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: Gold, copper and bauxite will emerge as the Australian mining industry's production growth bright spots during 2016-2020. Iron ore and coal 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 USD94bn in 2016, down from USD106bn in 2015. We forecast Australia's mining industry value growth to pick up hereafter, reaching USD112.6bn in 2020. The potential return of La Nina this year poses downside risks to coal and iron ore production forecasts.

Australia Mining Industry Value
2014e 2015e 2016f 2017f 2018f 2019f 2020f
e/f = BMI estimate/forecast. Source: Australian Bureau of Statistics, BMI calculation
Australia Mining Industry Value, USDbn 123.70 106.20 94.40 94.50 99.20 105.80 112.60
Australia Mining Industry Value, USDbn, % y-o-y -11.00 -14.10 -11.10 0.10 5.00 6.70 6.40

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. Australia's share of global output will average 25.5% during this period.

  • 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. Rio Tinto's Weipa project will double the mine's production capacity by 2019, 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. The Indonesian export ban and Malaysia's moratorium on bauxite mining will benefit Australia's bauxite sector by shifting investment to Australia. While bauxite accounts for only 4.7% of Australian mining value, the country is the global top producer, providing about 31.1% of global supply in 2016. Bauxite production will increase by an average of 9.1% per year by 2020, reaching 122.3mnt in 2020 from 82.4mnt in 2016. This is compared to the 3.3% annual average growth during 2011-2015.

  • The Australian coal industry will experience limited production growth due to weak prices, environmental regulations, and increasing competition from lower cost foreign producers weighing on production. 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 USD51/tonne in 2016 before modest gains to USD52/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 1.0% during 2011-2015. Australia's copper sector production will be buoyed by projects such as BHP Billiton (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 improve as higher gold prices increase miners' profit margins. Based on our forecast for gold prices to improve from USD1,275/oz in 2016 to USD1,500/oz in 2020, we expect Australia's gold production to total 13.9 million ounces (moz) in 2020, up from 11.4moz in 2016. Production growth will increase to 5.6% during 2016-2020, compared to 5.0% 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. From 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 2.9% 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 6.1% on average per annum during 2016-2020, compared to 7.5% during 2011-2015. 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 2.9% y-o-y during 2016-2020, compared to the 1.5% over 2011-2015. We expect production to increase from 7.1thousand tonnes (kt) in 2016 to 8.1kt 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 0.4% during 2016-2020, compared to a 1.1% decline over 2011-2015. Production will increase from 601kt in 2016 to 644kt by 2020. We expect Chinese firm 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: Growth To Accelerate
11
Latest Developments
11
Table: Australia - Bauxite Production Forecast
11
Table: Australia - Select Bauxite Projects
11
Structural Trends
13
Coal: Bleak Outlook Ahead
16
Latest Developments
16
Table: Coal Production Forecast (Australia 2012-2020)
16
Table: Australia: Select Coal Projects
16
Structural Trends
18
Copper: Strong Growth Despite Weak Prices
25
Latest Developments
25
Table: Copper Production Forecast (Australia 2012-2020)
25
Table: Australia - Select Copper Projects
26
Structural Trends
27
Gold: Strong Growth Ahead
30
Latest Developments
30
Table: Gold Production Forecast (Australia 2012-2020)
30
Table: Australia - Largest Gold Mining Projects By Volume
30
Structural Trends
31
Iron Ore: Major Players To Drive Production Growth
33
Latest Developments
33
Table: Australia Iron Ore Production Forecast
33
Table: Australia - New Iron Ore Projects
33
Structural Trends
35
Lead: Growth To Stagnate
39
Latest Developments
39
Table: Lead Production Forecast (Australia 2012-2020)
39
Table: Australia Selected Lead Projects
39
Structural Trends
40
Nickel: IGO To Drive Production
43
Latest Developments
43
Table: Nickel Production Forecast (Australia 2012-2020)
43
Table: Australia - Select Nickel Projects
44
Structural Trends
44
Tin: Metals X To Dominate
47
Latest Developments
47
Table: Tin Production Forecast (Australia 2012-2020)
47
Table: Australia - Tin Mining Projects
48
Structural Trends
48
Zinc: No Recovery Ahead
50
Latest Developments
50
Table: Zinc Production Forecast (Australia 2012-2020)
50
Table: Australia Selected Zinc Projects
50
Structural Trends
51
Industry Risk Reward Ratings
53
Australia Risk/Reward Index
53
Rewards
53
Industry Rewards
53
Country Rewards
53
Risks
53
Industry Risks
53
Country Risks
54
Asia Risk/Reward Index
55
Key Takeaways
55
Latest Revisions
56
Table: Asia - Mining Risk/Reward Index
57
Regulatory Development
58
Key Regulation Facts
58
Trade & Investment Risk Analysis
59
Table: Australia - Mineral Taxes
62
Commodities Forecast
63
Commodities Outlook
63
Table: BMI Commodities Price Forecasts
63
Competitive Landscape
64
Iron Ore Majors To Outperform
64
Table: Financial Data For Key Mining Firms Listed In Australia
65
Company Profile
68
Global Company Strategy - Rio Tinto
68
Table: Select Commodities - Price Forecasts
70
Company Analysis
70
Table: Rio Tinto - Key Projects
76
Table: Rio Tinto - Key Financial Data
77
Global Company Strategy - Glencore
78
Table: Selected Commodities - Price Forecasts
80
Company Analysis
80
Table: Glencore - Key Projects
84
Table: Glencore - Key Financial Data
86
Global Company Strategy - MMG Limited - Q3 2016
87
Table: Select Commodities - Price Forecasts
89
Table: MMG Limited - Key Financial Data
93
BHP Billiton - Q3 2016
94
Table: Select Commodities - Price Forecasts
96
Latest Financial Results
98
Table: BHP Billiton - Key Financial Data
101
Regional Overview
102
Asia Overview
102
Slowing Iron Ore Production
102
Indian Coal Consumption To Outperform
103
China & India To Lead In Outbound Investment
104
Indonesian Ban Moderation Ahead
105
Chinese Coal & Steel Sectors To Consolidate Slowly
107
Methodology
108
Industry Forecast Methodology
108
Sources
109
Risk/Reward Index Methodology
110
Table: Weighting Of Indicators
111

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.