Wednesday, June 1, 2011

Australian Government Bans Mining in Queensland

The risk on trade just got more interesting. Two of the favored sectors - mining and agriculture are now competing for attention from the Australian government. Australian iron, coal, and other mineral exports have been a key source of the country's astounding growth vis a vis its relationship w/a resource hungry China.

Australia's Queensland To Ban Mining On Key Agricultural Land
The government of Australia's coal-rich Queensland state said it will prohibit mining on a vast area it considers the best land for crops, clashing with some in the mining industry who warn the move will deter investment.

Environment and Resource Management Minister Kate Jones released maps covering 4.78 million hectares, including much of southern Queensland, that she said will be granted protection. Mining and other development projects that aren't well advanced in the approvals process will now be subject to the legislation when it is introduced later in the year, she said.

"Through this policy, we are protecting our important food bowls across the state," Jones said in a statement. "New mining projects that will permanently render strategic cropping land unusable in the protection areas will not be able to go ahead."

She said the state government will soon release a draft planning policy to ensure approvals for development include appropriate consideration of agricultural land.

Queensland is the world's largest exporter of seaborne coking coal, with the Bowen Basin region accounting for almost 40% of global output of the raw material in steel production. Australia is expected to produce 163 million metric tons of coking coal and 232 million tons of thermal coal this year, driven by strong economic growth in developing Asian economies which is underpinning demand for steel, according to data released in March by the Australian Bureau of Agriculture and Resource Economics and Sciences.

The Queensland government expects its policy on agricultural land will be replicated in other states.

Neighboring New South Wales to the south last week placed an immediate 60-day moratorium on granting new coal, coal seam gas and petroleum exploration licenses in a move it said was aimed at striking a balance between agriculture, mining and energy. The government said all new drilling and mining applications would now need to include an agriculture impact statement and be opened for public comment.

The Association of Mining and Exploration Companies, an industry body, said the areas defined by the Queensland government for protection are so vast they will impede the mining industry.

"Queensland would be an economic wreck without mining, yet the state government seems determined to ignore the financial impact of ruling out mining across a massive area," said Ross Musgrove, state manager for the association. "This wholesale mining lockout will scare potential investors and raise doubts about the sovereign risk attached to doing business in Queensland."

Amec members include Anglo American PLC, Fortescue Metals Group Ltd. and Teck Resources Ltd.

Source: CME News For Tomorrow

The Bottom Line: Competing pressure to feed mouths and machinery have come to a head in Australia where the local government has banned mining. In the short term, supply constraints may tighten even more.
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