Adding value to minerals
and energy: mining
equipment, technology
and services
Mining Supplies and Innovation: An
opportunity for the Country
Ian Satchwell
11 April 2014
Outline
• Investment and production
• Redefining the Australian mining sector
• Employment and multipliers
• Case studies of METS development
• Some lessons
• Australian approaches to development
• The value of people
2
Australia’s engineering and construction challenge – the largest
investment wave since the 1800s gold rushes*
WA & NT projects
to 2016: USD220 billion+
LNG, mining
DARWIN
Offshore petroleum
basins
Pilbara Region
LNG, iron ore,
infrastructure
Queensland
projects to 2016:
USD100 billion+
BROOME
PORT HEDLAND
KARRATHA
Northern Territory
Queensland
Western Australia
Mid West Region
Iron ore, gold,
uranium, nickel,
Gladstone and
North West
Economic Triangle
Base metals,
bauxite-alumina
Bowen, Surat and
Galilee Basins
Coal, CSG, LNG
South Australia
BRISBANE
Copper, uranium,
New South Wales
mineral sands, New South Wales
Coal, gold, base
PERTH
petroleum
SYDNEY
metals
South West Region
Goldfields Region ADELAIDE
CANBERRA
Victoria
Alumina, mineral sands, Gold, nickel, iron ore
gold
MELBOURNE
South Australia
projects to 2016
*Reserve Bank,
HOBART
USD10 billion+
Australia
3
Western Australia case: investment will result in decades of
increased production with lower volatility
Historic and forecast production value* for WA’s key
resources
$m
Double 2011
value
Increased
sustaining
capital and
services
80,000
70,000
Gold
Value in $M*
60,000
50,000
Iron Ore
40,000
Nickel
30,000
20,000
Oil/Gas
10,000
Alumina and Bauxite
0
2005
Source: ACIL Tasman analysis
2009
2013
* At ten year average prices
2017
4
Resource economy in Australia: bigger than traditionally
measured
Gross Value Added – resource economy 2011-12
Share of nominal GVA, financial year
(has more than doubled in past 10 years)
•
•
18% of GVA
11.5% directly from extraction and
processing
6.5% from other sectors providing inputs
Resource employment by industry 2011-12
Share of total employment, financial year
•
•
10% of employment
3.25% directly from extraction and
processing
6.75% from other sectors providing inputs
5
GDP contribution of Mining Equipment, Technology and
Services (METS) sector has grown faster than mining’s
METS output is growing
at 15 to 20% a year
• 4% of national output
in 2002-03
• 8.4% in 2011-12
METS contribution to
GDP
• 6.7% in 2010-11
• Est. 9.4% in 2012-13
Many METS are
knowledge- and
technology-intensive
Source: Australian Treasury and Ed Shan / Minerals Council of Australia 2012
6
METS is now a very important industry sector to Australia
7
Source: Austmine
Australian exploration and mining industry is now global
– the business dimension of Australia’s strategic interests
Europe
53 companies
Mongolia
19 companies
China
16 companies
Canada
33 companies
Greater Asia
31 companies
United States
42 companies
Laos & Cambodia
14 companies
Philippines
19 companies
Africa
220 companies
Indonesia
47 companies
Papua New Guinea
25 companies
Latin America
94 companies
8
Australian METS firms are now major exporters of
equipment, technology and knowledge
Source: Austmine 2013
9
…with deep links into the economy
Source: Austmine
10
METS development extends well beyond mining regions
HEAD OFFICES AND OPERATIONS
Western Australia
METS firms
46 manufacturing: equipment,
supplies, chemicals
34 EPCM / engineering / construction
26 consulting
27 contract mining
10 IT developer/ equipment provider
10 technology development/application
15 other professional services
18 other
Head offices
Branch operations
11
METS = Mining Equipment, Technology and Services.
Source: Austmine 2013
Employment growth: driven by mining, but more
than just mining jobs – Western Australia example
Current workforce (2010)
Additional workers until 2020
Employment
growth by
industry
sector
2010-2020
Mining and
Construction
Non Mining and
Construction
0
500,000
1,000,000
1,500,000
Construction
Healthcare and Social Services
Retail
Mining
Australian
mining
employment
multiplier is
3–4
Africa 7 – 10
Professional Services
Education
Manufacturing
Transport
Hospitality
Administration and Support
Other
0
50,000
100,000
150,000
200,000
Source: CCIWA: Building Western Australia’s Workforce for Tomorrow, June 2010
250,000
300,000
12
Taking a broad view: indirect and induced benefits
Economic output from mining
operation
Direct
 Purchasing expenditure
for local goods and
services
 Payments to employees
Local
manufacturer
or service
provider
Local dealer
Indirect
Induced
 Subsequent backward
expenditure for local goods
and services along the supply
chain
 Income of supply chain
employees
 Taxes paid by suppliers to the
Government
 Household consumption as
direct and indirect employees
spend their income within the
local economy
 Income of dealer’s employees
 Taxes paid by dealer to the
Government
 Household consumption as
direct and indirect employees
spend their income within the
local economy
In Australia, for every $1 of mining revenue, 40¢ is spent on goods and services:
Reserve (Central) Bank
Adapted from Saipem 2011
13
Australian Industry Participation in Western Australia
resource projects
•
Proportional spending on the construction phase of oil & gas projects (but not
mining) has shifted towards overseas suppliers over the last 30 years
•
But there continues to be a very high level of Australian industry participation
•
CME/APPEA Local Content Study (2011)1:
•
Sector
Construction
Operations
Mining
86%
95%
Oil & Gas
58%
83%
WA State Government Local Content Report – November 20112
Sector
Mining, Oil & Gas
•
Construction
Operations
74%
100%
Publically announced local contracts July 2011 to March 2012 = A$15.5 billion3
Sources:
