Australian Resources Weekly News

Australian Resources Weekly provided by Australian market analyst UBS.

Impact of Apache explosion

Apache gas pipeline explosion event:

On June 3, Apache Corp. reported a pipeline rupture and fire at its Varanus Island plant which shut down a third of Western Australia's gas supplies. The company indicated that gas supplies are expected to be restored partially in a couple of months. The state of Western Australia is home to 1,030 operating mine sites, producing over 50 different minerals and accounts for 16% of global iron ore supply and 11% of global nickel supply according to various news reports.

Nickel prices have increased 11% since the incident:

Iron ore supplies have not been affected as RIO, BHP and FMG have either made alternate arrangements or were not dependent on Apache for gas supplies. However, nickel supplies from BHP and Minara have been impacted which has seen the nickel price increase more than 11% since June 3. MRE indicated that temporary gas supplies have been secured but additional gas supplies will need to be secured in order to allow the plant to operate at full production. Management reduced their production forecast guidance for the year to 31-35kt.

BHP bringing forward its maintenance shutdown at Kwinana Nickel:

BHP indicated that with the ongoing issues in attaining natural gas, it has decided to bring forward its maintenance shut down at its Kwinana nickel smelter which is expected to impact nickel sales in 2009 by 25kt.

Some are substituting diesel for gas but this is results in higher costs:

Other companies that have been impacted by the incident include: ABY, NCM, OXR, ILU and AWC which have all switched their operations to diesel.