Aussie Farmers, Chinese Miners Vie for Water

A decades-long drought has seared the landscape of Western Australia, a state far from the floods that recently battered the eastern part of the country. Deprived of adequate rain for years, the region's farmers have managed to produce the biggest wheat harvests in Australia by relying more on aquifers—large underground reservoirs of water. Now farmers like Pete Mills are battling a Chinese company and its local partner for that water. "It's noticeably getting worse," says Mills of the drought. "I'm worried this new mine is going to take the water that's left."

The $1.8 billion iron ore project, a venture between China's fourth-largest steelmaker Anshan Iron & Steel Group and Perth's Gindalbie Metals, has applied to use water from the same underground supply that irrigates Mills's 4,000-hectare (9,880-acre) wheat and sheep farm. Anshan and Gindalbie's Karara mine is the first of at least eight iron ore projects planned for the state's Mid West grain belt in the next decade. Mines need water to help dig out and process the ore, remove waste rock, and suppress dust to meet air quality rules.

"We haven't had many conflicts between mining companies and other water users in the past because there hasn't been a big mining industry in the Mid West," says Phil Kneebone, spokesman for Western Australia's government-run Water Corp., which supplies drinking water to communities. That's going to change as the mining companies, often backed by Chinese investors, open more mines. In Western Australia there are about $170 billion in mining projects in the pipeline over the next five years.

Gindalbie, the Australian company in which Anshan Steel holds a 35.9 percent stake, says it applied to use 5.3 gigaliters of the estimated 49 gigaliters (or 49 billion liters) available in the Parmelia aquifer, from which Mills and other farmers draw their water. "Karara has spent around $3 million conducting extensive tests on the aquifer and the sustainability of our water usage plans," Gindalbie corporate affairs manager Michael Weir wrote in an e-mail. When the mine starts, it will generate $363,000 of export revenue for the state for each megaliter of water used, he says.

The Gindalbie project will have access to one section of the aquifer. Mills says the mine will drain as much as 87 percent of that section of water. That, says Mills, will leave farmers with little. He is an active member of the Water Action Group, which is organizing petitions and protests against the mine's water allocation by the Western Australian government.

One aspect of the Gindalbie project that especially alarms the region's farmers is that the mine is for magnetite iron ore, says Mills. Magnetite is a lower grade of ore that needs more processing than the hematite found to the north in the Pilbara region. More processing requires more water.

The Chinese are settling in for the long haul. In the northern region of the state—far removed from Mills's farm and the planned Anshan/Gindalbie project—Citic Pacific, an arm of China's biggest state-owned investment company, has built a 51-gigaliter desalination plant to provide the fresh water for its $5.2 billion Sino Iron magnetite project. "Western Australia is a very hot, hard, and flat country on which it's hard to store water," says Peter Strachan, who heads Perth-based independent advisory firm StockAnalysis. "Processing these magnetite ores is going to be pretty greedy for water."

Sinosteel, China's biggest iron ore trader, is also developing a magnetite project in the Mid West part of the state. Australian regulators approved more than 100 Chinese acquisitions of businesses between November 2007 and October 2009, according to the Australian government.

It's up to the state's water authorities to approve Anshan/Gindalbie's request to use the Parmelia aquifer. State environmental regulators have already given the green light to the project. The planned Karara mine has "strong government support," Gindalbie said in a Jan. 31 statement.

More rain would help both the miners and the farmers. Figures from the government-run Bureau of Meteorology show a significant decrease in rainfall in Western Australia since the mid-1970s, according to bureau forecaster Patrick Ward. Dams servicing the area around Perth, the state capital, are less than 30 percent full. "The winter rains have become more unreliable, and that seems to be a trend that will continue," Ward says. "Some areas where agricultural crops are marginal might soon tip over so they're unsustainable."

The bottom line: Farmers in the state of Western Australia are competing with mining companies for precious water supplies.

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