1: CME/APPEA Local Content Study 2011
2: Government of Western Australia, Department of Commerce, Local Content Report 2011 – figures for period 1/1/2011 though 30/9/2011
3: Media Statement, 8 March 2012, Minister for Commence, Hon Simon O’Brien
14
Case studies of METS clusters in Australia
WHAT WE HAVE LEARNED
• DARWIN
PILBARA REGION
Northern Territory
Queensland
North West
Shelf LNG
Western Australia
BRISBANE
• KALGOORLIE
South Australia
New South Wales
PERTH
SYDNEY
ADELAIDE
CANBERRA
Victoria
MELBOURNE
HOBART
15
Case study: North West Shelf Project and technologyintensive service industry development
APPLICATION OF LEADING TECHNOLOGIES PREVIOUSLY NOT AVAILABLE IN AUSTRALIA
Transfer to
other projects
Development of
petroleum
services hub
Services to
WA and
overseas
markets
Development of a
new technology and
knowledge intensive
industry sector
Technical
innovation in
Australia
Technology
transfer from
overseas
Attraction of
investment
16
Case study: Kalgoorlie, Western Australia
• Mining town since 1900s –
●
Gold, nickel sulphide and nickel laterite –
long life operations and evolving industry
• 600 km east of Perth
• Region’s population 45,000
• Mining services developed initially
because of remoteness
• Strong regional METS clusters (sectoral
and geographic)
●
~200 manufacturing & services sites
• Now a net ‘exporter’ of mining
equipment and services to other
locations
17
Case study: Darwin, Northern Territory
• Australia’s most northern and isolated city
●
Major service centre for mining, oil and gas,
defence and marine sectors
• Population 110,000
• Mining services developed initially because of
remoteness
• Now has a competitive advantage in mining
and petroleum services
• Strong regional METS clusters (sectoral and
geographic)
●
~300 manufacturing & services sites
●
Collaborative business culture
• Exporter of METS to other locations, including
Indonesia
18
Kalgoorlie and Darwin: Factors of success
• Long-life customer mining/petroleum operations ; diverse markets (Darwin – sector
•
•
•
•
•
•
diversity; Kalgoorlie – geographic diversity)
Good business and community infrastructure: serviced industrial land, roads, energy,
water, community
Skilled resident workforce; sustainable demographic profile; attractive town amenity
Education and training institutions: public and private secondary schools, and
vocational training and education; universities / school of mines (Kalgoorlie)
Strong entrepreneurship culture, support networks, business services
Financial institutions that understand mining and services
Supportive, light-handed government interventions, eg: industry participation policies;
partnerships with business to connect customers and suppliers; small business support
19
Kalgoorlie and Darwin: overcoming obstacles
• Collaborations to overcome small scale and lack of capacity
• Right size contracts and alliances to help build local firms
●
some operations have adopted ‘inside-out’ strategies to help
employees become independent services suppliers
• Revise e-procurement and payment processes for small firms
●
companies offer access to global supply chains for good
performers
• Government-business partnerships to build supplier-customer
linkages, eg
●
Australian Industry Participation National Framework
●
Industry Capability Network; Project Connect
• Infrastructure to support business
●
Government investment and facilitation of business infrastructure
through PPPs
20
Australian approaches to development
GROWING THE PIE
• Economic reform and infrastructure
partnerships
• Investment attraction, efficient approvals,
certain fiscal regime
• Win-win-win approaches: partnerships,
delivery of returns for all
• Using mining to facilitate broad-based
Source: Qantas
economic growth
• Importance of technology, knowledge and
skills
<New slide>
• Generating strong social licence to operate
21
Regulatory and institutional processes
THREE DECADES OF REFORM
• Market-based reforms to energy, water and transport
• Flexible and diverse labour market
• Demand-responsive education and training
• Liberalisation of trade and investment
• Taxation reform
• Robust policy processes – eg Productivity Commission,
Infrastructure Australia, green & white papers, think tanks
• Transparent and open approval processes
<New slide>
22
People are Australia’s most important asset
Focus on attracting, developing and retaining high-quality talent, not just a
focus on hard infrastructure
Education and
training institutions:
key infrastructure
assets
• Crucial to dealing with challenges and opportunities of the 21st Century
• Advanced education integrated with research
Complementary to
traditional
infrastructure
• Knowledge-intensive and knowledge creating
• Adaptable and capable to deal with uncertainty and to engage with the
emerging new global economy
Public sector and
industry
collaboration
• e.g. Technical colleges; SKM Learning Centre, GE Energy Learning Centre;
University research and teaching centres (Rio Tinto, BHP, Chevron, Shell)
• Knowledge spillovers: trained workers move between projects and firms, taking skill
set and culture with them
Integrated policy on industry, education and training
Contact
International Mining for
Development Centre
The University of Western
Australia
WA Trustees Building
Level 2, 133 St Georges Terrace
Perth WA
Australia 6000
Tel: +61 8 9263 9811
Email: admin@im4dc.org
www.im4dc.org
The Energy and
Minerals Institute
The University of Western
Australia
M475, 35 Stirling Highway
Crawley WA
Australia 6009
Tel: +61 8 6488 4608
Email: emi@uwa.edu.au
www.emi.uwa.edu.au
The Sustainable
Minerals Institute
The University of Queensland
St Lucia
Brisbane QLD
Australia 4072
Tel: +61 7 3346 4003
Email: reception@smi.uq.edu.au
www.smi.uq.edu.au