Major Mining Projects and Investment
Presented at the ‘State of the Nation’
19 June 2012
Professor Quentin Grafton
Executive Director/Chief Economist
Bureau of Resources and Energy Economics (BREE)
bree.gov.au
Overview
• The Mining Boom – Price and Volume
Trends
• Major Mining Projects – Trends and
Prospects
bree.gov.au
The Boom: Price & Volume Trends
bree.gov.au
Metal Prices: Past Trends
bree.gov.au
Commodity Prices: Past Trends & Projections
1200
Thermal Coal
Metallurgical Coal
Iron Ore
1000
800
600
400
200
Index
Mar-01
Mar-03
Mar-05
Mar-07
Mar-09
Mar-11
Mar-13
Mar-15
Mar-17
bree.gov.au
Commodity Production: Past Trends
bree.gov.au
Commodity Production: Past Trends &
Projections
150
Energy
Minerals
120
90
60
30
Index
l
1991-92
1996-97
2001-02
2006-07
2011-12
2016-17
bree.gov.au
Key Messages
• Overall commodity prices have peaked (2011)
and likely to moderate over the next five years
and beyond.
• Price reductions likely to be more substantial in
period 2020 and beyond due to large supply
responses from Australian competitors.
• Australian export values are projected to
increase in medium term, but underpinned by
higher volumes
bree.gov.au
Major Mining Projects: Trends
bree.gov.au
Value of Advanced Mineral and Energy
projects ($2011-2012)
bree.gov.au
Mining Capital Expenditure
• Capital expenditures in mining industry
totalled about $50 billion in 2010-11 ─
highest ever, 30% higher than in 2009-10
and about three times greater than annual
average over past 30 years.
• Based on industry intensions canvassed in
December quarter 2011 expected to
exceed $80 billion in 2011-12.
bree.gov.au
Number of Advanced Mineral & Energy
Projects
bree.gov.au
Completed Major Mining Projects ($201112)
bree.gov.au
Australian private minerals exploration
expenditure ($2011-12)
bree.gov.au
Value of advanced projects by
commodity
2002 v 2012
bree.gov.au
Value of advanced projects by state
2002 v 2012
bree.gov.au
Prospects: Value of Advanced Projects if
no new projects were announced
bree.gov.au
Prospects: Number of Advanced Projects
if no new projects were announced
bree.gov.au
Less advanced mineral and energy
projects
bree.gov.au
(D
ec
20 ) 0
03 2
(A
20 p r
03 )
(
20 Oct
)
04
(A
20 p r
04 )
(
20 Oct
)
05
(A
20 p r
05 )
(
20 Oct
)
06
(A
20 p r
06 )
(
20 Oct
)
07
(A
20 p r
07 )
(
20 Oct
)
08
(A
20 p r
08 )
(
20 Oct
)
09
(A
20 p r
09 )
(
20 Oct
)
10
(A
20 p r
10 )
(
20 Oct
)
11
(A
20 p r
11 )
(
20 Oct
)
12
(A
pr
)
Value of advanced and less advanced projects
Dec 2002 – April 2012
350
Advanced
Less advanced
300
250
200
150
100
50
A$b
(2011-12)
0
bree.gov.au
(D
ec
20 ) 0
03 2
(A
20 p r
03 )
(
20 Oct
)
04
(A
20 p r
04 )
(
20 Oct
)
05
(A
20 p r
05 )
(
20 Oct
)
06
(A
20 p r
06 )
(
20 Oct
)
07
(A
20 p r
07 )
(
20 Oct
)
08
(A
20 p r
08 )
(
20 Oct
)
09
(A
20 p r
09 )
(
20 Oct
)
10
(A
20 p r
10 )
(
20 Oct
)
11
(A
20 p r
11 )
(
20 Oct
)
12
(A
pr
)
Number of advanced and less advanced
projects
Dec 350
2002 – April 2012
Advanced
Less advanced
300
250
200
150
100
50
No.
0
bree.gov.au
Factors Affecting Investment
• Factors common to investment decision across
the economy:
– Macroeconomic conditions (interest rates, exchange
rate, etc.)
– Government policies
• Factors specific to the mining sector or
commodity:
– probability of discovering an economic mineral
deposit or extending the resource base of a known
deposit;
– current and expected future prices;
– mining and processing technologies; and
– input costs
bree.gov.au
Key Messages
• Advanced projects, exploration expenditures
and mining capital expenditure are at historic
highs.
• High levels of investment (real $) will last for
next few years given the time it will take for
some very large projects to reach completion.
• Over the longer term high levels of investment
unlikely to be maintained if resource commodity
prices continue to moderate.
bree.gov.au
Thank You
quentin.grafton@bree.gov.au
bree.gov.au