Australia Mining Report

Providing expert analysis, independent forecasts and competitive intelligence on the mining.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Petrochemicals Risk Reward Index, Economic Forecasts, Company Profiles and Global, Regional and Country Industry Overviews.

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Australia Mining Report
Product Price
$1,295.00

BMI View: Nickel and bauxite will emerge as the Australian mining industry's producti on growth bright spots during 2016 -20 20 . Coal and gold output growth will slow more markedly due to continued price weakness.

Although Australia will remain one of the world's largest mineral producers, growth will slow across the board due to continued mineral price weakness. The Australian mining sector will be particularly affected by China's economic slowdown, as the country accounts for almost 80.0% of the country's iron ore exports. We expect Australia's mining industry value to fall to USD86bn in 2016, down from USD96bn in 2015. We forecast Australia's mining industry value growth to pick up again by 2018, reaching USD94bn in 2020. Iron ore, for example, which accounts for 33.5% of the country's mining industry value, will increase its share to 36.3% of industry value by 2020 and drive industry growth.

Australia Mining Industry Value
2014e 2015e 2016f 2017f 2018f 2019f 2020f
e/f = BMI estimate/forecast. Source: Australian Bureau of Statistics/BMI Calculation
Mining Industry Value, USDbn 117.27 96.11 85.57 84.58 88.49 91.38 93.82
Mining Industry Value, USDbn, % y-o-y -13.11 -18.04 -10.96 -1.17 4.63 3.27 2.66

Latest Developments & Structural Trends

  • We forecast iron ore production in Australia to register average annual growth of 2.0% during 2016-2020 compared to 10.7% during 2011-2015.This is due to mothballing of mines from junior miners as iron ore prices remain weak as we believe that majors will stick to their production growth targets to crowd out high cost producers. Beyond 2016, iron ore production will start to slow from 4.9% in 2016 to -1.3% in 2020 on the back of low prices. We expect Australia to remain the top global producer of iron ore, with production increasing from 754 million tonnes (mnt) in 2016 to 792mnt by 2020.

  • Australian bauxite production will grow over the next few years due to the expansion of Rio Tinto's Weipa mine and the Amrun project that was approved in November 2015. The Indonesian export ban and now Malaysia's three-month moratorium on bauxite mining which will likely be extended will benefit Australia's bauxite sector by shifting investment to Australia. While bauxite accounts for only 5.4% of Australian mining value, the country is the global top producer, providing about 34.2% of global supply in 2016. Bauxite production will increase by an average of 6.0% per year by 2020, reaching 112.7mnt in 2020 from 90.1mnt in 2016. Rio Tinto's Weipa project will double the mine's production capacity by 2016, reaching 50.0mnt per annum, while the Amrun project will see an extra 10.0mnt per annum from the Queensland mine reaching a total of 22.8mnt per annum by 2019.

  • We expect Australia's share of global coal production to stagnate and remain at 6.2% during 2016-2020. Production will reach 500mnt by 2020, slightly higher than 481mnt in 2016, as y-o-y growth for that period will slow to 0.9%, compared to an average annual growth of 2.6% over 2011-2015. Growth will remain positive as lower production costs and take-or-pay contracts with freight operators will incentivise production. The repeal of the country's carbon tax in July 2014 failed to benefit the industry. Subdued coal prices will weigh most heavily on firms, as we forecast thermal coal prices to average lower y-o-y at USD59/tonne in 2016 before modest gains to USD60/tonne in 2017. As a result, Glencore announced the 2015 closure of its Newlands underground mine, as well as suspending production at its Ravensworth mine.

  • We forecast Australia's copper production growth to register an annual average of 3.6% during 2016-2020, which is a significant increase from the 1.6% during 2011-2015. Australia's copper sector production will be buoyed by projects such as BHP's expansion at its Olympic Dam, and Sandfire Resources' DeGrussa copper mine, which will produce 300 thousand tonnes per annum (ktpa) at full capacity. Australia will remain the fifth largest copper producer in the world, producing 1.1mnt of copper by 2020.

  • Australia's gold production growth will slow as weak gold prices will reduce miners' profit margins, forcing companies to scale back and in some cases halt operations. Based on our forecast for gold prices to remain flat at USD1,120/oz from 2016 to 2020, we expect gold production to total 9.9 million ounces (moz) in 2020, up from 9.8moz in 2016.Production growth will slow and average 0.5% during 2016-2020, compared to 3.2% during 2011-2015.

  • We forecast Australia's zinc production to register annual average growth of -0.9% during 2016-2020, which is due to a 30.0% decline in 2016 attributed to the closing of Minerals and Metals Group's (MMG) Century zinc mine in August 2015. 2017 onwards we expect positive growth rates increasing to 7.5% by 2020. In 2015, Glencore's Mount Isa Mines and McArthur River mine accounted for approximately 54.7% of Australia's total zinc output. We expect Australia's zinc sector will account for 2.0% of Australia's cumulative mining industry value in 2016, down from 2.8% in 2015. Overall, we expect the zinc industry in Australia to shrink by 36.8% y-o-y in 2016.

  • Australia's nickel mine production will expand 6.3% on average per annum during 2016-2020. Production declines in 2014-2015 were partially attributable to Norilsk Nickel, which decided to sell the firm's Australian portfolio in 2013, and First Quantum Minerals' Ravensthorpe mine halt in December 2014 due to a tank failure, respectively. Norilsk's divested portfolio includes four nickel mines that had been idled due to low prices and an escalation in production costs to around USD18,000/tonne. Ravensthorpe has resumed operations since August 2015, albeit at 50% of capacity. It will reach full capacity in another six months time, where it is expected to produce 38,000 tonnes per annum. With nickel prices set to disappoint, new supply growth will come from expansions of low cost nickel projects and the development of low cost green field projects in Australia.

