Author: yinghui

The start to 2016 for the mining and METS sectors has been a disappointing one.

Whilst iron ore has temporarily risen in price, it is forecast to drop back down to around $US30 per tonne, and another smaller iron ore player, Gindalbie Metals, has been abandoned by parent company Ansteel and currently hovers in uncertainty about the future of its Karara Project.

Some of Austmine’s directors took time out to share their thoughts on 2016, what it holds for the industry and what can be done about it.

Alexander Kachellek, managing director of Korvest and chair of Austmine, gave a shrewd evaluation of what is to come in 2016:

“Miners and METS companies need to be able to continue as they are for, I believe, the next 2 years with the current tumultuous business conditions. Businesses need to focus on strategies, then action plans, that include things like Kaizen that makes the business fitter and ready for an upswing.

“Remember, ‘if it is down, then it will go up and if it is up, it will go down’; we just do not know the length of downs and ups!”

Ian Gibbs, executive general manager – mining of RCR Resources provided some excellent insights and advice:

“The METS sector is facing one of the toughest periods in history, with 2016 being defined by weak domestic opportunities. (Certainly the worst I have seen in nearly 40 years in the industry). Many projects have been delayed and the outlook appears these will remain on hold for the most part of the year,” Gibbs said.

“Both coal and iron ore sectors do not forecast rapid improvement, certainly in the first half of the year. Many companies will face the challenges of restructuring to prepare for the future, leaner and with improved effectiveness.

“My thoughts are, our opportunities lie in improving our efficiency as suppliers, restructuring our offering to clients and providing real cost saving solutions by innovation. This may include new technologies, but also new ways in engaging with clients in service and support.

“However offshore opportunities will present with the weaker Australian dollar and I have already witnessed our competitiveness has dramatically improved, which should unlock many opportunities, for Austmine members,” he said.

“Apart from the obvious measures to reduce costs Australian companies will need to be very nimble, seize the opportunities presented and looking a new ways to do things.”

Rob Simpson, manager for infrastructure and environment at Xenith Consulting and deputy chair of Austmine concurred with Gibbs, emphasising the need for diversifying in METS:

“Whilst 2015 was one of the toughest years in recent history for the mining and METS sectors, 2016 has started with even more uncertainty. The forecast weakening Australian dollar and late 2016 recover of the oil price provides some light, however subdued investment throughout the industry will continue, as will financial pressures on many organisations,” Simpson said.

“Retaining existing clients whilst broadening service, geographic and/or customer base; as opposed to even further, unsustainable cost cutting and market shrinkage; is critical for METS companies sustainability over the next 12 months.”

Max Wijasuriya, vice president for capital equipment at Metso Australia made some excellent observations on the opportunities and need for innovation provided by these challenging market conditions. He took a positive approach to how organisations need to tackle this new market norm:

“The challenges will certainly be there in 2016 with the volatility around the world markets and uncertainty around commodity prices. What seems to be changing though, is the opportunity for innovation, to do things differently – something which has always been there, but where the take-up of these ideas was quite low (or took too long) in the past, due to the focus on proven production sometimes seemingly at any cost,” Wijasuriya said.

“More and more now we’re seeing that mining companies and suppliers are challenging themselves to do things differently, and that’s not just around new technology and innovation, but also in new ways of approaching a problem or issue, and (cautiously) embracing these ideas if they work. For the METS industry, it is about how they can add value to their customers – and this is happening more than ever before. This ties in very well with Metso with their innovation and technology initiatives, as well as strategic partnership/development projects with key customers.

“METS companies need to find more than ever before ways to add value, whether through technology, innovation, or different problem-solving approaches, etc. The need to maximise profit and improve efficiency has never been more important with less to go around given the challenging times – but mining will continue to remain a critical business worldwide; it’s just that some of what is being focused on may change and progress.

“What was important before will remain important, but other areas and ways of thinking will come to the fore – a positive development.”

Alan Broome, chairman emeritus of Austmine and chairman of Micromine and Hedweld, two Austmine member companies, offered his insights into the reality of the next 12 months for miners and METS here in Australia:

“This year is going to be very tough for Mining and METS,” he said.

“The latest Macquarie Bank commodities forecast is very gloomy, reflecting the current and immediate future state of our sector. My opinion is that a lot of Mining Companies will go out of business and a huge number of assets will be put up for sale at bargain prices. The flow on to METS will be significant and unless they can adjust, they will falter.

