BusinessFocus October 2011

BankSA Commercial Banking… Total Financial Solutions

SA’s Mining Sector Builds Momentum

Alice MccleAry Highly risky but rewarding business

... pg. 10

GrAhAM AscOuGhExploring new frontiers

... pg. 12

Kevin renfrey Riding the mining wave

... pg. 18

Welcome to the October 2011 edition of Business Focus.

This edition looks at South Australia’s mining and resources sector. It covers a number of exciting exploration projects throughout the state, we look at how SA-based mining services firms are supporting growth and touch on the sector’s need for new infrastructure to maximise and fulfil this growth potential.

Economic analysis released by KPMG last month forecasts the South Australian economy will grow steadily, owing to a boost by mining export projects.

As reported recently by KPMG in its Economic Scenarios and Forecasts, our economy is tipped to be lifted by the mining, defence, construction and service sectors. It also predicts that over the next five years the Gross State Product will grow at a healthy annual rate of 3.1 per cent.

It’s well accepted that as it strives to meet its own domestic growth, the Asian region will increasingly look to Australia to provide resources. This is good news for South Australia, which has a strong mining tradition as far back as its early colonial days.

Our mining sector is currently undergoing an exploration “boom” to such a degree that many economic and industry experts are tipping a mining “boom” that will impact our wider economy within the next decade.

Not only will the benefits be directly felt in the mining sector, but mining services can also look forward to strong gains, says Kevin Renfrey who runs Renfrey Plant Hire and Renex Equipment, both firms which supply heavy plant and equipment to the sector.

The need for a huge amount of new infrastructure goes hand in hand with any growth in the area says construction and engineering firm Ahrens, which has already been involved in major mining projects around the nation as well as SA.

We spoke to ASX-listed SA companies including Centrex Metals, UraniumSA, Archer Exploration and Mithril Resources about some of the promising exploration projects they are involved in across the State.

South Australian companies’ vast expertise in the sector is also being exported as demonstrated by Regency Park-based GJC Engineers. The team has been crucial in the development of a fully contained, mobile test plant currently being used in the US.

At BankSA we also continue to support regional South Australia – areas that really stand to benefit from the future mining surge.

I hope you will enjoy these and the other stories included in this latest edition of Business Focus.

lindsay hick, General Manager, commercial and Business Banking

Welcome…

Business Focus

South Australia in prime position to

Strike Mining Paydirt

player and winner in the future as the Asian region’s demand for raw minerals increases.

As SA Chamber of Mines and Energy (SACOME) Chief Executive Jason Kuchel says, mining and energy production has a proud history in SA and now, more than ever, the state’s resources are generating strong local and offshore interest.

Fittingly, the Adelaide foothills, home to Australia’s first economic mine at Glen Osmond are visible from the SACOME boardroom where Mr Kuchel explains one reason for optimism is the state’s consistent ranking among the top global jurisdictions for mining potential, ensuring a spot on the international investment radar.

World-class deposits, low sovereign risk and high quality geological information make SA a great place to explore and invest, he said.

Indeed the local sector is going through a rapid period of growth, assisted by the State Government’s exploration subsidy scheme Plan for Accelerating Exploration (PACE).

SACOME figures show that in 2004, there were four major minerals mines operating

in SA. Today this has grown to 18 either producing, approved or under construction. These include Olympic Dam, Beverley, Leigh Creek, Prominent Hill and Honeymoon.

“The resources industry is the state’s biggest export sector with minerals export revenue alone totalling more than $2.7 billion in 2009 and rapidly increasing – comprising 36 per cent of our exports in 2009/10,’’ Mr Kuchel said.

“South Australia is home to the world’s largest uranium resources, the fourth largest copper deposit, the fifth largest gold deposit and the world’s largest zircon deposit.

“Not only this, there are so many exciting exploration and other projects in the pipeline with the sector expected to spend more than $30 billlion on infrastructure alone from now until 2020 to help realise all this mineral wealth.’’

When it comes to exploration post-GFC, the 2010 exploration figure in SA was $189 milllion – down from the heady pre-GFC figure of $300 million, yet still a steady and healthy investment, Mr Kuchel said.

The national resources boom was described in a July, 2011 speech by RBA Governor Glenn Stevens as “the biggest gift the global economy has handed Australia since the gold rush of the 1850’s”.

More recently this sentiment was echoed in some of our national media following BHP Billiton’s record $22.5 billion profit – the biggest from any Australian company.

The result was received as good news not just for the big miner, its shareholders, employees and suppliers, but also for Australia. Even though soaring commodity prices force up the dollar and make some other sectors less competitive, mining sector investment is expected to add an extra three per cent to annual GDP – compared with only one per cent from the remaining 80 per cent of the economy.

Our resource exports to China and India – a region undergoing major expansion and growth – is widely acknowledged to have protected Australia from the worst of the 2008 Global Financial Crisis.