  • Australia's tin production will increase on the back of several key mining projects coming online over the coming years, We forecast tin production growth to average 3.6% y-o-y during 2016-2020, compared to an average decline of 2.5% over 2011-2015. We expect production to increase from 6.3 thousand tonnes (kt) in 2016 to 7.1kt by 2020. Growth will primarily be driven by the sector's strong project pipeline. For instance, Metals X will continue expanding through brownfield investment, and has reported new high-grade reserves at Renison Bell mine, the largest tin mine in Australia. Other high-grade tin mine expansions include Stellar Resources' Heemskirk project, which boasts an estimated 4.4mnt reserve.

  • We forecast lead production in Australia to register an annual average growth of 2.1% during 2016-2020, compared to a 1.1% decline over 2011-2015. Production will increase from 664kt in 2016 to 722kt by 2020. We expect MMG 's USD1.4bn Dugald River mine to be the bright spot in lead production over the coming years as a declining zinc sector will drag down lead production with mine halts. Subsequent increases in zinc and lead prices will lead to better output growth from 2018 onwards.

BMI Industry View
7
Table: Australia Mining Industry Value
7
Latest Developments & Structural Trends
7
SWOT
9
Industry Forecast
11
Bauxite: Amrun To Lead Growth
11
Latest Developments
11
Table: Australia - Bauxite Production Forecast
11
Table: Australia - Select Bauxite Projects
12
Structural Trends
12
Coal: Growth To Slow
15
Latest Developments
15
Table: Coal Production Forecast (Australia 2012-2020)
15
Table: Australia: Select Coal Projects
15
Structural Trends
16
Copper: Strong Production Despite Weak Prices
22
Latest Developments
22
Table: Copper Production Forecast (Australia 2012-2020)
22
Table: Australia - Largest Copper Projects
23
Structural Trends
23
Gold: Weaker Australian Dollar To Encourage Growth
26
Latest Developments
26
Table: Gold Production Forecast (Australia 2012-2020)
26
Table: Australia - Largest Gold Mining Projects
26
Structural Trends
27
Domestic & International Firms Still Active
27
Iron Ore: Smaller High-Cost Miners To Exit
29
Latest Developments
29
Table: Australia Iron Ore Production Forecast
29
Table: Australia - New Iron Ore Projects
29
Structural Trends
31
Lead: Zinc To Drag Down Growth
35
Latest Developments
35
Table: Lead Production Forecast (Australia 2012-2020)
35
Table: Australia Selected Lead Projects
35
Structural Trends
36
Nickel: More Mine Closures Ahead
39
Latest Developments
39
Table: Nickel Production Forecast (Australia 2012-2020)
39
Table: Australia - Select Nickel Projects
40
Structural Trends
40
Tin: Production To Boom
43
Latest Developments
43
Table: Tin Production Forecast (Australia 2012-2020)
43
Table: Australia - Tin Mining Projects
44
Structural Trends
44
Zinc: No Rebound To Previous Highs
46
Latest Developments
46
Table: Zinc Production Forecast (Australia 2012-2020)
46
Table: Australia Selected Zinc Projects
46
Structural Trends
47
Industry Risk Reward Ratings
49
Australia Risk/Reward Index
49
Rewards
49
Industry Rewards
49
Country Rewards
49
Risks
49
Industry Risks
49
Country Risks
50
Asia Risk Reward Index
51
Australia Stays On Top While India & Myanmar Gain
51
Shifting Scores Reflect Changing Sector Dynamics
52
Table: Asia - Mining Risk/Reward Index
53
Regulatory Development
54
Key Regulation Facts
54
Trade & Investment Risk Analysis
55
Table: Australia - Mineral Taxes
58
Commodities Forecast
59
Commodity Strategy
59
Ferrous Metals
59
Iron Ore: Price Weakness To Continue Over Coming Years
59
Steel: Oversupply To Drag Down Prices
61
Non-Ferrous Metals
64
Aluminium: Continued Weakness, But No Sharp Downturn
64
Copper: Recent Relief Rally To Fade
66
Lead: Prices Weakness To Continue
67
Nickel: Subdued Prices Due To Weak Demand Growth
68
Tin: Supply Deficits To Underpin Rally In Tin Prices
69
Zinc: Positive Multi-Year Outlook, But Increasing Risks In Months Ahead
70
Table: Select Commodities - Performance & BMI Forecasts
72
Competitive Landscape
73
Iron Ore Majors To Outperform
73
Table: Financial Data For Key Mining Firms Listed In Australia
74
Company Profile
77
Global Company Strategy - Rio Tinto - Q2 2016
77
Company Overview
79
Company Strategy
80
Table: Rio Tinto - Key Projects
83
Latest Financial Results
83
Table: Rio Tinto - Key Financial Data
84
Glencore
86
Table: Glencore - Key Financial Data
90
Global Company Strategy - MMG Limited - Q2 2016
92
Table: MMG Ltd - Supply Chain Analysis
96
Table: MMG Limited - Key Financial Data
97
BHP Billiton - Q2 2016
98
Latest Financial Results
100
Table: BHP Billiton - Supply Chain Analysis
103
Table: BHP Billiton - Key Financial Data
104
Regional Overview
105
Continued Domination Of Iron Ore Production
105
Indian Coal Consumption To Outperform
106
China & India To Lead In Outbound Investment
107
Indonesian Ban To Continue
109
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.