My view is that many METS businesses are not equipped to adjust quickly enough to the changing market demand and circumstance. They will need to be very focussed on ‘adjustment strategies’ rather than “more of the same”. I’m not sure that this is widely appreciated as yet. Every company needs to have its own adjustment strategy; there can be no one fits all approach. This state of the market is not a flash in the pan; it has been with us for quite some time and will continue for a fair while yet, so you can’t just hold your breath and hope it goes away.

“The places to be are South America, particularly Chile and Peru, and the emerging markets in Central Asia and Russia. The commodities most likely to provide opportunities are nickel and copper because they have good medium term prospects, but frankly at the moment everything’s quite depressed.”

Peter Seligman, managing director of SRO Technology, an SME METS business provided commentary and advice based on his own position in the industry, facing these challenging times:

“The last few years all the miners have been chasing their cost curve. Their products have been getting cheaper, so they either had to get more productive or cut the costs of their operations. More often than not, they’ve been focusing on getting cheaper, rather than more productive. We’ve seen this with them cutting their workforce, spending less on maintenance and investing in less capital expenditure.

“Last year, David Moult, MD and CEO of Centennial Coal talked about the 3 waves of the downturn (a concept borrowed from Kirby Johnson, Consulting Partner at Wipro) and improving efficiency,” he said.

“Firstly you cut costs, secondly you sweat your assets and thirdly is the re-engineering phase, where you begin to spend money once again on making your assets more productive. That third wave is the huge opportunity for METS – but who knows when it’s going to happen? It might be 2016, it might not be. However, it does have to be relatively soon, because there’s no more cost the miners can cut. They will need to start spending money, in order to save any more on costs.

The opportunity for METS, in my opinion, lies in METS taking responsibility for kicking off that third wave. What can they do to get their hands dirty to demonstrate that miners can, and should, initiate that third wave?

“METS need to get pilots up and running, or demonstrate the cost savings of their technology, rather than just explaining it. I know that costs money, and most METS are small businesses like mine, and it means you have to invest hard cash, but sometimes you can find a customer who is willing to help you fund a pilot in an innovative way if they feel it may save them some money in the future! The challenge as I see it is that people are standing on the sidelines, rather than risking getting involved in these projects that could help reduce costs for the industry or their operations.”

Austmine CEO, Christine Gibbs Stewart shared her thoughts on what METS can do to stay strong and competitive during the year to come:

“As noted by our Directors, and evident in the commodity prices, news and forecasts, 2016 is going to be another challenging year for the METS sector. We can either be defeated and go nowhere, or rise to the challenge and look at new ways of doing things, explore new opportunities, develop new relationships and importantly – innovate.”

Nyrstar has announced the formal launch of the sales process for all its mining assets.

These mining assets include operating mines in Canada, the U.S., Peru, Chile, Mexico and Honduras.

“Nyrstar has received a number of unsolicited expressions of interest for its mining assets from various potential buyers and will seek to engage with all prospective buyers for the mining assets, individually and as a portfolio, to ensure a fair and transparent sales process,” it said in a company statement.

The process will be carried out over a period of seven months.

It is unknown how this will affect its refinery operations, particularly those in Hobart and Port Pirie.（给其提供过实验室破碎机和齿板）

However, late last year the company signed a pledge to invest in its Tasmanian smelter, which followed on the back of an Australian stepping into the CEO role.

The company signed a binding agreement for a $52 million investment at the Hobart smelter.

The funding is used for four growth projects at the site, two of which are focused on increasing its capacity to treat more complex concentrates.

This agreement was modelled on a similar agreement struck between Nyrstar and the South Australian Government, where the two agreed to a $563 million redevelopment of the Port Pirie smelter to an advanced multi-metals processing and recovery facility.

Gindalbie Metals has hit a roadblock with the withdrawal of funding by joint venture parent Ansteel.

The WA miner announced last week it would voluntarily halt trading after it was informed by Ansteel, owner of the controlling share (52.16 per cent), that it would be “unable to continue providing funding support to Karara due to the impact of economic and industry downturn”.

Gindalbie is a JV owner of the Karara Project, located 200 kilometres east of Geraldton, which employs a workforce of around 1000, jobs that have been thrown into jeopardy by funding withdrawal.

The company is expected to make an announcement prior to commencement of trading on Tuesday 12 January.

The West Australian reported that the subsidiary operator Karara Mining has lobbied the WA government for royalty and tax concessions, in the effort to cut $200 million from operating costs to break even at current iron ore prices.

