Iron Ore (Channar Joint Venture) Agreement Act 1987

The Act and the scheduled agreement rest on several foundational concepts. “The Agreement” means the document in Schedule 1, as varied from time to time in accordance with its provisions and by the 2017 variation agreement (s 3). The “Joint Venturers” are the two companies that comprise the joint venture: CMIEC (Channar) Pty Ltd and Channar Mining Pty Limited, and their successors and permitted assigns (clause 1 definitions). “Hamersley” is Hamersley Iron Pty Limited, a third party that provides infrastructure and services. “Mining lease” means the mining lease granted pursuant to clause 15, which is to be granted under and subject to the Mining Act except as otherwise provided in the agreement, but with a fixed term of 30 years from the date of approval of proposals (clause 15(2)) and exemption from the expenditure conditions of the Mining Act (clause 15(3)). “Approved proposal” is any proposal approved under the agreement (clause 1); proposals cover mining, roads, housing, water, power, environmental management and other works (clause 7(3)). “f.o.b. revenue” is defined in detail in the original agreement as the price for iron ore less export duties, ocean freight, marine insurance and other costs, with the Minister having a discretion to deem costs not reasonably incurred (clause 1). This definition was deleted by the 2017 variation and replaced by a royalty regime that follows the Hamersley Range 1963 Agreement (Schedule 2 clause 2(4)). “Direct shipping ore”, “fine ore” and “fines” were categories used in the original royalty calculation but were likewise deleted by the 2017 variation. The 2017 variation also introduced the “Hamersley Range 1963 Agreement” as the source of the royalty obligations and added a new clause 23A permitting the joint venturers to blend iron ore from the mining lease with ore from the Hamersley Range operation. “Force majeure” under clause 37 deems the agreement subject to delays caused by circumstances beyond the party’s control, including acts of God, war, strikes, shortages of labour, and factors due to overall world economic conditions. “Arbitration” under clause 46 is the dispute resolution mechanism for matters arising under the agreement, conducted under the Commercial Arbitration Act 1985, except where the Minister is given a discretionary power. “Determination” of the agreement can occur on default not remedied within 180 days, or on liquidation of a joint venturer, subject to arbitration rights (clause 39). The concept of “private road” is defined in clause 1 and clause 13 imposes obligations on the joint venturers to construct and maintain private roads and to pay for upgrading public roads that they damage.

The Act and the scheduled agreement directly affect the State of Western Australia, acting through its Premier and relevant Ministers, and the two joint venturers: CMIEC (Channar) Pty Ltd (originally a subsidiary of China Metallurgical Import and Export Corporation) and Channar Mining Pty Limited (now Sinosteel Channar Pty Ltd after the 2017 variation). Hamersley Iron Pty Limited is a party to the agreement, not as a joint venturer but as a third party providing infrastructure services such as power supply (clause 16), water supply (clause 17), and possibly railway and port facilities, and it also indemnifies the State against losses caused by default of the joint venturers (clause 49). The joint venturers’ workforce and their dependants are affected by provisions on housing, township services and community amenities (clauses 19 and 20). Local government authorities, particularly the Shire of West Pilbara, are affected by provisions on airport upgrading (clause 14), rating (clause 31) and zoning (clause 30). The Commissioner of Main Roads and the Railways Commission are involved in road and railway crossing matters (clause 13). The State Energy Commission (now part of the electricity market) is referenced in clause 16(2) regarding power supply. The Commonwealth of Australia is indirectly affected because the joint venturers must obtain export licences under Commonwealth law (clause 43); the State is authorised to apply for those licences on behalf of the joint venturers. Third parties who may use the joint venturers’ private roads, railway, wharf and port facilities (clauses 25(b), 27, 28) are affected by the by-laws that the Governor may make on the recommendation of the joint venturers. Holders of other mining tenements over the same area for minerals other than iron ore are affected by clause 15(6), which allows the State to grant such tenements unless the Minister for Minerals and Energy determines they would unduly prejudice the joint venturers’ operations. Mortgagees and assignees of the joint venturers’ rights are affected by clause 35, which requires a deed of covenant in favour of the State unless the Minister otherwise determines. The 2017 variation agreement extended the term of the agreement to 22 February 2028, affecting all parties’ long-term planning, and introduced a five-year extension possibility for completing productive mining or decommissioning and rehabilitation (Schedule 2 clause 2(8)).

