Three hours from the centre of Western Australia’s iron ore industry, a scrubby patch of ground stands as a reminder of what happens to mining towns when the money moves on.
The patchy outline of a football oval is all that’s left of the town of Shay Gap, which once had a population of 650. Lang Coppin, an East Pilbara shire councillor whose family runs Yarrie Station, where the town was built, can spot it when he flies over the area in his helicopter – but that’s only because he knows where to look.
“You will drive past there now and if you didn’t know where the town was you wouldn’t believe it,” Coppin said. “You wouldn’t know you went past a town that once had schools, football ovals, shops.”
Founded by Mount Goldsworthy Mining Associates in the early 70s as a worker hub for nearby iron ore operations, Shay Gap closed two months after the mine ceased operation in February 1994.
Twenty years on, residents of the Pilbara’s small regional towns are again circling the wagons against a plummeting iron ore price which has seen junior miner Atlas Iron Ore put its operations on hold and prompted job losses at larger companies such as Fortescue Metal Group (FMG), BHP Billiton and Rio Tinto. All three large miners have been put on negative watch by the ratings agency Standard and Poor’s.
Newman and Tom Price, both a few hours’ inland from the Pilbara hubs of Port Hedland and Karratha, are no longer on mining company land, like Shay Gap was, but still have the feel of company towns.
The Newman townsite was established by the now defunct Mount Newman Mining Company in 1968 to support the iron ore mine at Mount Whaleback, and was wholly owned by the mine until 1982 when it was opened up and handed over to local government.
Mount Whaleback was BHP’s first WA mine and, at 5km long, is the largest open-cut iron ore mine in the world.
Tom Price, 275km to the west, is a Rio Tinto town. Peter Foster, a local councillor for Ashburton shire, said at least one person in every household worked for the mining company. The rest work in service industries such as health and education, or for local businesses, but when the mining job goes, so does the family.
“Permanent staff live in company housing, so that when they lose their job they lose their home as well,” Foster said.
With no mortgage to tie them to the community and limited employment options, there is little but small town charm to encourage families to stay.
Foster said people in Tom Price watch the iron ore price the same way farmers watch the weather.
“It’s something that you always overhear at the pub, overhear at Coles, overhear in the car park or in the playground: ‘Did you see the iron ore price today?’ ”
Last week the iron ore price was hovering just above $US50 a tonne, down 60% from January 2014, causing a significant hit to the West Australian budget.
Goldman Sachs is forecasting the price could get as low as $US40 a tonne in the next four years.
Rio Tinto and BHP aim to get their break-even down to $US20 a tonne. Both are expected to shed some jobs to reach that target, but neither is looking at slowing production. For Tom Price and Newman, that means some families might go but the town will survive.
Atlas just managed to get its costs below $US60 a tonne when it suspended production. FMG, which gets a discounted price for producing lower-grade iron ore and recently completed a $3bn railway to get its product to port, is reportedly aiming for a break-even price of $US39 a tonne.
The East Pilbara shire chief executive, Allen Cooper, said longer-term residents in Newman expected their success to be cyclical.
“In the late 90s we had a significant hit when we lost about 1,000 people in a six-month period,” Cooper said.
“It was really severe; shops were vacant. But back then we had more small businesses.”
Between 2000 and 2012 Newman’s population tripled from 3,000 to 9,000. BHP’s iron ore output in WA for the same period grew from 50m tonnes a year to 300m tonnes.
Newman’s population has since dropped to about 6,000. “In some ways it’s good – it gives us a chance to catch our breath,” said Cooper.
He said the town was trying to diversify its economy and grow its population, slowly becoming less reliant on the mine. The pastoral industry is becoming more important again – while iron ore prices have plummeted, cattle prices have doubled in the past 12 months.
WA branch secretary of the Australian Workers Union, Stephen Price, said the ubiquity of fly-in, fly-out (Fifo) workers could shelter smaller Pilbara towns from the full effect of the downturn, but service hubs such as Port Hedland and Karratha would feel the pinch instead.
Atlas’s 500 mine-based staff were Fifo and FMG has changed its rosters from eight days on, six days off, to two weeks on, one week off – a change that will allow it to operate with fewer workers.
Price said many workers would struggle to cope with the longer roster but would put up with it to keep their jobs. Wages in the mining industry are still higher than average.
“Once you get used to an income you start to live your life to that income, and it makes it difficult to change. You are restricted to a certain level of income,” he said.
In Port Hedland, where whole streets are owned by BHP for housing staff and almost half the cars are identically numbered four-wheel drives, the mayor, Kelly Howlett, expects the diversity of companies that rely on the port will keep the economy afloat.
“We are no longer a one-company town,” Howlett said. “Residents and businesses in Port Hedland are quite resilient; we are used to these fluctuations.”
Howlett said the days of Port Hedland being tied to just one commodity were over.
“It’s hard to compare it and probably doesn’t do it justice to compare it to the last downturn, because we are a different town now,” she said.