Last month Karara CEO Zhang Zhao Yuan met with mine and finance minister Bill Marmion and Department of State Development director-general Stephen Wood.

In early December Gindalbie chairman Keith Jones said it would be more costly to close the mine than to operate, which it would continue to do as long as Ansteel was prepared to subsidise losses.

It is understood Karara Mining is locked into high haulage costs due to take-or-pay agreements made with Brookfield rail during the mining boom.

Karara has already benefited from $9.3 million in temporary royalty concessions in the form of a 50 per cent rebate over 12 months to last September.

Last May Karara consolidated $US1.48 worth of loans into a single facility, with the maturity date moved to 2030.

Ansteel’s involvement with Karara originally began as a means to directly source material for its steel making operation at Bayuquan near the port of Yingkou.

Iron ore is trading around $US41.40 per tonne, compared to $US120 in 2011 when the Karara mine began operations.

In FY2014 the Karara mine produced nearly 2.4 million tonnes of concentrate from 5.853 million tonnes of magnetite ore.

Ausenco has been awarded a number of coal processing plant contracts and work in Africa.

It is currently finalising the terms for the upgrade of a CHHP flotation module, at an unnamed NSW coal operation, worth approximately $17 million.

The EPC project includes the design, supply, construction, and commissioning of the flotation module, as well as modifications to parts of the existing CHPP to support the upgrade.

Work is slated to begin this month, and take around 12 months to complete.

Ausenco has also been awarded a $15 million, three year ‘Optimise phase’ contract to provide operation and maintenance services for the CHPP at the Isaac Plains coal mine.

The contract will run for three years.

On top of these Australian wins, Ausenco has also been awarded work in Africa, working on a six month ‘Optimise phase’ extension of works at Vale’s Moatize CHPP in Mozambique.

Kramer Ausneco has also seen strong growth in PNG.

Undersea mining has made a leap forward with the development and testing of a new machine in the UK.

Proactive Investors flagged the announcement from Specialist Machine Developments, a UK company that was acquired last year by a subsidiary of China’s CRRC Zhouzhou Institute.

Land-based testing of the 310 tonne deep sea ore harvester was recently completed in Newcastle.

Details are sketchy, but the new machine was touted as the world’s most powerful to date, boasting two megawatts of power and capacity for underwater oil and gas, trenching and cable laying applications.

The equipment is designed to be used in conjunction with a cutting machine and collecting machine to engage in mining activities.

A new survey is forecasting a growth in equipment related technology by Australian miners in the next two years.

The latest Timetric Mining Intelligence Centre survey predicts a boom in safety, maintenance, and productivity related technology.

“A substantial share of Australian mines have already invested in environmental monitoring, fleet management and predictive maintenance technologies, with tyre monitoring, collision avoidance and remote control/machine automation to be the key areas for future investment,” Timetric stated.

The group surveyed 100 mine managers and other decision makers across operating Australian mines late last year, asking respondents to identify which of 12 different mine site technologies they have invested, and will invest, into.

These technologies included fleet management, environmental monitoring, energy management, and collision avoidance technology, as well as drones and wearable technology.

“The results show the highest share of respondents (88 per cent) have invested in environmental management technologies, followed by an assembly of technologies focused around the vehicles and mobile equipment on a mine site,” Timetric said.

“Five other technologies in which more than 80 per cent of respondents’ have invested are fleet management (85 per cent), predictive maintenance (85 per cent), tyre monitoring (83 per cent), scheduling and shift optimisation (81 per cent) and collision avoidance technologies (80 per cent).”

The respondents also pointed to a greater focus in vehicle technology.

“Over the coming two years, significant shares of those yet to invest are expected to make investments in tyre monitoring (53 per cent of those yet to invest), collision avoidance and proximity detection (50 per cent), and remote control and machine automation technologies with 48 per cent,” Timetric said.

“In total over the next two years, 92 per cent of mines are expected to have tyre monitoring technology implemented, some 90 per cent will have collision avoidance technologies and 77 per cent will have implemented remote control and machine automation on site.”

Commenting on the results, Timetric senior analyst, Nez Guevara, said “the results show the Australian mining industry recognises environmental accountability, social responsibility and commercial success are not inseparable.

“Monitoring the sustainability of a mine operation covers its entire life cycle, from exploration and feasibility, to decommissioning and closure.

“The speed at which companies can adapt to become more efficient is crucial for success in an industry that now maintains a tight grip on capital and operational expenses. This is more of a necessity at present, as low commodity prices affect the industry globally,” he said.