The joint venturers bear the primary operational duties under the agreement. They must submit detailed proposals for mining, transport, housing, water, power, environmental management and other matters by 30 June 1988 (or later date allowed by the Minister) (clause 7(1)). Those proposals must include evidence of financial arrangements and readiness to proceed (clause 7(5)). Failure to submit proposals by the deadline results in automatic determination of the agreement (clause 7(6)). Once proposals are approved, the joint venturers must implement them in accordance with their terms (clause 9(7)). They must carry out a continuous environmental monitoring programme and submit reports to the Minister (clause 11). They must use labour available within Western Australia except where impracticable, and give proper consideration and preference to Western Australian suppliers and contractors when performance, price, quality, delivery and service are equal to or better than obtainable elsewhere (clause 12). They must also impose similar obligations on their third-party contractors (clause 12(2)). The joint venturers are responsible for constructing and maintaining private roads (clause 13(1)) and must pay for upgrading or repairing public roads they damage (clause 13(3)). They must pay royalty on all iron ore from the mining lease: originally at rates of 7.5 per cent of f.o.b. revenue for direct shipping ore with a minimum of 59.0524 cents per tonne, and lower rates for fine ore and fines, but as amended by the 2017 variation, royalty is now payable in accordance with the Hamersley Range 1963 Agreement as if the ore were produced under that agreement (clause 23(1) as substituted). The joint venturers must pay an additional rental of 24.6052 cents per tonne on all iron ore subject to royalty, with a minimum of $300,000 per year (clause 22). They must use their best endeavours to obtain the best price possible for iron ore and not sell direct shipping ore as fine ore or fines (clause 25(d)). They must operate any conveyor or railway in a safe and proper manner, and provide carriage for the State and third parties on reasonable terms (clause 25(a)(b)). The joint venturers have the right to assign, mortgage or dispose of their rights to an associated company as of right, or to others with the Minister’s consent, but must remain liable unless the Minister releases them (clause 35). They may surrender any part of the mining lease with abatement of future rent (clause 15(5)). They may blend iron ore from the mining lease with ore from the Hamersley Range operation (clause 23A). The State’s duties include granting the mining lease on application (clause 15(1)), ensuring the land remains zoned for mining use (clause 30), not imposing discriminatory rates (clause 32), and not resuming the joint venturers’ works or property without their consent (clause 34). The State may also provide wharf and port facilities if advantageous (clause 26). The 2017 variation added a new clause 50A requiring the State to cause endorsements on the mining lease and other lease registers to reflect the extended term to 22 February 2028.

The Act itself creates a limited penalty regime: by-laws made under s 5 may prescribe offences punishable by fines not exceeding $100 for contravention or failure to comply. Those by-laws are subject to a disallowance procedure: they must be laid before each House of Parliament within six sitting days of publication in the Government Gazette (s 5(2)(a)) and are not subject to s 42 of the Interpretation Act 1984 (which would require tabling within 14 days). The agreement provides more substantial enforcement mechanisms through termination and default provisions. Under clause 39, if the joint venturers make a default that the State considers material in the due performance of their obligations, or if they abandon or repudiate the agreement, the State may give notice specifying the default. If the default is not remedied within 180 days after notice (or, if referred to arbitration, within the period fixed by the award which must be at least 90 days if there was a bona fide dispute), the agreement ceases and determines without further notice or action by the State (clause 39(1)(I)). If either joint venturer goes into liquidation (other than a voluntary reconstruction) and its interest is not assigned to the other venturer or an approved assignee within three months, the agreement likewise ceases and determines (clause 39(1)(II)). On cessation or determination, the joint venturers’ rights to the mining lease and other tenures cease (subject to exceptions for townsite lots), and all buildings and improvements on the land become the State’s property absolutely without compensation (clause 40(2)). The joint venturers may remove fixed or moveable plant and equipment if they give notice, but the State has a right to purchase them at a fair valuation (clause 40(3)). The 2017 variation did not alter these termination provisions. Additionally, clause 43 provides that if the joint venturers fail to obtain any necessary Commonwealth export licence due to their own act or default, they are in default under the agreement. Clause 24 imposes a penalty for off-loading iron ore within the Commonwealth without prior written approval: a further additional rental of up to 98.4207 cents per tonne as the Minister demands, without prejudice to other rights and remedies. The arbitration clause (clause 46) provides a mechanism for resolving disputes about reasonableness of ministerial decisions under clause 9 and about defaults under clause 39. The joint venturers may refer a ministerial decision to arbitration, and if the decision is found unreasonable the award takes effect as a notice of approval (clause 9(5)). The ultimate penalty for the joint venturers is the loss of their entire mining rights and improvements without compensation, making compliance with the agreement’s detailed obligations commercially critical.

