Glencore draws exit plan from Dumbstralia

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I’m no great fan of Glencore but I sympathise today as the miracle economy works its magic:

Mining giant Glencore has handed the Queensland Labor government a fresh election-year headache by threatening to wind up its extensive copper operations in the state’s north in a year in a move that could cost up to 2000 jobs.

With infighting inside the government of Annastacia Palaszczuk already casting further doubt on the viability of the proposed $16.5 billion Adani coal mine, Glencore has threatened to walk, blaming high costs for energy, labour, freight and rail, as well a “materially changed” national investment environment. The threat also places pressure on the Turnbull government to come up with an energy policy that will be durable politically and guarantee investment certainty.

In a letter to the Premier, Prime Minister Malcolm Turnbull and their respective resources ministers, director of Glencore’s copper business Aristotelis Mistakidis says the company will no longer guarantee is copper processing facilities, which include a smelter in Mt Isa and a refinery in Townsville. Nor will it guarantee is copper mining operations beyond the life of the current mines near Mt Isa.

“There are a range of cost factors which are currently impacting the ongoing viability of our copper operations in Queensland, including energy, labour, rail and freight,” Mr Mistakidis writes in the letter, dated May 26.

Glencore owns some of those NSW thermal coal mines I’ve been talking about for years that will have to shut to make room for the publicly-subsidised, much higher cost, loss-making Adani white elephant.

As for copper and power, why wouldn’t Glencore leave? It would be cheaper to ship copper ore to Japan or China and use Aussie gas there to process it because, well, we already built high cost and loss-making white elephant LNG plants:

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Meanwhile:

Industrial gas buyers such as Arrium and other big players are being used as a bargaining chip in hard-nosed negotiations between Santos and the federal government on the structure of the controversial domestic gas security mechanism.

Santos is thought to have threatened to pull out of some domestic gas sales contracts or jack up prices – putting high-profile local businesses at risk – if the government’s proposed LNG export controls crack down on shipments from its $US18.5 billion GLNG venture in Queensland.

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And:

ExxonMobil and BHP have applied to delay development of one of the biggest Bass Strait gas discoveries of recent times for another five years, in an application that federal and Victorian resources ministers are considering whether to allow under their “use it or lose it” powers.

In a move that will further restrict potential new gas for tight east coast markets, it is understood the two resource giants, whose 50-50 Gippsland Basin joint venture in Bass Strait is the east coast’s biggest conventional gas producer, are arguing that the 2010 Southeast Remora discovery has too much carbon dioxide to run through the current gas plant set up at Longford.

The pair have applied for a retention lease extension renewal on the permit VIC/RL4 in which the discovery sits, rather than a production licence, after the previous retention lease expired.

This means they are saying the field cannot be economically developed in the next five years, despite soaring east coast prices and demand as Gladstone’s three LNG export plants power up.

Go Dumbstralia.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.