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Australia Mining Report Q1 2009
Business Monitor International, March 2009, Pages: 250
Australia Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Australia's mining industry.
Hosting a gamut of metals and minerals including iron ore, nickel, bauxite/aluminium, copper, gold, silver, uranium, diamond, opal, zinc, coal and oil shale as well as petroleum and natural gas, Australia continues to be the world leader in mining. Australia lies within the top five for most of the world’s key minerals. It is the world’s leading producer of bauxite and alumina, ilmenite, rutile and zircon, synthetic rutile and tantalum. It ranks second for production of iron ore, lead, uranium, diamonds (by weight) and zinc. It is the third-largest producer of silver and nickel and has also now become the world’s third-largest producer of gold, behind China and South Africa. The country is the world’s largest exporter of alumina, black coal, iron ore, lead and zinc, and figures second in the export of uranium. The mining industry is a significant contributor to Australia’s GDP and the majority of mining activity takes place within the country’s largest state, Western Australia. This state will now benefit from the election of a more business-friendly Liberal government in the wake of September 2008’s early election.
Owing to its exceptional geology, Australia is home to some of the biggest names in the global mining industry. Some of the multinationals operating in the Australian mining industry include local BHP Billiton and Newcrest, UK-based Rio Tinto, US-based Alcoa, China-based Aluminium Corporation of China (Chalco), Canada’s Alcan, and Switzerland-based Xstrata. At present, the mining industry in Australia is undergoing a shift, with more and more companies exhibiting an interest in the exploration of base metals, iron and uranium, rather than gold. This trend reflects strong international demand for the resources, especially from emerging economies such as China and India.
Foreign investment rules are liberal and encourage inward investment. Mergers and acquisitions (M&As) are subject to scrutiny by the Australian Competition and Consumer Commission (ACCC). The country has well-defined regulatory bodies and a well-established legal system that can be described as investorfriendly. In the case of specific mineral exploitation, the authorities now consider uranium mining proposals on a case-by-case basis.
BHP And Rio Tinto Shed Jobs
Mining giant BHP Billiton has recently announced that it is to cut 6,000 jobs and close its huge Ravensthorpe nickel mine in Australia. BHP had been one of the few companies maintaining production amid claims that sales and volumes were holding up. Of the 6,000 job cuts, approximately 70% will come from independent contractors. Meanwhile, in December 2008, Rio Tinto announced it would be cutting 14,000 jobs as it plans to cut its debt levels by US$10bn by the end of 2010. As part of planned reductions in capital expenditure, the mining giant is also mothballing a number of projects, these include a US$1.5bn extension to the Argyle diamond mine in Western Australia.
Meanwhile, in November 2008, BHP Billiton announced the time limit for its offer for Rio Tinto had elapsed, thus effectively ending its prolonged chase for its rival.
New WA Government To Boost Uranium Sector
In November 2008, the new Liberal government in Western Australia lifted the ban on mining uranium, which should come as a significant boon to this sector. There is strong demand for uranium as countries such as China attempt to convert to nuclear power on a large scale. That said, uranium companies have warned it will take some time for production to get underway, even after the ban is lifted.
Industry Forecast
The forecasts for Australia’s mining industry are discouraging, with estimating that the industry contracted by almost 5% in real terms in 2008. Meanwhile, we forecast an average annual reduction of almost 2% in real terms for the remainder of the forecast period. The main reason for this discouraging outlook is the global slump in commodity prices. However, Australia has been particularly hit by restructuring at the world’s largest miners BHP Billiton and Rio Tinto.. By 2013, this report forecasts that Australia’s mining industry will represent only 3.08% of GDP, compared to 4.26% in 2007.
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