CRA Limited

55 Collins Street
Melbourne
Victoria 3001
Australia
(03) 658-3333
Fax: (03) 658-3707

Public Company
Incorporated: 1959
Employees: 19,000
Sales: A$4.59 billion (US$3.55 billion)
Stock Exchanges: Australia New Zealand

CRA Limited is an Australian grouping of predominantly resource-based companies. Its principal activities are the mining of iron ore, bauxite, diamonds, coal, and a variety of minerals and precious metals. The diversity, size, and international spread of CRA’s activities are such that it rivals Broken Hill Proprietary in its influence on Australia’s political and economic affairs. CRA (Conzinc Riotinto of Australia) was formed in July 1962 through the merging of the Australian interests of two U.K. companies, the Consolidated Zinc Corporation (CZC) and Rio Tinto. At the same time the Rio Tinto-Zinc Corporation of the United Kingdom came into being. This company took a majority interest in CRA which lasted for nearly 25 years. CZC was itself the product of the 1949 merger of two U.K. firms, the Imperial Smelting Corporation and The Zinc Corporation (ZC), the latter of whose interests were largely centered in Australia.

ZC was founded in 1905 for the purpose of recovering the huge amounts of zinc locked in the tailings—or waste material—dumps, which had grown up around the silver-lead mines at Broken Hill, New South Wales, since the start of mining there in the 1880s. Recovery of the zinc—a valuable commodity since the discovery of its suitability for such industrial applications as galvanization—would, it was hoped, offset the declining price of lead in the early 1900s and help keep the Broken Hill mines open.

Extraction of zinc from the tailings depended on the froth flotation process jointly patented by Delprat and Potts in 1907 and on later, more efficient variants such as selective and differential flotation. ZC’s first years were beset with financial and technical difficulties and several different plants were built before a fully satisfactory extraction process was developed in 1912.

In the previous year ZC had extended its operations into mining proper with its acquisition of the Broken Hill South Blocks Co., which at that time held the southernmost leases of the Broken Hill mining area. The low sale price was the result of a widespread belief that the ore in the South Blocks leases lay at too great a depth to be mined economically. Fortunately for ZC this conviction proved mistaken. The southern end of the field soon began to produce more easily accessible ore, and in larger quantities, than the preferred northern leases.

Treatment of the tailings at Broken Hill continued during World War I and into the early 1920s when the supply of tailings ran out. During the war itself, ZC and the other Broken Hill mining companies found themselves deprived of their two main customers, Belgium and Germany. The Australian government took advantage of this situation by informing the Broken Hill companies that henceforth concentrates would have to be refined in Australia rather than abroad. As a result of this restriction, in 1915 ZC and two other companies set up the Broken Hill Associated Smelters Proprietary Company (BHAS) to take a controlling interest in the Broken Hill Proprietary’s lead-zinc smelting plant at Port Pirie in South Australia. ZC thus took its first steps into secondary production.

During the 1920s the Australian mining industry experienced a decline due to falling world metals prices, the working out of the more accessible ore deposits and rising mining, transport, and labor costs. The onset of the Depression in 1929 forced metals prices even lower so that by 1931 the value of Australian metals production reached a new low point. Thereafter metals prices began to rise, albeit slowly at first, and in turn stimulated recovery in the Australian mining industry. By 1936 ZC had re-established a sufficient capital base to embark on an extensive rebuilding of its mine and concentration plant at Broken Hill. By 1939 a new all-flotation zinc extraction circuit had been constructed.

New Broken Hill Consolidated (NBHC), which was intended to seek southern extensions of the Broken Hill line of lode, was formed in 1936. ZC and NBHC remained closely associated, and 30 years later CRA and NBHC jointly discovered the large copper deposits at Panguna on Bougainville Island, Papua New Guinea.

World War II forced Australia to develop its steel and chemical industries at the expense of its mining operations. Although the contribution of the Broken Hill mines to the war effort was considerable, J.B. Chifley’s post-war government recognized the low state of the industry and accordingly instituted tax reforms and bounties to encourage renewed prospecting. Simultaneously the first systematic surveys of Australia’s mineral reserves were undertaken.

