Australia: Is this the beginning of the end for mining boom?

This time last year, Roxby Downs was booming.

In an Australian landscape dotted with constellations of metal, mineral and energy mines, Roxby was one of the most modern towns in Australia, growing out of an isolated patch of desert 563km north of Adelaide.

Roxby began life as a joint venture between BHP—the world’s largest mining company—and the South Australian State Government, purpose built to service BHP Billiton’s Olympic Dam mine as it rips copper, uranium, gold and silver from the earth in massive quantities.

That was the late ‘80s. Since then, Australia has built an economic empire out of turning dirt into raw minerals to supply the world’s construction needs. The mining boom hit the country like a great rising tide, with Roxby Downs perfectly placed to benefit.

Rents soared with the overwhelming demand for housing, and the magnetic pull of secure, high-pay work drew people into the Australian desert. Around the same time, the EU began to lurch from one financial crisis to the next.

But in August last year, the tide broke. BHP shelved a four-year-old plan to expand Olympic Dam into the world’s largest open cut mine, and the decision sent shockwaves radiating out across the country.

The announcement took many people by surprise, especially those who lived and worked in Roxby Downs. “We found out the same time the press release went out,” says BHP horticultural contractor and member of the Roxby Downs Council Board George Giakoumis. “There was some high optimism, so it came as a disappointment more than a surprise.”

Eight months on, Roxby is in a slump. Once upon a time, the outback boomtown had enough houses to meet demand. Rent was so high there were serious conversations among local authorities on how to cope. Now, there are empty houses, contractors are circling the wagons and retailers are bleeding.

“It’s a very sad atmosphere. There’s some serious uncertainty up here,” Giakoumis says. “People go to work and not know whether they will have a job. Domestic violence has increased. I’ve got no hard data on that, it’s more a conversation over the bar. But there’s more family trouble and mental illness.

People don’t like to talk about the downturn. Department and company officials are quick to point to the expansion of mining projects elsewhere. Requests for interviews from residents or members of the town board were declined or not responded to, and it is understandable.

Where BHP has stepped back, other companies like Santos and Rio Tinto have ramped up their operations.

The future of everyone living in Roxby is tightly bound up in whether or not BHP will go ahead with the planned expansion and no one wants to make waves. The project at Olympic Dam means a lot of money to a lot of people, and not just in Roxby.

It promises to bring significant investment not just from BHP, but also from contracting companies working on the project, and everyone from Adelaide to Canberra wants a piece.

The South Australian State Government has its own special Olympic Dam Task Force and has pushed back BHP’s deadline to 2016, giving the company another four years to decide on whether it will go ahead with the expansion.

Meanwhile, BHP is quick to talk up the $540 million it is investing in South Australian research to develop cheaper technology that would lower the cost of going through with the project.

But what comes next is anyone’s guess.

As everyone from low-level contractors to company and government officials are saying, “It’s a commercial decision.” What it all comes down to is whether or not BHP thinks it will be able to make enough money to justify the cost of expansion.

Whether BHP will go ahead with the project will be influenced by anything from commodity prices to competition from other projects across South America, the US and South Africa and it’s this kind of uncertainty that has made life hard in Roxby.

“They make decisions offshore in London and we feel it here on the other side of the world,” says Giakoumis. “We were told BHP were hopeful of producing a cheaper model within the next 12 months. I wouldn’t say they are confident, but they are hopeful.”

Roxby Downs is just one town in the interconnected web of Australian outback towns and mining camps, and where BHP has stepped back, other companies like Santos and Rio Tinto have ramped up their operations.

Right now, a 20 year-old woman can find work washing dishes for $3000 a fortnight in one of the fly-in/fly-out programs servicing anything from oil and gas rigs to coal mines.

For between two to three weeks, she will live and work in a tiny, isolated community with meals and accommodation paid for.

On the whole, life is good at this end of the world.  Compared to the EU and some parts of the US, Australia is powering through a worldwide economic downturn. The question is how long it will last.

Thousands of people have gambled their futures on the idea that things will stay the same. Right now, a web of isolated desert towns and mining camps is alive with activity, excitement and hope.

There seems to be such a huge mineral wealth that, to many, the idea that they may run out is absurd. Many deposits are not expected to be exhausted for the next 50 to 100 years and that means the problem will be left to the next generation to deal with.

No one is thinking about what comes after. No one wants to. It’s bad for business. The good times have been running high and fast for so long, the thought of it ending is a source of fear.

So when Director of Corporate and Government Affairs for the Minerals Council of Australia Ben Mitchell says it is becoming increasingly expensive to do business in Australia, it gets attention.

“If it’s in the ground, it’s for want of a better word, dirt,” Mitchell says. “You can argue that we have resources for 800 years, but whether we can get it out is another story. Whether those sources are accessible depends on commercial and political considerations of the day.”

To an extent, what Mitchell is referring to is the Mining Tax introduced last year by the Federal Government, which levies 30 percent on resource profits above $75 million. But if Roxby Downs is a palm reading of Australia’s future, there is a deeper truth.

With financial chaos dominating international headlines, fewer people worldwide are shopping for raw materials and lower prices are already expected for the Australian iron industry in 2014.

The cold reality is that a globalised economy means decisions made in Beijing or London will profoundly affect thousands of lives a world away and this is what Roxby Downs represents; a sobering reminder that we are rarely in control of our own future.

“You can appreciate that these people leave their lives and communities and come to the middle of the desert,” says Giakoumis. “They had hopes and dreams and now some of those hopes and dreams have shattered.”