Industry and government experts say that rich in untapped mineral, gas and petroleum deposits, South Australia will be a key

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SACOME believes SA is where WA was two or three decades ago and that we are in the middle of an exploration boom that will translate into an estimated further five mines by 2015 – exceeding the Chamber’s own predictions.

“Olympic Dam will be a mini-boom in its own right, but the rest of the local industry won’t see a boom status this side of 2020.

“In SA we have several brownfields developments – the best example would be Prominent Hill, where there’s been more than $1 billion in the initial investment. They’ve now discovered another ore body and are drilling a 900 metre shaft from the open cut pit to reach the adjacent ore body.

“Companies make that initial investment and then see if it’s worthwhile spending more exploring immediately around the original deposit. That’s what happened in WA and that’s what will happen here.

“Once we see a critical mass of mines we’ll start to see a boom here because of those brownfields activities. We predict 20 mines by 2020 giving us that critical mass so that

somewhere in the 2020’s we’ll start to see a boom across the industry.’’

With all this will come inevitable regional economic development. Under the SA Strategic Plan our total export target by 2014 is $25 billion with a significant percentage of that expected to come from the mining sector.

SACOME expects 40 to 50 per cent of jobs created in SA over the next 10 years to be the direct or indirect result of mining activity.

Earlier this year recruitment firms said that while the GFC postponed development on many mining projects worldwide, employment in the industry has started to pick up again.

Manpower Australia managing director Lincoln Crawley said the firm had received interesting feedback from mining and construction sector employers about skills.

“Organisations need to prioritise attraction and retention strategies as the war for talent will be heating up,’’ he said.

“ Mining and energy production has a proud history in SA and now, more than ever, the state’s resources are generating strong local and offshore interest. ” Jason Kuchel

SA Chamber of Mines and Energy

(SACOME) Chief Executive

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Business Focus

Recruitment company Talent2 predicted that mine planning engineers, senior boiler engineers and electrical engineers would be in high demand, while Hays said the fight to hire the best talent would extend beyond the engineering field throughout the whole resources chain, from exploration to construction, fabrication and exporting.

It’s important, Mr Kuchel warns, “not to get caught up in the hype and make business investments based on that hype’’.

“Look ahead to 2020 and beyond and make investments accordingly. It’s important to understand that the industry is tracking steadily and between now and 2020 mining is still our largest growth industry and no doubt if you are looking to grow a business and are remotely associated with the mining sector – this is where the opportunities are.’’

There are a multitude of reasons for SA to be optimistic about the future of its lucrative mining and resources sector – job creation, export income, regional stimulus

and spin-offs for a variety of mining supply and service industries.

But for this growth to be realised, the sector agrees, SA needs new and improved infrastructure.

A viable port is absolutely essential and at the top of the list.

If we had a port capable of accommodating very large bulk carriers, we would have an additional three to five mines today, Mr Kuchel said.

“We really have been stymied by lack of a port and a variety of sub-optimal options is the result.”

“The government’s PACE program has been instrumental in the exploration boom and the government has done some things about infrastructure but we have to tackle the issue if we want to see the mining boom sooner rather than later.’’

Joe Mastrangelo, Department of Primary Industries and Resources of South Australia (PIRSA), Director of Major Projects and Investment Attraction,

agrees the sector’s growth will place new demands on existing infrastructure.

“Given the probability of ongoing strong external demand for mining outposts, there is strong potential for this pressure to continue over the longer term,’’ Mr Mastrangelo said.

“The Resources and Energy Sector Infrastructure Council (RESIC) – a partnership between private sector and government, has been established to develop infrastructure solutions and policy recommendations to meet the future requirements of the resource and energy sector.’’

Current levels of exploration, the establishment of new mines and supporting services and infrastructure will combine to put South Australians in the box seat to reap the rewards from our predicted mining boom.

Jane KittelBankSA Managing Director

Most South Australians are taught at primary school that economically, along with agriculture, our mining and resources sector is one of the state’s most important industries.

The sector creates thousands of jobs, earns major export dollars and has been responsible for supporting many new infrastructure projects.

But when you actually look at the massive potential, extent of exploration and the degree of untapped resources around the state, we have every reason to be strongly optimistic about where the sector can take the state in years to come.

South Australia’s “modern” mining history is almost as old as its first European settlement and goes back to the discovery of silver and lead at Glen Osmond in the Adelaide foothills in 1841.

The history books tell us that mining of copper ores at Kapunda and Burra soon followed in 1845, sparking huge interest in metal mining in South Australia and causing the first major decentralisation from Adelaide. Cornish miners and their families poured into the state to take part in the great boom that at the time earned SA the title of The Copper Kingdom.

By 1850 exports of copper and lead from South Australia earned more than Australia’s exports of wool and wheat and in those early years, mining was credited with saving the young colony from bankruptcy.

As mining discoveries grew across the state, so did communities and the necessary basic support structures.

