Pilbara-based Mining Services
As mining takes off again in WA’s Pilbara region, communities are bracing themselves for another boom and working to ensure locally-based service providers have a share in the sector.
WITH three new major iron ore mines on the cards and the increasing prominence of lithium, gold and copper in the area, the Pilbara could be set for another mining boom.
But in the hopes of mitigating the highs and lows of the past, community leaders were encouraging a greater focus on awarding contracts to local service providers within existing hubs and a strategy of diversification.
Most of the services necessary for new developments were already in place in the Pilbara, thanks to the region’s rich mining history, with many towns having been created specifically for the purpose.
City of Karratha mayor Peter Long said the relationship between mining and service-providers had shaped the Pilbara since gold was first discovered east of Whim Creek in 1887.
When an iron ore export ban that had been in place since 1938 was lifted in 1960, the large deposits scattered over the region suddenly became commercially viable, and a slew of towns were established to provide services supporting the new iron ore operations.
According to Mr Long, this was followed in the coming decades by gas discoveries, but more recently there had been a diversification in the mineral production of the region thanks to renewed interest in minerals such as gold and copper, and the new focus on battery metals.
“Lithium is one of the latest things of course, because it’s required in batteries, and there’s now three mines south of Port Hedland,” Mr Long said.
“It’s quite incredible and there’s so much in the future as well – there’s so much investment that’s going to happen, so we’re very fortunate.
“Providing the world market stays stable, it will be a very big year for Karratha, the Pilbara, and WA too.”
Despite his optimism, Mr Long warned that jobs needed to be localised as much as possible, in order to avoid the issues of the last boom, which were characterised by inflated living costs and shortages in land, electricity, and sewerage capacity.
“We definitely want to keep jobs local and we don’t want the rents to go crazy because already they’re starting to go up quite significantly,” Mr Long said.
It was a sentiment shared by Shire of East Pilbara president Lynne Craigie, who said services were already well-established within the region, but were increasingly facing the pressure of competing with larger, often multinational companies for key contracts.
“Local contractors have tried their best and up until a point recently they have provided services to the mining industry – it’s only now as the economy is tightening that the big players are trying to come in and take over some of those services for mining companies, which is not advantageous to local communities,” Ms Craigie said.
“Looking at my own community, something that would have employed 10 or 12 small contractors in town – those contracts are now being taken over by large multinationals.”
Forming Service Alliances
For local contractors that have extensive experience in providing mining services, but are sometimes too small to compete against larger, out of town companies, a joint tender may be the answer.
While Mr Long said he had yet to see a formal Pilbara-based mining service alliance, joining forces to compete for a contract was fairly common.
“As the City of Karratha, we split up contracts as small as possible so that local contractors can tender on them,” Mr Long said.
“That doesn’t always happen on these huge billion dollar projects, so what happens is that smaller companies have to band together, and that’s actually happening already.
“I haven’t heard of a specific alliance aimed at iron ore just yet, but some of our local companies have been very successful; they’ll join with others, so one might be an expert in steel fabrication and they might join with an aluminium fabricator.”
Ms Craigie said such alliances, whether formal or not, were a good way to ensure local services stayed in the region.
“I personally think it’s a great idea because at the minute everything gets taken to Perth or further afield, or those multinationals get it,” Ms Craigie said.
“Not only does it mean that the local contractors miss out on mining work, it also means they can no longer afford to offer those services to the rest of town.
“If you look at a local electrician for example, if all he’s got is the odd bit of residential work around town, there’s not going to be enough work for him to employ five, or 10, or 20 people; whereas if he can combine that with mining work, then the town gets the service as well.
“If we could have a Pilbara base of contractors, they could move around the Pilbara and provide services better.”
Ms Craigie said utilising local service-providers could also make smaller mines more viable.
“We talk about mining as in iron ore, and that’s great because iron ore is our bread and butter, but there are other small mines and other commodities that are almost on the edge of being financially viable to mine,” she said.
“If we can have local services provided so they don’t have some of that great expense of taking stuff in and out of the Pilbara, maybe that could help make them more viable too.”
A Local Focus
Many of the larger miners have already taken the local message on board, including BHP, which announced in October last year that more than 50 per cent of its contract commitments for its South Flank project was to businesses with Pilbara-based activity.
At the time, South Flank project director Simon Thomas said BHP embraced its responsibility to support local job opportunities and the participation of Pilbara residential labour in the South Flank project.
“We expect this of our contractors too, requiring all to supply detailed methodology for providing maximum employment opportunities for Pilbara residents,” Mr Thomas said.
“We’re deliberate about making sure as many Pilbara-based businesses have the opportunity to benefit from South Flank too.
“Our contractors are clear on our expectations of subcontracting to local suppliers, and initiatives like our Local Buying Program make it easier for the smaller businesses to participate.”
Beyond the Boom and Bust Cycle
Concerns for jobs to stay local, were not just about ensuring existing service providers maintained work, but also about stemming the population flow into the region, which wreaked havoc with the cost of living during the last boom, according to Ms Craigie.
“The East Pilbara was damaged in a lot of ways by the boom – there wasn’t a lot of warning it was coming,” Ms Craigie said.
“We had a population explosion within the town and rents went up to absolutely ridiculous levels; you could pay $800,000 for a small three bedroom asbestos ex-mining house.
“While that was good for those who could sell in that market, it made it very hard for local business to compete and to bring new people into town.”
She said further damage was done when the boom ended and the bottom fell out of the housing market.
“You have that boom and bust cycle with mining traditionally, and that’s very damaging for the region, because prices go through the roof, and then it’s like someone has ripped the rug out from underneath them,” Ms Craigie said.
“There were foreclosures on houses everywhere because people tried to get in on an investment level and paid $800,000 or $1 million for a house that wasn’t worth it, and then the bank suddenly values it at $300,000 or less, but they still have an $800,000 mortgage.
“We need to have land available so that if there is another boom and there’s a housing shortage, there will be land available and people won’t be paying top dollar – the land will be there and developed ready to plonk a house on if that’s what they need.”
Ms Craigie said while communities in the Pilbara were attempting to safeguard themselves against the typical boom and bust cycle, the increasing diversification of mining in the region would also protect local businesses and service providers by ensuring they were not reliant on the success of a single commodity.
“With the expansion of the type of stuff we’re mining – we’ve got more gold and lithium coming into the market – we’ve stopped being so reliant on one commodity price,” she said.
“The issue is that it’s all been iron ore in a pretty big way, and we are very much hamstrung on the price of that commodity, so if the commodity price of iron ore dropped, so does work in the Pilbara.
“If we can make it more diverse so that there’s a greater range of minerals being mined or other things happening, we’re not so reliant on that, and it should help to cushion that boom bust effect.”
Mr Long said Karratha was also working to safeguard the community against a boom, and were prepared for the population to double to 50,000, however diversification was still a vital component of the city’s strategy.