Section 4(3) provides that the Agreement has effect notwithstanding any other Act or law, which is a standard provision for State agreement Acts in Western Australia that overrides inconsistent legislation unless expressly preserved. The agreement itself specifically modifies or displaces several statutes. Clause 15(1) grants the mining lease “notwithstanding the provisions of the Mining Act” and clause 15(2) provides that the term of the mining lease shall be 30 years “notwithstanding any provisions of the Mining Act to the contrary” and that s 78 of the Mining Act (which deals with forfeiture for non-compliance) does not apply. Clause 15(3) exempts the joint venturers from expenditure conditions under the Mining Act during the currency of the agreement. Clause 21 modifies the Land Act 1933 by substituting a new subsection for s 45A(2), deleting the proviso to s 116, deleting ss 135 and 143, and including powers to grant occupancy rights and leases on terms consistent with the agreement. Clause 16(2) requires the joint venturers to negotiate with the State Energy Commission for power supply where available, but the original agreement gave priority to supply from Hamersley. Clause 17(16) provides that the Rights in Water and Irrigation Act 1914 applies to any water source developed for the joint venturers’ purposes except where inconsistent with the agreement. Clause 31 requires that for rating under the Local Government Act 1960 (now the Local Government Act 1995), the valuation of lands under the agreement shall be on unimproved value, and no discriminatory rates may be imposed. The 2017 variation amended clause 31 to introduce specified improvements (accommodation, recreation, administration facilities and associated buildings within 100 metres) that are excluded from the unimproved value assessment (Schedule 2 clause 2(6)). Clause 41 provides that nothing in the agreement exempts the joint venturers from compliance with environmental requirements under any Act; the 2017 variation specifically inserted a reference to the Environmental Protection Act 1986 (Schedule 2 clause 2(7)), confirming that the State’s general environmental laws apply. Clause 33 permits the State to resume land for the purposes of the agreement under the Public Works Act 1902 and sell or lease it to the joint venturers, with certain provisions of that Act disapplied. Clause 43 requires the joint venturers to obtain Commonwealth licences and consents, and the State may make representations to the Commonwealth for export licences. Clause 45 exempts the agreement, instruments executed by the State, and assignments (other than mortgages or charges) from stamp duty, but only if executed within seven years of the date of the agreement (27 October 1987). The 2017 variation added a new clause 51 sentence submitting the parties to the jurisdiction of Western Australian courts. The Act’s by-law making power under s 5 is subject to a modified tabling procedure. The Government Agreements Act 1979 is expressly preserved by s 4(3), meaning that the Channar agreement’s override of other laws does not affect that broader Act.