Today, as reiterated by the sector’s peak body, the SA Chamber of Mining

and Energy (SACOME), South Australia is ranked in the top 12 jurisdictions in the world for mining potential. World class deposits – including copper, gold and uranium, low sovereign risk and high-quality geological information make South Australia a great place to explore and invest.

The sector is now going through a period of rapid growth and is our biggest export sector generating $2.9 billion in export income in 2009-10. With many exciting projects in the pipeline – including the expansion of Olympic Dam at Roxby Downs – the resources industry is expected to spend more than $30 billion on infrastructure between now and 2020 to help realise our mineral wealth.

These are genuine reasons to be optimistic.

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Not only does the sector bring enormous economic benefits to South Australia, it has a number of other positive spin-offs for the community including being a catalyst for regional and infrastructure development, employment creation and it fosters innovation in research and development. It also stimulates a range of mining support services and industries.

Given the sector’s proven track record as an economic driver and its tantalisingly positive future, I wasn’t surprised to see the results of recent research carried out as part of BankSA’s latest State Monitor survey that shows South Australians are significantly more positive about the long term future of mining and resources than

any other sector, including information technology/communications and the education sector.

Results show that people see mining and resources as a key to building a strong economy, generating jobs and developing regional South Australia. They see ongoing demand, especially from China and India, as well as a clean energy future as reason for optimism surrounding exports for natural gas, iron ore and uranium.

The BankSA State Monitor results also show that consumers and businesses are strongly supportive of:

• The local mining and resources sector using South Australian suppliers;

• Increased training of a local workforce to meet the demand for skilled labour to service the sector;

• Boosting our exports of coal, uranium, gas and iron ore.

The availability of water and skilled labour, being able to build the appropriate infrastructure such as roads, rail, ports and housing for mine workers, and having sufficient energy supplies were identified as key challenges for the sector.

The community’s optimism is justified. Between 2005 and 2010, more than $950 million was spent on exploration in South Australia – a significant amount from Chinese investors and leveraged

through the State Government’s program Plan for Accelerating Exploration (PACE).

Last year mining companies spent $189 million on exploration in South Australia and while that’s down from the $300 million spent pre-GFC, it’s still considered by the SACOME as a strong investment constituting an exploration boom that will lead to SACOME’s forecast mining boom in another decade or so.

SACOME tells us that in 2004 we had four mines operating in South Australia – today we have 12 mines in production and several more projects either being explored, undergoing approval or under construction.

Interestingly, BankSA’s research found South Australians want to make sure we capture and retain some of the expected financial benefit from a resources boom for future generations. The research shows there is an amazing 91 per cent support for the establishment of a future fund to preserve the benefits from current mining and resources development.

People specified they would want investment via a future fund to go towards new hospitals, schools, infrastructure projects, environmental protection and renewable energy programs, new apprenticeships and industry start-up incentives.

The idea of a future fund is not a new or radical one. The Organisation for Economic Co-operation and Development (OECD) has noted that future funds can reduce the call on future governments’ budgets and several countries including New Zealand, France and Norway – whose fund consists of revenue from the sale of North Sea oil - have operational funds.

To quote Joe Mastrangelo, Department of Primary Industries and Resources of South Australia (PIRSA), Director of Major Projects and Investment Attraction, we know from exploration projects that South Australia is rich in untapped resources and rich in future investment opportunities. The future economic returns are expected to be massive.

Mr Mastrangelo, who is also Resources and Energy Infrastructure Council (RESIC) Director, writes in a recent minerals industry publication that the current strong economic activity in the sector “has been driven by the developing world’s demand for raw materials to fuel their own strong domestic growth’’.

In addition to the number of mines already in operation “there are currently a further 31 projects in advanced stages of exploration, many of which may develop into mines. In addition to these advanced projects there are more than 100 exploration projects in the pipeline. The increase in the number of active mines has resulted in total annual mineral

production steadily increasing to $3.28 billion in 2009-10.’’

With so many projects in the pipeline this is the tip of the iceberg it would seem.

However, as he also says, this growth places new demands on existing infrastructure. That pressure will continue to grow with “probable further dramatic increases imminent’’ in the number of tonnes of ore transported within and exported from the state.

RESIC has engaged consultants to carry out an infrastructure demand study to identify the strategic infrastructure needs of the sector over the next decade and beyond.

Given this snap-shot it’s fair to suggest that South Australia’s future looks very bright. This view is supported by SACOME as indicated in its projections that South Australia could have up to 23 mines by 2015/16 and possibly up to 40 operating mines by 2020.

Overall, South Australians are extremely optimistic about the State’s mining and resources potential and they want to maximise that potential via a future fund for the benefit of generations to come.

If this clear and strong wish is to be realised, it will require political and industry leadership to develop a plan for mining and resources sector management to ensure South Australians are left with a lasting legacy from the State’s rich but finite resources.