ZC made an important acquisition in its 1948 purchase of the Sulphide Corporation and its Cockle Creek lead smelting plant. The merger in the following year of ZC and the Imperial Smelting Corporation enabled the Sulphide Corporation to take advantage of Imperial’s advanced process for the simultaneous production of lead and zinc from lead/zinc sinter. By 1961 a new plant using the Imperial process had been installed.

The 1949 merger of the U.K. interests of ZC and Imperial led to the establishment of CZC and its Australian subsidiary, Consolidated Zinc Proprietary (CZP). It rapidly became apparent that efficient management of the Australian operations of ZC and NBHC from London was proving difficult. In 1951, management control was transferred to Melbourne, and CZP was appointed manager for ZC, NBHC, and other interests. Toward the end of World War II the search began in Australia for uranium, a mineral which had become extremely valuable once its use in prewar experiments in nuclear fission had been demonstrated. The Australian government offered tax-free rewards to prospectors, one of whom, Jack White, found a large deposit in 1952 at Rum Jungle in the Northern Territory south of Darwin. After initial investigation the Australian Atomic Energy Commission handed over development of the site to CZP’s specially formed Territory Enterprises Ltd. Rum Jungle supplied some 3,530 tons of yellowcake—the form in which uranium is produced—between 1954 and 1971. Until 1964, this was in the main supplied to the United Kingdom’s military authorities.

An even larger uranium deposit, named Mary Kathleen, was found 40 miles east of the Mount Isa copper mine in Queensland. CZP bought an initial 51% holding in the development company, Mary Kathleen Uranium (MKU), set up to operate the mine. Production commenced in June 1958 and until its temporary closure in 1963 the mine produced over 4,000 tons of yellowcake. The closure was prompted by a sharp drop in uranium prices and it was not until MKU’s partners had judged these to have recovered sufficiently to justify reopening the mine that production was restarted in 1976.

The rise in uranium prices had not been foreseen by the U.S. company Westinghouse, which found itself without sufficient uranium reserves to honor its commitments as a supplier to its U.S. customers. Westinghouse brought a legal action against CRA, accusing it, through its link with Rio Tinto-Zinc, of participating in a uranium producers’ cartel designed to control the price of uranium. A U.S. court ordered CRA’s directors to give evidence before it, whereupon the directors appealed to Canberra for protection. The Australian government took the unusual step of passing legislation forbidding CRA to obey the court’s injunction. As a result the allegation of price-fixing remained unresolved.

Soon after the Mary Kathleen discovery came news of vast bauxite ore deposits at Weipa on the Cape York peninsula in northern Queensland. These had been discovered by Harry Evans, chief geologist of the Frome Broken Hill Company, an enterprise in which CZP held a one-third interest. CZP immediately undertook operations to establish the size of this ore-body—over three billion tons, forming nearly two-thirds of total known Australian reserves and just over one-third of total proved world reserves.

In setting out to exploit these vast bauxite ore deposits—the base material for the production of alumina and thence aluminum—CZP needed access to the huge amount of capital—foreign, as the required funds had to be found outside Australia at that time—necessary for development of a mine and its related facilities. It also required an alliance with a partner already experienced in such projects, which was also a member of the group of five companies that then controlled the world’s aluminum industry. These were Alcoa, Reynolds, and Kaiser Aluminum of the United States, Alcan of Canada, and the French company Pechiney. CZP came to an agreement with Kaiser, and a new company called the Commonwealth Aluminium Corporation (Comalco) was formed in 1956 to develop the mine, with CZP and Kaiser initially holding 50% of the equity each.

The Weipa mine was CZP’s largest project to date, involving the construction not only of the mine itself but of new deep-water port facilities and an entire township for Comalco’s employees. The bulk of production was destined for immediate shipment to Europe and Japan, but the Queensland government, anxious like most Australians to see its country increase the volume of its value-added exports, had stipulated in its agreement with Comalco that at least part of the mined bauxite ore had to be refined in the state. Consequently, in 1963, CZP’s successor CRA became a partner with Kaiser and Pechiney in the establishment of Queensland Alumina (QAL). The task of QAL was to process Comalco’s Weipa bauxite ores at a new refinery which was built at Gladstone on the east coast of Queensland near Rockhampton. In turn, the Gladstone plant supplied alumina to the Bell Bay aluminum smelter in Tasmania in which Comalco had bought the Australian government’s two-thirds interest in 1960.