The Act was originally enacted as No. 61 of 1987, assented to and commencing on 13 November 1987. It remained unamended until 2017. The Standardisation of Formatting Act 2010 (No. 19 of 2010) made minor formatting changes to the compilation but did not alter substance. The significant amendment came via the Iron Ore (Channar Joint Venture) (Hamersley Range) Agreements Amendment Act 2017 (No. 13 of 2017), which received royal assent on 5 December 2017 and commenced on 6 December 2017. That amending Act inserted the definition of “2017 variation agreement” in s 3, inserted new s 4(1A) to ratify the variation agreement, and inserted the heading and text of Schedule 2 (the variation agreement itself). The variation agreement, executed on 29 September 2017, made ten substantive changes to the principal agreement. The most significant changes were: deletion of the definitions of “direct shipping ore”, “fine ore”, “fines” and “f.o.b. revenue”, and insertion of definitions of “Hamersley Range 1963 Agreement”, “Variation Agreement” and “Variation Date” (Schedule 2 cl 2(1)); amendment of clause 15(5) and (7) to require the concurrence of the Minister for Minerals and Energy for surrenders and to update the reference to the Hamersley Range 1963 Agreement (cl 2(2)); amendment of clause 22 to confirm that additional rental applies to ore on which royalty is paid under the Hamersley Range 1963 Agreement via clause 15(7), and to clarify treatment of pre-Variation Date rent (cl 2(3)); complete replacement of the royalty clause (clause 23(1)-(4)) so that royalty is now paid according to the Hamersley Range 1963 Agreement instead of the original f.o.b. revenue formula, and deletion of the return and inspection subclauses (cl 2(4)); insertion of a new clause 23A allowing blending of ore from the mining lease with ore from the Hamersley Range operation (cl 2(5)); amendment of clause 31 to specify that accommodation, recreation, administration facilities and maintenance workshops within 100 metres are “specified improvements” excluded from unimproved value rating (cl 2(6)); amendment of clause 41 to expressly reference the Environmental Protection Act 1986 (cl 2(7)); replacement of clause 50 to provide that the agreement expires on 22 February 2028, with a possible five-year extension for completing productive mining or decommissioning and rehabilitation (cl 2(8)); insertion of new clause 50A requiring the State to endorse an extension of the mining lease and lease I163654 to match the new term (cl 2(9)); and amendment of clause 51 to add submission to the jurisdiction of Western Australian courts (cl 2(10)). The variation agreement itself had a ratification mechanism: it was to come into operation on the day the amending Act passed, with a termination date of 31 December 2017 if not ratified (Schedule 2 cl 1).

The source text contains no references to any litigation that has arisen under the Act or the Agreement. However, the Agreement itself contains a comprehensive arbitration clause (clause 46) that provides a mechanism for resolving disputes other than those where the Minister has an express discretionary power. Clause 46(1) requires disputes to be referred to two arbitrators (one appointed by each party) with an umpire, conducted under the Commercial Arbitration Act 1985. The arbitration clause is used in several contexts: review of the reasonableness of ministerial decisions under clause 9(4) (whether the Minister’s conditions on proposals are unreasonable), disputes over costs and charges under the f.o.b. revenue definition (clause 1), disagreements over royalty adjustments under clause 23(1)(h), and disputes over the reasonableness of by-law alteration requests under clause 28. Clause 46(3) empowers arbitrators or an umpire to grant interim extensions of time periods. The 2017 variation added a new sentence to clause 51 submitting the parties to the jurisdiction of Western Australian courts in relation to any dispute or question arising out of or in connection with the agreement (Schedule 2 cl 2(10)), which would permit court proceedings as an alternative to arbitration for some matters. The source does not indicate whether any arbitration awards or court decisions have been made. It is noteworthy that the agreement’s provisions on termination (clause 39) require a 180-day notice period and allow the joint venturers to contest the default by referring the matter to arbitration; if the arbitrator finds a bona fide dispute and lack of dilatoriness, the compliance period must be at least 90 days from the award (clause 39(3)). This structure suggests that litigation or arbitration over defaults has been anticipated but not necessarily occurred. The agreement also contains an indemnity in favour of the State from Hamersley (clause 49) for losses arising from joint venturer defaults (except royalty defaults), which could give rise to litigation between Hamersley and the State or the joint venturers. The absence of any cited cases in the compilation table or notes indicates that the Act has been the subject of no noteworthy court proceedings in the reported decisions as at the compilation date.