Business Focus

World class deposits – including copper, gold and uranium, low sovereign risk and high-quality geological information make South Australia a great place to explore and invest. ” Jane Kittel

“

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A welcome and Self-Contained

Solution

“ ...the process is ground-breaking technology that taps into an unexploited resource. ” Glenn Jobling

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Business Focus

When it comes to innovative solutions and project management, South Australian firm GJC Engineers is gaining a solid reputation for its work on a number of international as well as local ventures.

With capabilities in a range of areas including chemical, electrical, mechanical and control systems engineering, over the past decade the firm has focused on becoming an important provider to the uranium industry and in the field of uranium processing, in particular the drying and drum packing of yellowcake.

As GJC founder and engineering director of Adelaide Control Engineering (ACE) Glenn Jobling explained, the Regency Park-based company has an established worldwide reach, having worked on projects in Canada, Finland, Kazakhstan and Africa.

Mr Jobling established GJC Engineers in 1994 and in 2005 bought ACE to service the mining and processing industries in Australia and overseas.

The company’s latest and most challenging project to date has been the design, construction and delivery of a 1000th scale, transportable pilot testing plant. The plant, commissioned by leading uranium processor Urtek, was recently delivered to a fertiliser producer in the United States with the aim of deploying the unit to several other sites over the coming year.

The fully contained test plant was constructed inside two side-opening 12-metre shipping containers, ideal for use in remote locations and limiting the requirement for site-based labour.

Urtek, a joint venture between Toronto Stock Exchange-listed Cameco Corporation and Australian Securities Exchange-listed Uranium Equities Limited, is on the cutting edge of uranium extraction technology. Their innovative recovery process, the PhosEnergy process, extracts the naturally occurring uranium from phosphate fertiliser streams.

“With low operating costs, a high level of uranium recovery and reduced environmental impact, the process is ground-breaking technology that taps into an unexploited resource,’’ Mr Jobling said.

“Building plants to process materials at mining and other big production sites is difficult, time consuming and costly, so this transportable operation has major advantages.”

“It’s planned to operate for several months at the site in the US and will provide cost and design data to enable the construction of a full-scale commercial facility.’’

The plant has been built to international standards and can easily be transported to, and importantly integrated into, facilities around the world.

“Mineral and other processing plants typically require staff with special engineering skills, the involvement of skilled tradesmen and creation of custom control systems – hard to find skills on a remote site,’’ Mr Jobling said.

“Advanced control systems mean we can remotely monitor and control the plant here in Adelaide wherever it is in the world and that real time and historical data can be used to improve plant performance with input from experts around the world.’’

Urtek general manager James Davidson said the company hoped to run more testing in the US, Asia and Africa with the plant.

“We had the choice of making it anywhere in the world but chose to do it here because we had the confidence in the people here and we had the quality control we needed.

“All design and construction was done in Adelaide within strict time constraints and using the services of other skilled subcontractors and with input from engineers and scientific teams around the world.’’

Mr Jobling said there was potential to build and export similar transportable test facilities in the future and all involved would be watching the US-delivered module results closely.

how BanksA has helped...Mr Jobling has been associated with BankSA for twelve of the 20 years he has been in business and has developed a strong working relationship with the business banking managers who he finds especially helpful in assisting in his dealings with remote, offshore banks.

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A highly risky

but rewarding business

As recounted in many a romantic frontier tale of heartbreak, tears and success, the mining sector really is potted with stories of risk, anticipation, frustration and reward.

Company director Alice McCleary has seen first hand the highs and lows associated with the sector through her work with the ASX-listed Archer Exploration Ltd and UraniumSA Ltd.

She helped float UraniumSA in 2006 with managing director Russel Bluck and Tom Phillips. Shortly after the float, in the first operational test of its drilling equipment, significant uranium mineralisation was discovered at its Samphire Project, about 20km southwest of Whyalla at Mullaquana.

This is one of the most significant new uranium discoveries in recent South Australian exploration history, the company says.

“It really was one of ‘those’ moments,’’ Ms McCleary recalled. “We were testing our equipment, in an area that we thought was prospective for uranium but which wasn’t our main focus, before taking it out to tenements at Tarcoola in outback South Australia.

“It was just amazing to everyone - to be test drilling and then on our very first drill hole finding this deposit that was pretty much commercial grade. We’ve got applications in to do a field trial and hope that Samphire will be producing yellowcake in 2013. We are very confident.’’

Archer Exploration grew out of Uranium SA and is focused on magnesite, graphite and manganese, with copper, gold and uranium potential as well.

“Our lawyer at UraniumSA, Greg English, had some interesting tenements and I worked with him to manage the original Archer float,’’ she said.

Archer has now acquired a portfolio of projects, covering an area in excess of 10,500sqkm in the highly prospective Eyre Peninsula, Leigh Creek, Gawler Craton and Adelaide Fold Belt regions which include Burra and Wilmington.

“There is just so much to be excited about and so much happening, especially in graphite where we have made a string of very significant discoveries over the last 12 months,’’ Ms McCleary said.

