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An accident of Olympic proportions

07 Nov, 2009 02:30 AM
They’re watching in the boardrooms of London, the headquarters in Melbourne, and the outback plains of South Australia. In the Treasury rooms of Adelaide and the shops of Roxby downs, they’re counting the cost.

Industry sources say the shutdown and repair of Olympic Dam’s main shaft could cost the mining giant more than one billion dollars, and its economic ripples will be felt across the state.

Lost revenue and high costs of repairs and replacement of major machinery have sent the bill rocketing.

BHP workers have been redeployed into other areas of the operation and a wide range of contractors have left the site which is now operating at a quarter of its capacity.

MacMahon Holdings which had 250 staff at Olympic Dam has been forced to renegotiate its underground development contract with BHP at a cost of $10 million.

MacMahon’s told The Independent Weekly it had “re-structured and re-shuffled people to other activities”.

When MacMahon’s spokeswoman Kavneet Elvin was pressed about the detail of “redeployment” she admitted staff had been sent to the Argyle mine in WA.

Just hours after talking with The Independent, McMahon’s released a statement to the Australian Stock Exchange, but other than the mention of $10 million in lost revenue there was nothing more than a repeat of the “restructuring and redeployment” line.

It’s an example of the scant detail that’s coming out of Roxby Downs as the jewel in SA’s mining crown has slowed to barely 25 per cent of its production capacity, a situation that won’t change until at least March next year.

What went wrong at Clark shaft, the main ore extraction site at Olympic Dam, remains a closely kept secret.

BHP issued a statement to stock exchanges through its quarterly production report in October.

The report stated “On 6 October one of two haulage systems at Olympic Dam was damaged. We anticipate that ore hoisting will be at approximately 25 per cent of capacity until full production resumes in the third quarter of the 2010 financial year.”

BHP refuses to answer specific questions about the extent and impact of the accident, referring only to the quarterly production report.

Questions about the cost of the shutdown, staff cuts, delays to expansion plans and impact on smelter operations remain unanswered.

It has not responded to estimates that the total financial impact will top a billion dollars.

From workers at the site, what we do know is this; sometime around 10pm on the night of Tuesday 6 October an ore skip holding 34 tonnes had almost reached the top of Clark shaft before it suddenly snapped clear and plummeted 800 metres to the bottom.

Timing, as it happened, was everything.

“There were only two people in the vicinity because all the others were on a break in their crib rooms,” said one miner who was on shift that night.

“The skip was almost at the top of the shaft and as it came slamming down it took out ancillary equipment all the way down.

“The whole system was trashed.

“It took two hours for the dust to settle enough for workers to start moving out of the mine,” he said.

“The noise was like nothing I have ever heard.”

Clark shaft opened in 1999 when then owners Western Mining expanded the already-big Olympic Dam mine, home to some of the world’s largest reserves of copper, gold and uranium.

The shaft’s capacity took a big mine into a class of its own by trebling annual output.

Of the projected 10 million tonne annual output of Olympic Dam, more than eight million tonnes comes up Clark shaft which is 7 metres wide and the best part of a kilometre deep.

Sitting on top of the shaft is a massive Siemag hoist and winder – state of the art machinery designed in Germany with all manner of fail safe and emergency systems designed to haul 36.5 tonnes at 16 metres per second.

Its winder motor runs at 63 rpm, sounding like a jet engine.

State secretary of the Australian Workers Union Wayne Hanson said this week one of his members had said it was “something that had to happen”.

“We have some snippets of intelligence that come out of the mine,” Mr Hanson said.

“A member rang me and said excessive and premature wear and tear of the hoist and winder had occurred because of the high rates of usage.”

Records show that Olympic Dam’s owners commissioned Fluor Simulation to do computer modeling on the haulage system’s capacity. The company had done a similar simulation in 1997 which had shown the Clark shaft hoisting system should be constrained at between 7.8 and 8.8 million tones per annum.

Company records show annual output within those levels, but there is no breakdown of daily or weekly output to see if annual figures reflect consistent use, or whether high haulage rates occasionally occur.

But Mr Hanson also believes he may never find out the full story.

“They have a code of silence at that mining lease that’s stronger than any code in downtown Calabria,” he said.

“They even have the government tied up because when BHP says jump, the government says how high.”

After the accident an inspector from SafeWork SA was on site within a day.

Inspectors from the agency’s specialist Mines and Major Hazard Facilities Team are now involved in the investigation in conjunction with independent technical experts.

But this week, a spokesman for SafeWork SA said the investigation would take months to complete because of the complexity and size of the machinery involved.

For the State of South Australia, more reliant on mining than ever in light of major closures in manufacturing industry, the big questions remain;

• How many jobs have been lost and for how long

• How much royalty revenue will be lost

• What delays will there be in Olympic Dam’s expansion plan

• How safe are working conditions in Clark shaft

Deputy Premier Kevin Foley said he's satisfied with the information given to the State Government by BHP-Billiton.

“Although the nature of much of the information BHPB has provided to Government is commercial in confidence, they have kept Government informed of ongoing developments relating to the temporary malfunction at Clark Shaft,” Mr Foley said.

“BHPB is also continuing to work closely with SafeWork SA to complete necessary investigations and to ensure safety at the work site for all involved in rehabilitation work.

"It is important to note that BHPB say that whilst there will be some reduction in underground mining contractor workforce these numbers are being reassigned to maintenance work brought forward.

“This means that, according to the company, overall contractor numbers are expected to remain about the same as pre-the incident, although with a different emphasis on the type of work undertaken,” he said.

There is a silver lining in this story.

Olympic Dam is the state’s biggest energy consumer.

The consequent reduction in demand for power during the next six months leaves a lot of spare power available during our notorious peak demand summer.

Whether electricity retailers pass on the savings to their retail customers is yet to be seen.

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