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: Iron ore and bauxite will emerge as the Australian mining industry's producti on growth bright spots during 2016 -2019. 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 USD128bn in 2015, down from USD141bn in 2014. We forecast Australia's mining industry value growth to pick up again by 2017, reaching USD141bn in 2019. Iron ore, for example, which accounts for 44.0% of the country's mining industry value, will increase its share to 46.0% of industry value by 2019 and drive industry growth.

Australia Mining Industry Value
2013e 2014e 2015f 2016f 2017f 2018f 2019f
e/f = BMI estimate/forecast. Source: Australian Bureau of Statistics/BMI Calculation
Mining Industry Value, USDbn 135.26 118.45 102.67 96.16 99.16 104.42 109.51
Mining Industry Value, USDbn, % y-o-y -8.17 -12.42 -13.33 -6.34 3.12 5.30 4.88

Latest Developments & Structural Trends

  • We have revised our 2015 iron ore production to reflect further mothballing of mines from junior miners as iron prices remain weak as we believe that majors will stick to their production growth targets. We revised down our growth forecast for Australia down to 4.9% from 5.5% previously for 2015. Beyond 2015, iron ore will remain one of the sector's bright spots as production will be driven by major miners' strategy of expanding production to crowd out high cost producers. We expect Australia to remain the top global producer of iron ore, with production increasing from 754 million tonnes (mnt) in 2016 to 802mnt by 2019, averaging annual growth of 2.8%.

  • Australian bauxite production will grow over the next few years due to the expansion of Rio Tinto's Weipa mine. The Indonesian export ban will benefit Australia's bauxite sector by shifting investment to Australia, as the ban will hurt Indonesia's sector's investment attractiveness. While bauxite accounts for a meagre 5.0% of Australian mining value, the country is the global top producer, providing about 26.0% of global supply. Bauxite production will increase by an average of 6.0% per year by 2019, reaching 109mnt in 2019 from 81mnt in 2014. Rio Tinto's Weipa project will double the mine's production capacity by 2016, reaching 50mnt per annum. Australian Bauxite's Bald Hill project also produced 65 thousand tonnes (kt) since coming online in December 2014.

  • We expect Australia's share of global coal production to stagnate and remain at 6.1% during 2016-2019. Production will reach 498mnt by 2019, slightly higher than 481mnt in 2016, as y-o-y growth for that period will slow to 1.0%, compared to an average annual growth of 4.1% over 2010-2014. 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.

  • Australia's copper production growth will decline by 6.4% in 2015 due to a mill electrical failure at BHP Billiton's Olympic dam. This will reduce output by approximately 60-70kt over the year. Beyond 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 300ktpa at full capacity. While we do not expect Australia's copper's mining industry value share to increase, steady average annual output growth of 3.4% during 2016-2019 will ensure that Australia remains the fifth-largest copper producer in the world.

  • 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 USD1,175/oz from 2015 to 2019, we expect gold production to total 9.9 million ounces (moz) in 2019, up from 9.7moz in 2015. Production growth will slow and average 0.8% during 2015-2019, compared to 6.1% during 2010-2014.

  • We have revised down Australia's zinc production growth forecast significantly from 3.7% to -8.5% and -13.7% to -30.0% for 2015 and 2016, respectively. This represents a 182kt decrease for our 2015 production forecast, down to 1.4mnt for the year and 961kt in 2016. The country's zinc production from 2015 to 2019 will average -4.1%, compared to an average of 3.2% growth over 2010-2014. Over 2014, Glencore's Mount Isa Mines and McArthur River mine accounted for approximately 44.1% of Australia's total zinc output. Australia's zinc sector will account for 2.9% of Australia's cumulative mining industry value in 2015, down from 3.3% previously ( see: Glencore Plan: Australia & Kazakhstan To Be Hit Hardest', October 14).

  • The closure of MMG Century's zinc mine in H215 will also dent the sector's growth outlook. MMG, one of the world's biggest zinc producers, operates the largest zinc project in Australia. Zinc ore production from Century decreased 5.0% y-o-y to 466kt for 2014, and is expected to produce 320-370kt of copper in 2015 as the operation progresses through the final stages of the mine plan. This marks a decline from 488kt in 2013 and 515kt in 2012.

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)
21
Copper: Constructive Outlook Despite Slower Growth
22
Table: Australia - Largest Copper Projects
22
Table: Copper Production Forecast (Australia 2011-2019)
24
Gold: Golden Years Gone
24
Domestic & International Firms Still Active
24
Table: Australia - Largest Gold Mining Projects
26
Table: Gold Production Forecast (Australia 2011-2019)
27
Iron Ore: Maximizing Production In Years Ahead
27
Smaller Players To Focus On Cost Control
30
Table: Australia Iron Ore Production Forecast
31
Lead: Growth Positive But Subdued
32
Table: Lead Production Forecast (Australia 2011-2019)
34
Nickel: Expansion Despite Poor Prices
34
Table: Australia - Select Nickel Projects
36
Tin: Output Growth Ahead
38
Table: Australia - Tin Mining Projects
39
Table: Tin Production Forecast (Australia 2011-2019)
40
Zinc: Century Mine Closure Underpins Negative Outlook
40
Table: Zinc Production Forecast (Australia 2011-2019)
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
Table: Asia - Mining Risk/Reward Index
51
Regulatory Development
52
Mining Regulatory Framework
53
Table: Australia - Mineral Taxes
54
State Warming To Uranium
54
Commodities Forecast
55
Global - Metals: Lower Costs And Weak Demand To Anchor Prices
55
Metal Price Weakness: Chinese Equity Slump & US Dollar Strength
56
US Dollar Strength To Anchor Weak Metal Prices
57
Competitive Landscape
59
Iron Ore Majors To Outperform
59
Table: Financial Data For Key Mining Firms Listed In Australia
60
Company Profile
63
Global Company Strategy - BHP Billiton - Q3 2015
63
Latest Financial Results
66
Table: BHP Billiton - Supply Chain Analysis
68
Table: BHP Billiton - Key Financial Data
69
Global Company Strategy - MMG Limited - Q3 2015
70
Table: MMG Ltd - Supply Chain Analysis
74
Table: MMG Limited - Key Financial Data
75
Global Company Strategy - Glencore Xstrata - Q3 2015
76
Company Overview
77
Latest Financial Results
77
Company Strategy
78
Table: Glencore - Supply Chain Analysis
80
Table: Glencore - Key Financial Data
81
Rio Tinto
82
Company Overview
84
Company Strategy
85
Latest Financial Results
86
Table: Rio Tinto - Key Financial Data
88
Regional Overview
89
Continued Domination Of Iron Ore Production
89
Indian Coal Consumption To Outperform
90
Slowing Demand From China
91
Indonesian Ban To Remain In Place
92
Global Industry Overview
94
Global Mining: 2015 Key Themes Revisited
94
Table: Key Mining Themes For 2015
94
Theme: Mining Capital Expenditure Will Continue To Decline
94
Theme: US Dollar Strength
95
Iron Ore Consolidation & Majors Share To Increase
96
Asian Investment In Africa To Continue
97
2015's Standouts
98
Methodology
100
Industry Forecast Methodology
100
Sources
101
Risk/Reward Index Methodology
102
Table: Weighting Of Indicators
103

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.