“A number of the discoveries have included large flake graphite that is used for emerging green energy initiatives such as lithium-ion batteries for electric vehicles and in fuel cell technologies. The demand for flake graphite is ever increasing and given its rarity, is driving prices higher.”

While her background has been in corporate taxation and she has been a company director for the past 15 years, Ms McCleary says that few of her roles have come close to providing the buzz surrounding the mining sector.

“Yes, it’s high risk and there’s a lot of anticipation and you have to be very

patient. For me, one of the most exciting things has been to be out at one of UraniumSA’s sites for the first time and seeing drilling in progress. When the hole was finished, a 40m probe was winched down it to measure the radiation - and immediately got a reading which shows up on a computer screen in real time.

“It was an unforgettable experience. No one’s been there before and you don’t know what you’ll find. It really is pioneering stuff.

“South Australia is a treasure trove and that’s not just my view – we are regularly highly ranked by the Fraser Institute in Canada as being one of the world’s top prospective locations for minerals.’’

While it would seem the riches are there for the taking for those willing to take the risks, raising local venture capital is difficult, she said.

Other challenges are communicating the potential to those outside the mining sector, and lack of regional infrastructure, including transport and port facilities.

“We have internationally significant deposits of commodities that are in world demand. South Australians don’t have a sense of that – but I hope they will soon, because the benefits will be enormous.’’

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“ South Australia is a treasure trove and that’s not just my view – we are regularly highly ranked by the Fraser Institute in Canada as being one of the world’s top prospective locations for minerals. ”Alice McCleary

Business Focus

how BanksA has helped...Ms McCleary praised the responsiveness of the bank to a recent loan application which allowed her to exercise some options in UraniumSA. “With about a week to go before the expiry date, I approached BankSA to see if they could urgently extend my bank facility so I could exercise my options. They immediately understood the issue and the extension was made very quickly and smoothly.”

Exploring new

Frontiers

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“ The whole process of finding new mineralisation is very exciting and in South Australia there is still a lot of unchartered area. ”Graham Ascough

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Despite advanced technologies including satellite imaging, GPS mapping and computer modelling, there’s still a strong pioneering spirit and new frontiers element associated with modern resource exploration and mining.

This is one of the most appealing aspects of the business for Graham Ascough, managing director of greenfield explorer Mithril Resources Ltd and chairman of Musgrave Minerals Ltd.

A trained geophysicist with more than 22 years of industry exploration experience evaluating mineral projects and resources in Australia and overseas, Mr Ascough joined ASX-listed Mithril Resources five years ago.

“It’s very appealing to people who want to get in on the ground level, explore new areas and find something for the first time,’’ he said.

“The whole process of finding new mineralisation is very exciting and in South Australia there is still a lot of unchartered area – resources are the future for South Australia going ahead.’’

Mithril has already consolidated an extensive land holding throughout Australia and is primarily focused on exploration on core project areas in Western Australia and the Northern Territory.

The company has dedicated significant focus and resources to exploring the

Huckitta Project, about 160km east of Alice Springs, during the past 12 months. In that time, the size of the target area expanded significantly, the number of prospects increased and the company’s ability to pursue priority targets was enhanced by a capital raising strongly supported by new and existing shareholders.

Key targets include the Basil Copper Prospect, the Manuel Copper Prospect, the Polly Copper Prospect, and the Tibbs Gold Prospect. These form part of more than 25 priority regional targets which are currently being assessed at the Huckitta Project.

“What is unfolding at the Huckitta Project has all the characteristics of an emerging mineral province with a significant number of near-surface targets and mineralised trends extending up to 10km in length,” Mr Ascough said.

“In short, Huckitta has the potential to deliver a large tonnage, near-surface resource.”

Mr Ascough echoed widespread industry sentiment when he said “there will be a mining boom, but first we are going through an exploration boom in South Australia”.

“Overall this is an exciting time for South Australia and South Australian mining companies. We already know through Olympic Dam and Prominent Hill that we are host to world-class deposits and

there will be a continued focus on South Australia that will support a lot of growth and regional prosperity.’’

Mithril was a driving force behind the creation of Musgrave Minerals Ltd, an ASX-listed explorer dedicated to exploration and development of mineral projects in the largely unexplored Musgrave region in far north South Australia.

Musgrave Minerals, which listed on the ASX in April this year, has a powerful group of foundation shareholders including Mithril, Independence Group NL, Goldsearch Ltd, Integra Mining Ltd, Barrick (Australia Pacific) Ltd and Argonaut Resources NL. The company’s aim is accelerating exploration in this “highly prospective’’ part of SA.

“Musgrave Minerals has a massive footprint in the Musgrave Province - one of the least explored resource frontiers in Australia. We have tenements covering an area of 50,000sqkm - approximately five per cent of South Australia,’’ Mr Ascough said.

He said the geoscientists of Musgrave Minerals had already successfully completed an initial phase of exploration and identified new mineralisation, established new drill targets and advanced a number of conceptual targets to a drill test phase.

Business Focus

how BanksA has helped...

