Author: yinghui

With the release of the latest Federal Budget there have been fewer changes than expected, with small business and middle income tax payers the big winners, but how will it affect the mining sector?

The outlook, broadly for the industry, isn’t overly favourable with mining investment expected to fall by 27.5 per cent in 2015-16 and 25.5 per cent in 2016-17, as the industry still reels from the downturn.

Mining itself has also dealt a major blow to budget estimates, being directly blamed for a shortfall in expectations.

“The largest contributor to the expected forecast error in 2015-16 is from the shortfall in company tax. In 2015-16, company tax is estimated to be $3.5 billion (5.1 per cent) lower than expected in the 2015-16 Budget. This is primarily driven by the fall in commodity prices in recent years, lowering profitability in the mining sector,” the budget papers stated.

Yet the government is pinning forecasts for the domestic economy using what may be inflated spot prices.

It has forecast a spot price of US$55 per tonne for iron ore, a rise from previous estimates of US$39 per tonne; US$91 per tonne for coking coal compared to US$73 per tonne in the last budget; and US$52 per tonne for thermal coal, which remains unchanged from previous budget estimates.

Despite this negative forecast – or because of it – the government is stepping in to build a new foundation for the next wave of mining.

The resources industry has been supported by the federal Government with one of the largest major national initiatives, a program designed to reinvigorate exploration.

The National Resources Development Strategy – Exploring for the Future, is a $100.5 million program designed to boost productivity and competiveness of the sector.

“The 2016-17 Budget delivers a strong boost to the productivity and competitiveness of this sector with $100 million provided to Geoscience Australia for mapping mineral, energy and groundwater potential in northern Australia and South Australia,” national minister for resources and energy Josh Frydenberg said.

According to the government, “The $100 million Exploring for the Future programme will produce pre-competitive geoscience data, to be released on an annual basis over the next four years. Geoscience Australia estimates that around 80 per cent of Australia remains under-explored, in particular, areas in the Northern Territory, Queensland, Western Australia, and South Australia, which will be the focus of this initiative. This will improve Australia’s long term exploration prospects and help address declining new onshore exploration.”

Frydenebrg added: “The benefits for doing so are clear. In 1996, Geoscience Australia undertook $3 million of analysis in the Browse Basin. This helped identify the Ichthys field, which will produce more than $70 billion in export earnings over the next forty years.”

“Further, data compiled across South Australia in the 1960s, costing around $350,000, helped identify the resource potential of the Olympic Dam and ultimately to the discovery of ore more than 300 metres underground.,” he said.

“At a challenging time for the resources sector, this important initiative will help ensure that Australia’s strength in innovation is furthered, and that we maintain our competitive edge in this world-leading sector.”

The initiative was welcomed by mining lobby groups.

The Minerals Council of Australia called it a “strong pro-growth budget”.

“It balances a careful approach to spending, the maintenance of a strict approach to tax integrity and lays out a medium term plan to promote investment and growth,” Minerals Council chief executive Brendan Pearson said.

“The minerals sector welcomes the Government’s commitment to a $100.5 million initiative over four years to produce mineral, petroleum and groundwater resource data in targeted areas in northern Australia and South Australia to help identify new greenfield exploration sites.

“This is a critical investment to identify the next sources of Australia’s minerals wealth. “

The Queensland Resources Council echoed the Minerals Council, stating “it is pleasing the Turnbull Government has an eye to high-tech jobs of the future in the resources sector”.

“Exploration is the R&D, or building blocks, for the resources sector, getting the sector ready for the inevitable future upswing,” QRC chief Michael Roche said.

However, greener mining initiatives have been scrapped in the new budget, with the Low Emissions Technology Demonstration Fund and the Coal Mining Technology Abatement Support Package closed, while the Carbon Capture and Storage Flagships funding has been reduced.

Anglo American has sold its niobium and phosphates business to China Molybdenum for US$1.5 billion.

The miner was first slated to exit it’s the phosphate and niobium operations in Brazil in February, when the assets were estimated to be worth around US$3 billion.

Anglo American will use the proceeds to pay down debt.

The phosphates business consists of a mine, beneficiation plant, two chemical complexes and two further mineral deposits.

The niobium business consists of one mine and three processing facilities, two non-operating mines, two further mineral deposits and sales and marketing operations in the United Kingdom and Singapore.

Together, the businesses generated EBITDA of US$146 million in the year ended 31 December 2015.

Commenting on the sale, Anglo American CEO Mark Cutifani said, “The sale of our niobium and phosphates businesses is another positive step forward in the strategic reshaping of Anglo American that we set out in February.

“The proceeds from this transaction, together with the ongoing productivity and cost improvements we are driving through the business, will enable us to continue to reduce our net debt towards our targeted level of less than $10 billion at the end of 2016. This transaction confirms our commitment to creating the new Anglo American, positioned to deliver robust profitability and cash flows through the price cycle.”

The sale to China Molybdenum is still conditional upon Chinese government approvals, and that of the company’s shareholders.

Outotec has been awarded a contract by Houndé Gold Operation SA, a subsidiary of Endeavour Mining Corporation, for the delivery of process equipment to the greenfield Houndé gold project in Burkina Faso. Outotec’s contract value is approximately €13 million and the order has been booked in the second quarter 2016 order intake.
Outotec’s scope of work includes the design and delivery of a 6 MW SAG grinding mill, a 6 MW ball mill, a pre-leach thickener, and services including spare parts. The new plant will process annually 3 Mt of ore. The equipment will be delivered during the second quarter of 2017 to ensure the first pour of gold for by the end of 2017. “Outotec has a large portfolio of offerings for treating various gold ores. We are pleased have been the opportunity to deliver our energy efficient grinding mills and advanced thickener technology to Endeavour’s Houndé gold project”, says Kalle Härkki, head of Outotec’s Minerals Processing Business Unit.

Global cement and minerals processing leader FLSmidth has partnered with Wirtgen Group company Kleemann for the supply of cone crushers for mobile applications in the construction industry. Kleemann is the global technology leader within the road and construction machinery segment.

The long-term cooperation agreement between the two industry majors leverages FLSmidth’s technology leadership in cone crushers and Kleemann’s lead position in mobile crushing in the construction and aggregate industry.

Group Executive Vice President of the Minerals Division in FLSmidth Manfred Schaffer described the alliance as a part of FLSmidth’s strategy to develop technology in partnership with leading peers. With FLSmidth being the main provider of productivity within the minerals and cement segment, and Kleemann having a strong foothold in the construction industry, it presented a unique opportunity for FLSmidth to expand into adjacent markets, he added.