* Rio Tinto sees more cost cuts to come across industry
* Australia sees challenges to $230 bln in new resources
* West Australia sees 2-3 year delay, scale back of $6 bln
Oakajee port, rail
* State counts on Chinese to back Oakajee iron ore port
By Sonali Paul and Rebekah Kebede
PERTH, Nov 13 Rio Tinto said on Tuesday
that Australia's mining industry grew complacent in its race to
cash in on an overheated commodity market, and the global miner
predicted the industry faces widespread cost cuts now that
prices have cooled.
Miners had grown "fat and lazy" after allowing their costs
to follow prices higher, Australia's resources minister Martin
Ferguson said, warning this was putting at risk $230 billion
worth of new resource projects.
"Even if I might object to being called 'fat and lazy', he
makes a valid point," Rio Tinto's Australia chief executive,
David Peever, said at a conference in Perth attended by the
Miners have cancelled a string of projects, shut some coal
mines and slashed jobs, led by BHP Billiton's move to
shelve more than $40 billion worth of projects in copper, coal
and iron ore, as commodity prices have dropped.
"There are plenty of producers on both sides of the country
which have experienced this over recent months, and the
rationalisation will continue," Peever said.
Rio Tinto was looking at every possible way to slash costs,
he said. Last week it shelved plans to expand a workers' village
in the Pilbara iron ore region, though is pressing ahead with
its $16 billion iron ore expansion to 353 million tonnes a year.
Rio considers its Pilbara iron ore expansion to be the most
profitable development in the industry, which will allow it to
supply the market when demand picks up while smaller miners have
had to shelve or delay their developments.
"In other words, we get pole position in the market," Peever
He cited an industry report that said new iron ore mines in
Australia outside the established Pilbara operations on average
cost 30 percent more to build than in the rest of the world.
The resources minister said companies needed to manage
projects better in order to proceed with $230 billion worth of
mining and energy developments on the drawing board, the next
stage of projects following $270 billion already committed to or
"It's going to be very hard to get that second tranche (of
projects)," Ferguson told reporters on the sidelines of the
Western Australian Premier Colin Barnett said the mining and
energy boom had just hit a bump in the road and that growth
would be sustained though volatile over the next 10 to 20 years.
"The Chinese economy will not slow below 7 percent," Barnett
said, citing what he said Chinese officials had told him.
"We are hitched to China. But we will feel every little
hiccup and cough they have."
One of the casualties of China's slowdown was the A$5.9
billion ($6.2 billion) Oakajee port and rail project, shelved
last week by Japan's Mitsubishi Corp along with the
A$3.7 billion Jack Hills iron ore project, as it was unable to
line up a partner to help with funding.
Barnett said he expected Oakajee to be delayed by two to
three years, but was confident the development would go ahead.
"I wouldn't write Oakajee off. There's 13 billion tonnes of
magnetite iron ore in that province, there's probably over $3
billion in mainly Chinese investment in the area," the state
premier told reporters.
Western Australia would pursue talks with Chinese
state-owned enterprises to develop the port and rail project, he
"The project doesn't all have to happen in one go, it can be
staged... There's also scope to build a port, initially, of a
lesser standard," Barnett said.
For example, the port could operate for 250 days a year and
grow with market demand instead of operating all year round, he
Oakajee is one of several ports the state had hoped would be
up and running by the middle of this decade but it has suffered
from a reluctance by Chinese companies to invest offshore after
facing long delays and massive cost overruns.
Western Australia has the country's fastest growing economy,
thanks to A$167 billion in mining and gas projects, but it is
facing a slowdown as miners shelve developments, hit by soaring
costs, uncertain demand and a persistently strong Aussie dollar.
One of the state's major potential projects is Woodside
Petroleum's Browse liquefied natural gas (LNG)
development in northwestern Australia.
Woodside and its partners are due to decide by mid-2013 on
whether to build an LNG plant for gas from the Browse Basin at a
controversial location called James Price Point.
Royal Dutch Shell, which has expertise in floating
LNG technology, has recently lifted its stake in the project,
sparking speculation that the site will be abandoned in favour
of a floating LNG plant.
"The gas needs to come onshore," Barnett said, adding that
the James Price Point site has enough space for three LNG
developments in total.
The Premier also said processing gas offshore would cost
"If it's a floating LNG, that will be constructed entirely
offshore there will be no Australian jobs at all. I would think
that would be unacceptable to the Australian public," Barnett