Several provisions in the Act and the agreement contain traps for the unwary. The by-law making power under s 5 of the Act is exercisable on the recommendation of the joint venturers, which means the joint venturers effectively control the content of by-laws, but the Minister may still require alteration under clause 28 if the by-laws become unreasonable. The penalty for by-law offences is capped at only $100, which is very low and may not provide a sufficient deterrent for third-party misuse of infrastructure. Section 4(3) gives the agreement effect notwithstanding any other Act or law, which is broad but does not override the Government Agreements Act 1979. This means that the Channar agreement’s provisions cannot be used to invalidate provisions of other State agreements. Clause 45 provides only a seven-year stamp duty exemption from the date of the agreement (27 October 1987), so any instruments executed after 27 October 1994 are not exempt. The 2017 variation did not extend that period. Clause 34 prohibits the State from resuming the joint venturers’ works or property without consent, but that consent is not to be unreasonably withheld; the State could potentially frustrate operations by unreasonably withholding consent, though that would be subject to arbitration. Clause 37’s force majeure provision is very broad, including “factors due to overall world economic conditions”, which could potentially excuse performance in a downturn, but the party affected must promptly give notice and use best endeavours to minimise effects. The original royalty calculation using f.o.b. revenue was complex and allowed the Minister to deem certain costs not reasonably incurred, potentially increasing the royalty base. That complexity was removed by the 2017 variation, which substituted a reference to the Hamersley Range 1963 Agreement, but that agreement’s royalty provisions are not set out in the current Act, so a reader must consult that separate agreement to understand the effective royalty rate. Clause 15(7) allows the joint venturers to enter agreements with Hamersley for mining by Hamersley, with royalty computed under the Hamersley Range 1963 Agreement; this could create an overlap where the same ore is subject to royalty under two different regimes depending on who mines it. Clause 22’s additional rental of 24.6052 cents per tonne is expressed in 1987 currency and is not indexed; it becomes a fixed cost per tonne regardless of inflation. The minimum additional rental of $300,000 per year was also fixed and not indexed. Clause 40(2) provides that on cessation or determination of the agreement, all buildings and improvements become the State’s property absolutely without compensation, which is a draconian result for any developer. The joint venturers’ right to remove plant and equipment under clause 40(3) is subject to the State’s right to purchase in situ at a fair valuation, determined by arbitration if not agreed. Clause 35 provides that even after assignment, the original joint venturers remain liable for all obligations unless the Minister agrees to release them, which is a significant ongoing exposure. The 2017 variation’s new clause 50 allows an extension only for completing productive mining or decommissioning and rehabilitation, not for new mining. The extension must be requested by notice not later than 22 February 2027 (clause 50(2)). Clause 14 on airport upgrading requires only that the joint venturers confer with Hamersley and/or the Shire of West Pilbara “with a view to reaching agreement”; there is no obligation to actually upgrade the airport.

For the joint venturers, compliance with the Act and the scheduled agreement requires careful attention to a detailed regulatory framework. The first step is ensuring that all operations are conducted in accordance with approved proposals. The joint venturers must submit detailed proposals covering mining, roads, housing, water, power, environmental management and other matters (clause 7), and must implement them exactly as approved (clause 9(7)). Any significant modification to activities requires a new proposal under clause 10. The joint venturers must lodge quarterly reports to the State on the progress of studies and operations (clause 5(2)), and quarterly reports on the implementation of local labour and materials policy (clause 12(3)). Environmental compliance is critical: the joint venturers must carry out a continuous programme of monitoring and rehabilitation, and must immediately notify the Minister of any information that may require changes to approved proposals (clause 11). The 2017 variation confirmed that the Environmental Protection Act 1986 applies, so all statutory environmental approvals must be obtained. Royalty payments must be made in accordance with the Hamersley Range 1963 Agreement (clause 23 as substituted), which is a separate agreement that the joint venturers must obtain and understand. The additional rental under clause 22 must be paid quarterly, with a minimum of $300,000 per year. If the joint venturers ship iron ore to a place within the Commonwealth without the Minister’s prior written approval, they must immediately notify the State and pay a further additional rental of up to 98.4207 cents per tonne on demand (clause 24). They must keep proper books of account and permit the Minister for Minerals and Energy to inspect them for royalty determination purposes (original clause 23(3) - this was deleted in 2017 but may still be relevant for periods prior to the variation date). The joint venturers must comply with all by-laws made under s 5 of the Act or clause 28 of the agreement, and must pay the prescribed charges for third-party use of their railway and wharf facilities. They must ensure that any assignment of their rights is accompanied by a deed of covenant in favour of the State (clause 35(1)) and must remain liable after assignment unless the Minister releases them (clause 35(2)). They must not let the agreement be terminated by default: if any event of default occurs, they must remedy it within 180 days of notice, or refer the dispute to arbitration within 60 days (clause 39). If they wish to extend the term beyond 22 February 2028, they must give notice by 22 February 2027 requesting an extension for completing productive mining or decommissioning and rehabilitation (clause 50(2)). The State must also comply: it must grant the mining lease on application, ensure the land is zoned appropriately (clause 30), not impose discriminatory rates (clause 31), and cause the required endorsements on the mining lease and other lease registers under clause 50A. The State must make representations to the Commonwealth for export licences on request (clause 43(2)). The practical takeaway for both parties is that this is a long-term, heavily negotiated project agreement with bespoke provisions that override general mining legislation; deviations from the agreed framework require careful consultation and often ministerial approval.