In 1968, flushed with the success of the Gladstone refinery, Comalco and a group of German, Swiss, and Italian aluminum companies had formed the Euralumina consortium to build an alumina refinery in Sardinia. This was Comalco’s first venture into Europe.

Since aluminum smelters are intensive users of energy, reliable sources of low-cost power are an important factor in their siting and operation. In 1968 Comalco announced the setting up of New Zealand Aluminum Smelters in a partnership with two Japanese aluminum concerns. A sizable smelter was built at Bluff on the southern tip of the South Island of New Zealand. The Bluff smelter linked Australia’s bauxite with the South Island’s abundant hydroelectric power and thus provided another outlet for Gladstone’s alumina. Production began in 1971.

Another kind of ore brought CRA to the attention of the industrial world in the early 1960s. From 1938 until 1960 the Australian government had restricted the export of iron ore on the grounds that Australia’s known reserves were barely adequate for its own industrial purposes. The lifting of these restrictions caused a rush of discoveries, chief among which were those in the Pilbara region in the northwest of Western Australia. Amongst the largest of these were the ore deposits found in the Hamersley Ranges by a grazier and prospector named Lang Hancock.

Hancock and his partner Wright approached the Rio Tinto Mining Company of Australia (RTMA) in 1962 and this company (soon to merge with CZP) estimated iron ore reserves at some 5 billion tons, including at least 500 million tons of high grade hematite ore. In the Hamersley Iron Province, as the area soon became known, Australia now possessed iron ore fields of extraordinary quality and size.

The remoteness and harsh conditions of the Pilbara necessitated a massive scale of operation to justify the huge investment required to mine the iron ore under such conditions and transport it to the coast for shipment. As at Weipa, only the largest international mining companies were capable of amassing the necessary financing and technological expertise. CRA approached Kaiser Steel, and the two formed Hamersley Holdings in 1962 to initiate a four-year process of mine, railway, port, and township construction. This was completed ahead of schedule by its operating subsidiary Hamersley Iron.

The justification for this investment lay in the tremendous expansion of the Japanese steel industry in the 1960s and the development in that decade of a generation of large ore-carriers which made the supplying of iron ore from a distant country like Australia economically feasible for the first time. Crucial also for Hamersley were the long-term supply contracts offered by the Japanese steel mills. Although the Japanese were to prove less reliable customers in the early 1980s, without the security offered by such agreements CRA and other Australian mining houses would not have been so eager to mine the Pilbara ore deposits. In 1969 Hamersley Iron announced plans for a second mine at nearby Paraburdoo, which came into operation in 1972.

Hamersley’s first shipment of ore took place in August 1966. Within two years the company had opened a two million ton-a-year oxide pellet plant on the coast at Dampier. Some Australians chose to see this expansion as part of CRA’s strategy to head off growing public criticism of the way in which large and often foreign-owned mining companies appeared to be making huge profits out of Australia’s finite resources. CRA was singled out as an example of this phenomenon, because the United Kingdom’s Rio Tinto-Zinc had held a majority interest in the company since its inception in 1962. CRA argued that the Australian public would not choose to help underwrite the huge costs associated with the risky business of mine development and that it was therefore pointless to offer the public an increased shareholding in the company. A number of Australian politicians disagreed, claiming that the real reason was Rio Tinto’s unwillingness to lose control of CRA and its interests in Comalco and Hamersley.

Nowhere was this controversy more acrimonious than in regard to Australia’s uranium mines where an added moral dimension—the end use of the product—fueled years of controversy. MKU ceased operations in 1982. Since then the Australian government has confined uranium mining to three mines in the Northern Territory and South Australia. In the mid 1980s CRA located a significant uranium deposit at Kintyre in Western Australia but the federal government has refused to revoke its three-mine policy.

Copper was another metal in which CRA took a major interest in the 1960s. CRA/NBHC teams identified large copper ore deposits on Bougainville Island, Papua New Guinea, estimated at some 230 million tons. Once again a huge mining operation was set in motion and Bougainville Copper Pty. (BCL) emerged in 1967 to operate the venture.

