, the rights to minerals were held in perpetuity by the landowner. It meant the landowner, and not the state government, received any royalties.
“I think it is an absolute rip-off of the government but it is the way the law is so you can’t change it,” Levy said.
A dud stock pick
If the Bald Hill mine has failed to deliver any royalties to public coffers, it has hardly been good news for shareholders either.
Since floating on the stock exchange in September 2009 at 20 cents a share, the company has frequently raised cash by selling shares pitched to “sophisticated, eligible and/or professional investors”. Investors undoubtedly expected the company's potential bauxite projects would generate sufficient profits to enable dividends to be paid and more projects to be developed, driving stock prices higher.
A few days before the Tasmanian Government gave the company approval to proceed with the project in early December 2014, the company sold $3.75 million worth of shares to investors at 30 cents each. On the same day, another 1 million shares were issued to corporate advisors and contractors “in lieu of fees”.
Since the mine was approved by the Midlands Council, the company’s shares have sunk by over two-thirds, currently languishing at nine cents each. In the 10 years since Australian Bauxite was first launched on the stock exchange, shareholders have not received a dividend.
While the company’s only operating bauxite mine project is floundering, the company has a new pitch: the possibility that its Alcore subsidiary could establish a plant at Bell Bay to produce up to 50,000 tonnes a year of aluminium fluoride to sell to both Australian aluminium smelters and for export.
This project, the company stated in its September 2019 quarterly report, could have revenues “exceeding $80 million” a year.
But there’s a hitch.
With Australian Bauxite only holding only $920,000 in cash reserves at the end of December 2019, it is no position to finance another project in Tasmania.
Despite this, the company reassured shareholders holding out hope that its latest plan could win support and breathe new life into demand for bauxite from the Bald Hill mine that discussions with governments were continuing.