Australia Mining Report

Published 16 March 2015

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Australia Mining Report

BMI View: Australia's mining sector is set to suffer the painful spillover effects of a prolonged period of weak mineral prices, in part resulting from a sharp investment slowdown in China.

Australia has been among the biggest beneficiaries of the China-led commodities boom over the past decade, attracting huge amounts of investment into the minerals space. Driven by China's voracious appetite for key commodities such as coal and iron ore, the value of Australia's mining industry had increased by more than six-fold from USD24bn in 2003 to USD154bn in 2013. As a result, this has seen the sector's share of GDP rising from 4.5% to 10.2% over the same period. However, the boom years in the mining industry are over. With China's economy on course for a continued slowdown over the coming years and mineral prices set to remain low, Australia's mining sector will suffer the painful spillover effects.

Boom Is Over
Australia - Mining Industry Value
Australian Bureau of Statistics, BMI Calculation

We believe Australia will be the biggest loser from the mineral imports shift in China. The latter commands a prominent role in Australia's exports of key commodities including coal and iron ore. Already, the mining sector is feeling the crunch of plummeting commodity prices as a string of miners scale back their ambitions and slam the brakes on investment. The rising tide of economic nationalism, declining labour productivity and aggressive minimum wage legislation will compound the challenges in the mining industry, amplifying the downshift in Australia's economy going forward. We expect the value of Australia's mining sector to reach USD191.9bn by 2019, growing at an annual average rate of 3.6% over our forecast period. This contrasts with an average growth rate of 21.5% per annum over the past decade.

Heavy Chinese Exposure
Australia - Exports of Iron Ore (LHS) & Coal (RHS) by Destination (% of Total)
Source: Australian Bureau of Statistics, BMI

Despite the fading...

Table of Contents

BMI Industry View
7
SWOT
10
Industry Forecast
12
Bauxite: Weipa Leads Growth
12
Table: Australia - Select Bauxite Projects
14
Table: Australia - Bauxite Production (2011-2019)
14
Coal: Continued Headwinds
15
Table: Australia: Select Coal Projects
20
Table: Coal Production Forecast (Australia 2011-2019)
20
Copper: Constructive Outlook Despite Slower Growth
21
Table: Australia - Largest Copper Projects
21
Table: Copper Production Forecast (Australia 2011-2019)
23
Gold: Golden Years Gone
24
Domestic & International Firms To Remain Active
24
Table: Australia - Largest Gold Mining Projects
25
Table: Gold Production Forecast (Australia 2011-2019)
26
Lead: Growth Positive But Subdued
26
Table: Lead Production Forecast (Australia 2011-2019)
29
Nickel: Expansion Despite Poor Prices
29
Table: Australia - Select Nickel Projects
31
Table: Nickel Production Forecast (Australia 2011-2019)
32
Tin: Output Growth Ahead
33
Table: Australia - Tin Mining Projects
34
Table: Tin Production Forecast (Australia 2011-2019)
35
Zinc: Century Mine Closure Underpins Negative Outlook
35
Table: Zinc Production Forecast (Australia 2011-2019)
38
Iron Ore: Maximizing Production In Years Ahead
38
Smaller Players To Focus On Cost Control
41
Table: Australia Iron Ore Production Forecast
43
Industry Risk Reward Ratings
44
Australia Risk/Reward Index
44
Rewards
44
Industry Rewards
44
Country Rewards
44
Risks
45
Industry Risks
45
Country Risks
45
Table: Australia - Mining Industry Value & Minerals Production Forecasts
46
Asia Risk Reward Index
47
Australia Stays On Top While India & Myanmar Gain
47
Shifting Scores Reflect Changing Sector Dynamics
48
Table: Asia - Mining Risk/Reward Index
49
Regulatory Development
50
Mining Regulatory Framework
51
Table: Australia - Mineral Taxes
51
State Warming To Uranium
52
Commodities Forecast
53
Commodity Strategy
53
Ferrous Metals
53
Iron Ore: Further Price Declines
53
Steel: Weak Iron Ore Prices Will Drag On Steel Prices
55
Non-Ferrous Metals
58
Aluminium: Supply Growth To Mute Price Gains
58
Copper: Only Modest Multi-Year Recovery
59
Lead: Prices Weakness To Subdue Production Growth
60
Nickel: Short-Term Weakness To Abate Over Coming Quarters
62
Tin: Export Curbs Will Eventually Bite
63
Zinc: Outperformance Set For 2015
65
Table: Select Commodities - Performance & BMI Forecasts
66
Competitive Landscape
68
Iron Ore Majors To Outperform
68
Table: Financial Data For Key Mining Firms Listed In Australia
69
Company Profile
70
BHP Billiton - Q215
70
Latest Financial Results
73
Table: BHP Billiton - Supply Chain Analysis
75
Table: BHP Billiton - Key Financial Data
76
MMG Limited - Q215
77
Table: MMG Ltd - Supply Chain Analysis
80
Table: MMG Limited - Key Financial Data
81
Global Company Strategy - Glencore Xstrata - Q2 2015
82
Company Overview
83
Latest Financial Results
83
Company Strategy
84
Table: Glencore Xstrata - Supply Chain Analysis
86
Table: Glencore Xstrata - Key Financial Data
87
Global Company Strategy - Rio Tinto
88
Company Overview
90
Company Strategy
91
Latest Financial Results
92
Table: Rio Tinto - Key Financial Data
93
Regional Overview
95
Continued Domination Of Iron Ore Production
95
Indian Coal Consumption To Outperform
96
China & India To Lead In Outbound Investment
97
Indonesian Ban To Continue
99
Global Industry Overview
100
Global Overview
100
2
103
3
104
5
108
Methodology
110
Industry Forecast Methodology
110
Sources
111
Risk/Reward Index Methodology
112
Table: Weighting Of Indicators
113

The Australia Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI's Australia Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in Australia.

Key Benefits

  • Use BMI's independent industry forecasts on Australia to test other views - a key input for successful budgeting and planning in this mining market.
  • Target business opportunities and risks in Australia's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in Australia.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity), Key Projects Tables and Competitive Landscape Tables.

Coverage

BMI Industry View

Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.

Industry SWOT analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.

BMI Industry Forecasts

Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:

  • Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
  • Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
  • Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
  • Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.

BMI’s Mining Risk Reward Index

BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.

Competitive Landscape Tables & Analysis

Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.

Key Projects

Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Sources

The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.

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Testimonials

'An essential, multi-faceted research tool. BMI’s thorough understanding of the major market players enables an informed – and informative – review of the sector’s actual performance, together with useful insights into current industry issues, which are topped-off with detailed and invaluable forecasts of industry and macroeconomic trends.’

Senior Research Analyst, ABC International Bank plc