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Major Mining Projects and Investment
Presented at the ‘State of the Nation’19 June 2012
Professor Quentin GraftonExecutive Director/Chief Economist
Bureau of Resources and Energy Economics (BREE)
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Overview
• The Mining Boom – Price and Volume Trends
• Major Mining Projects – Trends and Prospects
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The Boom: Price & Volume Trends
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Metal Prices: Past Trends
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Commodity Prices: Past Trends & Projections
200
400
600
800
1000
1200
Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Mar-17
Index
Thermal Coal Metallurgical Coal Iron Ore
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Commodity Production: Past Trends
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Commodity Production: Past Trends & Projections
l
30
60
90
120
150
1991-92 1996-97 2001-02 2006-07 2011-12 2016-17
Index
Energy Minerals
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Key Messages
• Overall commodity prices have peaked (2011) and likely to moderate over the next five years and beyond.
• Price reductions likely to be more substantial in period 2020 and beyond due to large supply responses from Australian competitors.
• Australian export values are projected to increase in medium term, but underpinned by higher volumes
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Major Mining Projects: Trends
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Value of Advanced Mineral and Energy projects ($2011-2012)
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Mining Capital Expenditure
• Capital expenditures in mining industry totalled about $50 billion in 2010-11 ─ highest ever, 30% higher than in 2009-10 and about three times greater than annual average over past 30 years.
• Based on industry intensions canvassed in December quarter 2011 expected to exceed $80 billion in 2011-12.
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Number of Advanced Mineral & Energy Projects
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Completed Major Mining Projects ($2011-12)
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Australian private minerals exploration expenditure ($2011-12)
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Value of advanced projects by commodity 2002 v 2012
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Value of advanced projects by state 2002 v 2012
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Prospects: Value of Advanced Projects if no new projects were announced
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Prospects: Number of Advanced Projects if no new projects were announced
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Less advanced mineral and energy projects
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Value of advanced and less advanced projectsDec 2002 – April 2012
0
50
100
150
200
250
300
350
(Dec
) 02
2003
(Apr
)
2003
(Oct)
2004
(Apr
)
2004
(Oct)
2005
(Apr
)
2005
(Oct)
2006
(Apr
)
2006
(Oct)
2007
(Apr
)
2007
(Oct)
2008
(Apr
)
2008
(Oct)
2009
(Apr
)
2009
(Oct)
2010
(Apr
)
2010
(Oct)
2011
(Apr
)
2011
(Oct)
2012
(Apr
)
A$b (2011-12)
Advanced Less advanced
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Number of advanced and less advanced projectsDec 2002 – April 2012
0
50
100
150
200
250
300
350
(Dec
) 02
2003
(Apr
)
2003
(Oct)
2004
(Apr
)
2004
(Oct)
2005
(Apr
)
2005
(Oct)
2006
(Apr
)
2006
(Oct)
2007
(Apr
)
2007
(Oct)
2008
(Apr
)
2008
(Oct)
2009
(Apr
)
2009
(Oct)
2010
(Apr
)
2010
(Oct)
2011
(Apr
)
2011
(Oct)
2012
(Apr
)
No.
Advanced Less advanced
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Factors Affecting Investment
• Factors common to investment decision across the economy:– Macroeconomic conditions (interest rates, exchange
rate, etc.)– Government policies
• Factors specific to the mining sector or commodity:– probability of discovering an economic mineral
deposit or extending the resource base of a known deposit;
– current and expected future prices; – mining and processing technologies; and – input costs
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Key Messages
• Advanced projects, exploration expenditures and mining capital expenditure are at historic highs.
• High levels of investment (real $) will last for next few years given the time it will take for some very large projects to reach completion.
• Over the longer term high levels of investment unlikely to be maintained if resource commodity prices continue to moderate.