Mithril Resources has been with BankSA since being listed on the ASX in 2002 and enjoys a strong relationship and appreciates the consistency of experienced business bankers.

State Government approval in August, 2011 for Centrex Metal’s Wilgerup haematite iron ore mine on the Eyre Peninsula was another step in securing the region’s future as a mining and export province with the potential to produce many millions of tonnes of ore for export each year.

As Centrex chairman David Klingberg explains, the company and its subsidiaries hold iron ore rights within 16 exploration licence areas covering more than 2,000sqkm stretching from south of Whyalla, to just west of Port Lincoln.

Centrex and its joint venture partners have already announced 477 million tonnes of

inferred magnetite resource at its Carrow and Fusion prospects and a 103 million tonne inferred magnetite resource at its Bungalow deposit near Cowell. Exploration targets of up to 3,000 million tonnes provide further potential to significantly increase the resource base in the longer term.

“The potential not just for us but for the state is huge,’’ Mr Klingberg said. “We are delighted to have secured joint venture relationships with two of China’s major steelmakers.”

“The Wuhan Iron and Steel Co (WISCO) is one of China’s top 5 steelmakers and it has paid $153 million into a joint venture

with $78 million paid directly to Centrex and the balance going to exploration and feasibility studies. This acquired a 60 per cent interest in the iron ore rights over five of Centrex’s exploration licences on the Eyre Peninsula that make up the joint venture.’’

Centrex will hold the remaining 40 per cent of the 60/40 iron ore joint venture which aims to establish two 5 million-tonne a year magnetite iron ore operations within three to four years.

WISCO and Centrex have established a joint venture management company, Eyre Iron Pty Ltd for the exploration and development studies on the projects.

Centrex Central to Eyre Peninsula mining hub

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how BanksA has helped...

Centrex has significant funds on deposit with BankSA and expects a strong relationship to grow further as it develops the business.

Centrex has also established a significant joint venture with Baotou Iron and Steel Group (Baogang) from Inner Mongolia. Baogang is an important iron and steel industrial base and the largest rare earth industrial base in China.

“Baogang are investing in the Bungalow tenement north of Cowell where we are going ahead with exploration and environmental and feasibility studies’’ he said.

Critical to the company plans, Mr Klingberg says, is a deep water, purpose-built port which earlier this year received State Government Major Project status.

The port site some 20km north of Tumby Bay has deep water sufficient for cape-sized vessels within 500 metres from the shoreline. The $180 million construction project is now going through environmental approval and community consultation.

It is envisaged that the port which the company is hoping to call Port Eyre would also appeal to other miners in the vicinity and to the area’s grain exporters opening the region up to a previously unseen level.

South Australia still has a lot of unrealised potential and that’s something the state should be excited and positive about, Mr Klingberg said.

“Mining helped build our economy from the early days. Olympic Dam will be one of the world’s largest mines when it’s fully developed. South Australia is a trusted jurisdiction for exploration and mining and there are a significant number of new mines planned.

“This potential will only ultimately be realised with major private sector and government investment in new regional port, rail, road and electricity infrastructure.’’

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“ The potential not just for us but for the state is huge. We are delighted to have secured joint venture relationships with two of China’s major steelmakers. ” David Klingberg

Business Focus

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“ As far as exports go, Australia is the food and resource bowl for Asia and we are geared to supporting the agricultural and mining industries as well as major developments in regional and remote communities from coast to coast. ” Stefan Ahrens

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Growth allied to key Export Sectors

Business Focus

Like most successful business operators, Stefan Ahrens, Managing Director of SA-based engineering and construction firm Ahrens, knows his company’s future is closely tied to the health and well-being of the local and national economies.

Ahrens, a fourth-generation family business, started 105 years ago as a blacksmith shop at Shea-oak Log north of Gawler, and even though now it has outlets all over the country, the firm’s headquarters is still locally based at nearby Kingsford. From servicing the local farming community’s blacksmithing needs in the early 1900’s, the business extended its product range to steel-framed rural sheds and agricultural machinery.

In the mid 1970’s, Ahrens started producing structural steel, a decision that shaped the company’s future and led to its current position as a Design & Construct specialist supplying turnkey industrial and commercial buildings, materials handling, mining infrastructure, structural steel and grain storage and handling equipment. In 2003, Mr Ahrens was named South

Australian Young Entrepreneur and in 2009 he received the South Australian of the Year Business Award. Both awards recognised the steady growth of the business under his direction – and his parents Bob and Marj before him.

Mr Ahrens took over at the age of 25 and has since grown the business into a nationally focused company with four main operating divisions – Design and Construction, Mining Services, Steel Solutions and Agri. The company has been listed in BRW’s Top 100 Fastest Growing Private Companies for many years, and is among the top 500 private companies in Australia.

“As far as exports go, Australia is the food and resource bowl for Asia and we are geared to supporting the agricultural and mining industries as well as major developments in regional and remote communities from coast to coast,’’ Mr Ahrens said.

