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Andrew Michelmore

On going review the norm at Western Mining

Presentation on 10 May 1995

Change was a constant for Western Mining Corporation with the activities and functional boundaries subject to continuous scrutiny. For nickel and gold, the corporate culture was like that of a petrochemical company said Andrew Michelmore, Executive General Manager - Nickel & Gold speaking at the sixth CIP Breakfast.

WMC was the third largest nickel producer supplying a world market growing at about 3.5 per cent per year. Producing commodities that competed on world price, WMC was required to continually review costs and to ensure its ability to operate through periods of negative income. In fact, periods of negative income were stressed to be an entry barrier to the industry.

Over the past five years, WMC has invested $800 million in WA for nickel production, with another $500 million in related activities confirming WMC's commitment to nickel to at least the nickel matte stage. At present only about one-half of the nickel produced, equal to some 40 000 tonnes per year, is refined at their Kwinana refinery - the other half is exported to overseas refineries.

As nickel is a commodity sold on price, and with its average price falling by 2 per cent per year in real terms, cost reduction is critical to its operation. WMC was therefore closely monitoring the cost of production of its competitors, (broken down into cash and total costs).

Operating in an open market and without government assistance, competitive costs were the pre-eminent consideration for expansion. The activities, costs and returns were continually reviewed. Nevertheless one large competitor was seeking a target market share at the expense of immediate returns.

The 25 year old Kwinana refinery, uses the Sherritt Gordon hydrometallurgical process which is more energy-intensive than newer processes. Andrew said it was an investment appropriate at the time of a world-wide nickel shortage. Therefore, as all processes were subject to ongoing review, if the Kwinana refinery were to be replaced it could, depending on the technology used, be located at WMC's nickel deposit at Leinster, north of Kalgoorlie.

With its seemingly singular focus on costs and opportunities for their reduction, WMC instigated a culture requiring the preparation of budgets from the ground-floor up. Their whole operation was therefore in state of on-going review.

That review extended to technology as impacting on competitiveness, as well as the component functions of WMC. For example, its internal services and consumable stocks, are continually assessed with contracting out as appropriate. Their suppliers and service providers were made clear of that attitude. Self-sufficiency in services, as once important, was now stressed as secondary to consideration of competitiveness - an attitude of on-going assessment with a tolerance to change.

To comply with local sulfur dioxide emission limits requiring frequent interruptions to the roasting of nickel sulfide, WMC is investing $145 million in a 500 000 tonne p.a. sulfuric acid plant at its Kalgoorlie smelter. With CSBP needing only about two-thirds for fertiliser production, Andrew suggested the balance could be used in the development of a nickel project using acid leaching (eg. Bulong or Anaconda deposits). Though WMC's subsidiary, Queensland Phosphate was evaluating the Mt Duchess phosphate project near Mt Isa, (contingent on reticulated gas), Andrew said that WMC (WA) was not in the fertiliser business leaving that to companies such as CSBP.

A vote of thanks by Mike Allenby as Chairman of ACSPA (WA) concluded the presentation.

Though worlds apart from the specialty chemical industry represented by Frank Lawson at the previous CIP seminar, there is one element in common between Gibson Chemical Industries and WMC - their personnel but with different emphasis.

WMC emphasised people looking at costs as critical to competitiveness, and Gibsons of people interacting with their market. Both companies have developed a culture in their workplace that was focussed on the source of their competitive edge. Even accommodation has an influence, as later in discussion with Andrew, he said their relocation to a more open office promoted better people interaction (that was even sensed over the phone).

Though seemingly conflicting messages are sometimes transmitted by Australian industry, WMC, as a nickel producer using a chemical process, is signalling an organisation that looks first to world scale and competitiveness.

In subsequent discussion, about A$100 million value is added at their refinery implying another $100 million is added to the balance of the nickel matte not refined and exported to overseas refineries. Unlocking the expansion potential, here and in other value adding industries, could make a substantial contribution in offsetting our current account deficit that in one month exceeds the value of Australia's large alumina exports over 12 months.

Finally, it's worth noting that Dominion Mining have established a nickel process (`Activox') with recoveries of over 90 % at 99.5% purity. It will be interesting to see the implications for this new technology. It goes to show again the benefits of staying close to our comparative advantage - close to commodities.

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© 1996; Chemlink Pty Ltd, PO Box 673, West Perth, Western Australia

Chemlink Pty Ltd ABN 71 007 034 022. Publications 1997. All contents Copyright © 1997. All rights reserved. Information in this document is subject to change without notice. Products and companies referred to are trademarks or registered trademarks of their respective companies or mark holders. URL:

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Created: Thursday, 14 December 1995, 8:33:29 PM Last Updated: Thursday, 14 December 1995, 8:33:29 PM