CRA’s 1968 purchase of a major interest in the Blair Athol coal field of central Queensland provided it with valuable export potential. CRA expanded its coal mining capacity substantially in the late 1980s.

In the 1970s public and political pressure built up strongly in favor of the naturalization of foreign-owned companies operating in Australia. CRA’s failure in its 1978 bid for Australian industrial group AAR due to the size of foreign shareholding may have been instrumental in convincing CRA’s board that the company had to begin the process of transforming itself into an Australian company. In that same year, CRA was granted the status of a naturalizing company—a company becoming properly Australian rather than merely a foreign company operating in Australia—in line with the government’s foreign investment guidelines. By the end of the decade Rio Tinto-Zinc’s shareholding in CRA had fallen to just over 70% with a concomitant rise in public ownership.

In association with Ashton Mining, CRA discovered diamonds in the far north of Western Australia in 1972 near Lake Argyle. A large deposit was found at Ellendale and an even greater one at Smoke Creek, south of the lake. In partnership with Ashton, CRA set up the Ashton Joint Venture (AJV) to exploit this important series of discoveries, CRA holding nearly 60% of the equity of the new company. Ironically enough, the giant South African mining concern De Beers had surveyed the Lake Argyle area in the 1960s and had pronounced it lacking in diamondiferous deposits. AJV’s estimate of a yearly production of 20 million to 25 million carats, about half total world production, caused De Beers to fear it might lose its domination of the world diamond market.

De Beers entered into negotiations with AJV in 1981, inviting it to market its diamond production through De Beers’s Central Selling Organisation (CSO), which handled about 80% of the world’s diamonds. The attraction for AJV was that the CSO guaranteed to buy the mine’s production whatever the state of the world diamond market, an important consideration during the expensive and risky early years of the mine’s life. In 1982 the CSO was contracted to market the bulk of AJV’s production until the end of the decade.

In 1984, CRA and its partners opened a new five million ton-a-year mine at Blair Athol. It was Australia’s largest thermal coal development. At the time of its opening, the Japanese sought a short-term reduction of 25% in contract tonnage, but within two years sales to Japan were at original contract levels. This episode highlighted a contraction in the late 1970s and early 1980s of the volume of coal and iron ore moving to Japan as the rate of growth in that country’s heavy industries slowed.

This dispute graphically illustrated the danger of overdependence on one customer. The low metals prices at the start of the 1980s demonstrated the equal danger of dependence on fluctuating commodities markets. The depressed metals prices, combined with labor unrest, rising production costs, and an unfavorable rate of exchange, caused CRA’s earnings to fall 84% in the financial year 1981.

The recession in metals prices had a particularly severe impact on CRA’s profits because it occurred at a time when the company’s expenditure on several large projects—for example the Argyle mine development, Comalco’s A$600 million Boyne Island smelter, and CRA’s 1982 purchase of a further 22% holding in Comalco—was at a particularly high level.

The lesson was clear: CRA would have to move much further into secondary or downstream production, using its own dedicated supplies of ores to make steel and aluminum rather than simply selling those ores to foreign producers at whatever price a volatile market might dictate.

CRA had to seek its downstream opportunities abroad because Australia itself could offer nothing suitable. Initially there were setbacks. CRA’s 1984 bid for Kaiser’s Fontana steelworks in California fell through, as did its attempt to take a 35% interest in a new steel group formed from the intended merging of the two West German steel giants Krupp and Klockner-Werke. CRA was to have supplied iron ore to a single rationalized company but political opposition to the prospective Krupp-Klockner merger put paid to the deal. Comalco, however, succeeded in acquiring most of the aluminum interests of the Martin Marietta Corporation, a U.S. aviation and aerospace manufacturer. The deal cost US$400 million in 1985, but CRA’s disposal in that year of a number of assets not central to its core activities helped improve the year’s financial result.