“Our first mining contract in 1994 was a $9.5 million project for the Northern Territory Mount Todd gold mine.”

“Since then we’ve worked on a variety of design, construction and materials handling projects for the mining industry around Australia – including Olympic Dam’s waste heat boiler plant in SA, Savannah Nickel at the Port of Wyndham in WA, OZ Minerals facilities in both Darwin, NT and Prominent Hill, SA, Iluka Mines in SA and Xstrata Mines in Mt Isa, QLD.’’

Mr Ahrens said these and other projects have given Ahrens invaluable experience in the many facets and demands of the mining industry.

“Because of the work we’ve been doing and the growth of the Australian mining and coal seam gas extraction and processing industries, we have established a highly qualified and resourced Materials Handling Mining division specialising in conveyors, train and ship loading and unloading, structural steel, platework, mining infrastructure, mining camps, commodity storage buildings, workshops, warehouses and substations.’’

Its experience in the design and construction segment of mining encouraged Ahrens to become involved in mining services. In November last year they purchased Mahon Asset Management in Newman WA, which has a contract with BHP Billiton to refurbish and maintain residences in Newman, WA, and also provides a mine and town maintenance service to BHPB.

“We are very excited about the challenges and opportunities that lie ahead, especially in mining – there’s no doubt that if Olympic Dam goes ahead it’s going to be tremendous for SA,’’ Mr Ahrens said.

He said the firm was confident the mining and resources sector would stimulate and energise the economy, both nationally and in SA, for future businesses and generations to come.

how BanksA has helped...

Ahrens has had a business relationship with BankSA for the past six years and appreciates the fact that the people who run the bank are based in South Australia.

18

Poised to ride the Mining Wave

Kevin and claudette renfrey

Business Focus

19

South Australian businessman Kevin Renfrey has been involved with the state’s mining sector for 36 years.

“I believe that the growth we’re going to see in the mining sector in the coming years will make what we’ve seen in the past look comparatively small,’’ Mr Renfrey said.

“Our organisations have been doing a lot of inward looking, repositioning and planning in order to make sure we are poised to further participate in the expected growth.”

As managing director of family businesses Renfrey Plant Hire Services and Renex Equipment, Mr Renfrey and his team hire out heavy plant and equipment, sell and service mining machinery and install specific site safety equipment.

“Going back, my first job was as a sales cadet with a supplier of mining equipment and since then I’ve had a strong

association with the industry and watched it grow.

“I believe that what we’re seeing in South Australia now makes us the only state where there is real growth. We have Olympic Dam, projects coming on stream at Whyalla, Eyre Peninsula and the Far North, further expansion at Prominent Hill, and discoveries on Yorke Peninsula.’’

He still considers one of Renex’s biggest achievements as its 1982 supply of one of the five original items of underground plant at Olympic Dam.

“We supplied its first mobile rockbreaker, and we’ve maintained a connection with them since then.”

So positive is the firm about the future of the state’s mining and resources sector, Mr Renfrey has now relocated the Renex business to a larger premises at Wingfield with a focus on being a one-stop supplier

for the fit-out of plant and equipment to meet mine site compliance standards.

“We have basically re-invented Renex with a new logo, new identity and new products geared specifically for the potential that lies ahead,’’ he said.

Mr Renfrey said Australian mine site occupational health and safety requirements were particularly stringent and it was important that equipment was well prepared, compliant and ready to roll on site.

Renfrey Plant Hire is also poised for opportunities in mine development, materials handling and supporting infrastructure.

He said businesses associated with the sector would be wise to research the current level of exploration activity and see how best to position themselves to share in the sector’s growth in coming years.

“ I believe that what we’re seeing in South Australia now makes us the only state where there is real growth. ” Kevin Renfrey

how BanksA has helped...The company has been with BankSA since 2001 and enjoys a positive local relationship with people who understand the needs of the business. The bank has been helpful with funding for both plant and property acquisitions.

Growth in the state’s mining and resources sector isn’t just good news for mine operators.

With thousands working either directly or indirectly in the sector and a mining boom expected in the next decade, the spin-offs for other market segments will also continue.

Service sectors including engineering, export, construction, heavy equipment supply and housing are among major beneficiaries and SA Chamber of Mines and Energy (SACOME) expects 40 to 50 per cent of jobs created in SA over the next 10 years to be the direct or indirect result of mining activity.

With a reputation for building in remote locations, Rivergum Homes is one of the local builders to benefit from the health of mining expansion and three years

ago it completed a $6 million residential development in Roxby Downs.

As Rivergum managing director Victor Said explained, the company’s apartment complex of 20, two-bedroom homes was completed in just nine months and earned an HIA-CSR Apartment Project of the Year Award (in 2008).

The company believes the project is a vote of confidence in the future of BHP Billiton’s Olympic Dam project and reflects a growing need for quality accommodation for mine workers.

“We built these apartments because there are a lot of transient workers in Roxby including executive singles and couples with no children who need accommodation – they don’t want to rent a big house or live on a campsite.

