The latest data released Wednesday by Australia Bureau of Resources and Energy Economics (BREE) shows that, while many resources projects are being completed and the focus is shifting to production and outlook, there needs to be more progress in removing barriers to investment in the resources sector.
In the last 12 months, a record A$57 billion in resource projects have been finalized in Australia, with significant production that includes 215 million tonnes of iron ore, 43 million tonnes of coal and more than 1,100 petajoules of gas.
“The benefits from growth in production are considerable and welcome, but at the same time, we also need to ensure that the resources sector is given the support it needs for Australia to remain an attractive investment decision,” said Australia’s Ministry for Industry, Ian Macfarlane.
“Investment remains key to long term growth and the government is working with the industry to put in place policies to support the resources sector, sustaining existing investment and ensure Australia is internationally competitive and well positioned to attract the next wave of investment,” he stressed.
BREE’s Resources and Energy Major Projects—April 2014, which was made public Wednesday, observed, “The quarterly activities reports of many Australian miners and aspiring mine developers show a slowing in activity to progress projects to the Committed Stage.” The “Committed Stage” is defined as projects that have completed their planning activities, received all necessary regulatory approvals, and have finalized project capex financing to commence construction.
In the six months of November 2013-April 2014, eight projects worth a combined A$12.8 billion have progressed to the Committed Stage. Despite the downturn in iron ore prices, five of the eight new projects relate to iron ore.
Nevertheless, “The outlook for resources and energy investment therefore remains subdued in the near term with the investment cycle having peaked,” BREE observed, “However, it is important to remember that coinciding with the decline in investment are substantial increases in annual production capacity…”
“The investment phase of the mining boom is winding down but the shift to the output phase in now in full swing,” said the report. “Furthermore, while the investment phase lasted around five years, the output phase will last for decades and deliver an ongoing stream of economic benefits such as employment, royalties and ongoing operating expenditure in Australia.”
“Australia still has many high quality mineral and petroleum deposits that can be developed when the economic cycle rebounds,” the economists suggested. “Yet, future investment is far from certain and Australia is facing growing competition from aspiring market entrants for investment dollars. The resources and energy sectors will need to continue the recent efficiency and cost-saving drives along all stages of the supply chain to remain a world-leading destination for attracting capital.”
As of the end of April 2014, BREE identified 78 projects at the “Publicly Announced Stage” with a combined value of between A$96 billion and $122 billion. This is 14 fewer than reported in October 2013, with a corresponding decrease in value of between $13 billion and $29 billion. Projects at the “Publicly Announced Stage” are usually very early in their development and are typically undergoing an initial feasibility study.
While iron ore and coal projects are the highest number with 13 each at the Publicly Announced Stage, this has decreased by six projects since October 2013.
At the end of April of this year, there were eight gold projects with a combined value of between $990 million and $1.7 billion in the Publicly Announced Stage, one project less than in October 2013. There were 10 metals projects including copper, nickel, zinc, land and aluminum-related projects at the Publicly Announced Stage at the end of April 2014, four fewer than reported in October 2013.
There were 146 project at the “Feasibility Stage” at the end of April this year with a combined value of $169 billion. The number of projects has decreased by 16 since October 2013 and the value is $39 billion lower. “Feasibility Stage” are projects that have undertaken initial project definition studies and commenced more detailed planning such as Front-End Engineering Design studies, Bankable Feasibility Studies, and environment surveys in support of finalizing an EIS.
There are 47 coal projects at the Feasibility Stage with a combined value of $51 billion. There are 20 iron ore projects with a combined value of $29 billion and 13 gold projects with a combined value at $2.5 billion at the Feasibility Stage as of April. The number of metals projects have decreased by two with a total of 20 worth a combined $10.5 billion.
BREE reported 21 resources and energy projects valued at $25.6 billion were at the Completed Stage as of April, the second highest on record for completed project value. Seven iron ore projects, six coal projects, one gold project, one zinc project, one rare earths project and one uranium project progressed to the “Completed Stage” and commenced commercial production.