The mid-1980s were again a time of depressed base metals prices. Some industry analysts felt that it was the devaluation of the Australian dollar rather than reduced production costs and/or increased productivity that was maintaining CRA’s profit levels. CRA undertook a restructuring of its management and work practise with the aim of decentralizing operations and promoting increased efficiency. This proved unacceptable to some of the mining unions, and a series of strikes and disputes at the company’s mines at Broken Hill seriously affected the company’s 1986 results and dragged on until 1987.

The naturalizing process, begun in 1978, ended in 1986 when Rio Tinto-Zinc sold nearly 16.4 million shares to the Australian Mutual Provident Society, reducing its holding in CRA below the critical 50% level to 49% and transforming CRA into a majority Australian publicly owned company. The change of ownership occurred at a time when two major coal projects—Blair Athol and Tarong in Queensland—and the Ar-gyle diamond venture came to fruition. In the same year, however, Comalco withdrew from a troubled four-year joint venture with Japan’s Showa Denko, representing the failure of another attempt to move production downstream.

Better news came with Hamersley’s announcement of a joint development project with the Chinese Metallurgical Import and Export Corporation to exploit the Channar iron ore deposit in Western Australia. CRA’s search for new Asian customers had borne fruit.

In 1988 CRA continued its tradition of adding to Australia’s mineral wealth by revealing its discovery of a 5,000 million ton heavy minerals field near Horsham, Victoria. As with bauxite and iron ore CRA’s discovery overnight transformed Australia’s reserves figures, and commentators noted that the find would enable CRA virtually to set the market in titanium and zircon well into the 21st century, provided metallurgical problems can be overcome. A 120-ton-per-day pilot plant was commissioned on the Horsham site.

CRA and NBHC had merged their lead, zinc, and silver interests in 1971, and in 1986 the ZC and NBHC mines were combined and renamed Z.C. Mines. In June 1988 the situation changed again when CRA reached an agreement with another Broken Hill mining company, North Broken Hill Peko, on the merging of their lead and zinc interests in a new joint venture called Pasminco. The move was widely seen as a response to a series of mergers and associations among other base metals producers resulting in the formation of fewer and larger groupings in the industry. Agglomeration along these lines was designed to cut costs and strengthen marketing positions at a time of oversupply and consequent low prices in the world’s base metals markets.

The proposed merger attracted the attention of the Australian Trade Practices Commission, which feared it would unite the country’s only producers of zinc metal and refined lead. CRA and its partner successfully argued that since a new entity known as Enterprise Metals had been formed to handle domestic sales and since this entity could buy from either partner, no monopoly would be created. In March 1989 Pasminco became a publicly listed company.

After years of profitable activity since the start of its operations in 1972, Bougainville Copper was forced to close down its Panguna mine in May 1989 because of attacks on BCL employees and equipment by native activists bent on Bougainville’s secession from Papua New Guinea. The mine is unlikely to reopen until the PNG government has convinced CRA that it has brought the situation on the island under control.

A few months after this closure, British Petroleum announced the sale of its Australian coal assets to CRA for $275 million, the outcome of negotiations between BP and Rio Tinto-Zinc which had begun a year earlier. For BP this sale represented a step in its divestment of its worldwide coal interests, and for CRA a new contribution to its existing coal assets at Blair Athol and Tarong.

CRA is rightly regarded as one of a small body of elite Australian mining and resource companies, which includes, for example, Broken Hill Proprietary, the Western Mining Corporation, and Mount Isa Mines. In the 85 years since its birth amid the Broken Hill tailings dumps, CRA has grown into a large multinational mining enterprise with extensive downstream interests. Despite continuing uncertainty about the future of Bougainville Copper, CRA possesses a powerful base for the necessary move towards increased secondary production and manufacture.

Principal Subsidiaries

Argyle Diamond Mines Pty Ltd; Australian Mining & Smelting Limited; Bougainville Copper Limited; Comalco Limited; Conzic Asia Pty Limited; CRA Exploration Pty Limited; Dampier Salt Limited; Enterprise Metals Pty Limited; Hamersley Holdings Limited; Kembla Coal & Coke Pty Limited; Minenco Pty Limited; Novacoal Australia Pty Limited; Pacific Coal Pty Limited; Pacific Oil and Gas Pty Limited; Wimmera Industrial Minerals Pty Limited.