“Our apartments look more like a group of serviced apartments.’’

The design planning took into account the harsh climate of the region and the apartments have an impressive 6.9 star energy rating.

Features include increased use of insulation in walls, ceilings and floors, airtight sealed doors and window and solar hot water systems.

Rivergum general manager Richard Bolaffi (pictured right) said Rivergum is currently investigating further housing project opportunities in Roxby Downs which it hopes will be realised in the coming 12 to 24 months.

“ Rivergum Homes is one of the local builders to benefit from the health of mining expansion. ” Victor Said

20

Business Focus

21

Building Sector Enjoys

Mining Boost

BankSA & Staff Charitable FundCelebrates 70th Anniversary

BankSA’s Roxby Downs branch celebrated its second birthday in July, 2011 and is positioned to benefit from strong growth as the mining town expands.

The branch offers a full range of services and banking products to Roxby Downs including home loans, business banking, financial planning and insurance.

An innovative Virtual Financial Planner service was set up by BankSA in the Roxby Downs branch in September following a successful pilot project in its Darwin branch earlier this year.

Customers are able to talk to a city-based financial planner via high-definition video

link using real-time technology, while sitting down inside the branch at Roxby Downs, 560kms north of Adelaide.

The Roxby Downs branch employs five staff after opening on July 13, 2009 following a $1 million investment by BankSA.

Branch Manager Lauren Blanchard said the branch offered a broad range of services.

“We pride ourselves on excellent customer service and have expertise across the full range of banking services,’’ she said.

BankSA had previously operated an agency in Roxby Downs through the local newsagent, but a decision was made to

open a full-scale branch because of the strong demand from the local community.

The Olympic Dam mine operated by BHP Billiton is central to the fortunes of Roxby Downs. A final decision is expected to be made by the company early in calendar 2012 on an expansion of the mine which would be worth up to $48 billion to the SA economy over the next 30 years.

The Roxby Downs area has a young population and the highest income per household for any postcode in South Australia, which means there is substantial demand for expertise on banking needs and a wide range of financial services products.

BankSA’s Roxby Downs Branch – Positioned for Growth

The BankSA & Staff Charitable Fund celebrates its 70th anniversary this year, and marks the occasion with an official celebration on November 11, 2011, which of course is Remembrance Day.

The fund was originally set up to provide gift parcels to colleagues serving in the armed forces in World War II, hence the choice of this date to mark the 70th anniversary of the fund and its contribution.

The BankSA & Staff Charitable Fund has made an extraordinary contribution to

the community and charities in SA over the past seven decades, and makes donations to more than 100 charities and organisations each year.

The entire BankSA network in SA and the Northern Territory is being encouraged to be involved this year, with branches inviting a local charity into their branch to set up a display on November 11.

To mark the 70th anniversary the fund is sending a modern-day version of a comfort parcel to some of our serving military officers overseas, and also to

loyal contributors among the BankSA workforce who make a small contribution to the fund each pay.

The comfort parcels will include non-perishable food packs from well-known South Australian companies, along with other small, practical items such as sewing kits.

22

BankSA – A Division of Westpac Banking Corporation ABN 33 007 457 141 Australian Financial Securities Licence 233714 Australian Credit Licence 233714. BSA03519 (09/11)

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Business insurAnce - cAll 8424 5275As one of the largest Business Insurance Agencies in the State, we can tailor an insurance plan specifically designed for your customer’s business. • Free on-site consultation with a Business Insurance specialist or, • Convenient, over the phone cover for most SMEs • Comprehensive product range • Pay by the month for no extra cost on most policies to assist cash flow management • No Broker fees to save $

finAnciAl PlAnninG - cAll 8424 4097We have a dedicated Senior Financial Planner within Private Banking. Services include: • Wealth creation • Retirement/superannuation planning • Investment structures • Estate planning • DIY super funds • Lending to Self Managed Super Funds

BBO - cAll 8424 4792 Or 1300 554 004A user friendly online account management tool that enables you to conduct your banking from the convenience of your desktop. BBO is an innovative and time saving service, which offers a wide range of transactions in a secure Internet environment.

As the state’s leading business bank, BankSA is thoroughly committed to helping your business grow. We offer a wide range of products and services.

BankSA – A Division of Westpac Banking Corporation ABN 33 007 457 141 Australian Financial Securities Licence 233714 Australian Credit Licence 233714.

Business Focus is produced by BankSA’s Public Affairs Department. Readers’ comments are welcomed.

All correspondence should be sent to: The Editor, Business Focus, BankSA, GPO Box 399 Adelaide SA 5001. Telephone (08) 8424 4570

BankSA may be entitled to commission or fees in respect of products discussed in this publication. The information contained in this newsletter is believed to be accurate, but no liability is accepted for errors or omissions or for loss or damage suffered as a result of a person or business acting thereon. Print post approved 56001/00273. BSA01869 (10/11)

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