“Improvements in technology can change the way companies view mineral deposits, improve operational safety and manage overall costs.”

Despite the apparent normalisation of low commodity prices, the Federal Government has predicted mining exports earnings to grow by more than 40 per cent by 2019-2020.

The release of the Department of Industry, Innovation and Science Resources and Energy Quarterly report in the December quarter showed the mining sector’s contribution to the GDP over the past decade had increased from six to nine per cent, an upswing of 50 per cent.

The department expects resources and energy earnings of $166 billion in 2015-16, down on the previous year by four per cent due to lower commodity prices.

Chief economist Mark Cully said the low price conditions that characterised 2015 were forecast to persist in the short term, and that any prospect of recovery in that time frame was limited.

“On the home front, Australia’s production of most commodities has continued to increase despite lower prices,” he said.

“The rapid increase in mining output is expected to underpin the production phase of the boom and provide some support to export earnings.

“However, the increase in volumes is unlikely to be sufficient to offset the effect of lower commodity prices across the board.

The completion of LNG projects in Queensland and WA are expected to increase Australian exports by 45 per cent, worth an additional $20 billion this financial year.

Iron ore export volume, contributed to by the newly exporting Roy Hill mine and expanding production at other mines, was forecast to grow by 13 per cent in 2016.

World steel production, despite slowing in 2015 with less demand driving prices lower, is expected to stabilise in 2016 and return to growth, with a projected increase of 0.9 per cent worldwide.

Although China’s demand for steel will continue to slow, this will be offset by increased demand in India (by six per cent), the EU (1.2 per cent) and USA (1.5 per cent).

Australia’s steel consumption in the September quarter was down seven per cent on the previous year, and down 44 per cent of demand ten years earlier, thought to be at the expense of domestic production rather than imports.

The report also identified that Australia exports around 56 per cent of the world trade in iron ore, while projections indicate we will also soon become the world’s largest exporter of coal and LNG.

exploration expenditure faltered in 2015, continuing an ongoing trend of unemployment in the sector, with an overall decline of 32 per cent in the September quarter bringing total expenditure down to $977 million, boding poorly for new greenfields projects in the coming years.

The largest decline in exploration was recorded in South Australia, which was down 57 per cent year-on-year.

In terms of capital expenditure the mining sector slowed spending by 29 per cent in the September quarter year-on-year.

Mining sector employment was estimated at 220,000 people in November 2015, down only two per cent on the previous year.

BHP has marked a new milestone in their coal sector expansion as BMA opened the new third berth at the Hay Point coal export terminal yesterday.

Queensland Premier Annastacia Palaszczuk attended the official opening ceremony with BHP coal president Mike Henry and Mitsubishi Corporation COO for the mineral resources investment division Rick Tanaka.

The premier said coal exports had reached a record 219 million tonnes last financial year thanks to such investments.

“I want to thank BHP Billiton and Mitsubishi for their confidence in the Queensland coal export market and their contribution to the Queensland economy, despite coal prices having declined markedly in recent years,” she said.

Hay Point has been in operation since 1971, and the $US3 billion third berth and ship loader has been under construction since 2011.

At peak construction in 2014 the project employed 1630 people, with more than 12.6 million hours worked.

The new infrastructure has increased the Hay Point Coal Terminal capacity from 44 million to 55 million tonnes per annum.

Mike Henry said the recently completed terminal project reflected BHP Billiton’s confidence in the long-term outlook for metallurgical coal.

“BMA is the world’s largest exporter of seaborne metallurgical coal and employs 9,000 Queenslanders. The opening of the HPX3 project is a significant milestone,” he said.

“Importantly, the increased capacity at HPX3 will enhance our ability to run an even more productive value chain.

“Through its design features, the project has also improved the Port’s ability to withstand significant weather events, improving the resilience of the BMA business and enhancing customer confidence in the reliability of supply from BMA and Queensland.”

Stanmore Coal is edging closer to re-opening the Isaac Plains mine near Moranbah, with 150 job opportunities soon to come for local workers.

With the opening scheduled for February 2016, Stanmore Coal has not specified whether the mine will require FIFO workers.

Isaac Plains was put into care and maintenance by joint owners Vale and Sumitomo in September 2014, when 300 workers lost their jobs.

Isaac Plains will be opened at a reduced capacity of 1.1 million tonnes per annum, compared to the 2014 output of more than 2 million tonnes per annum.

Stanmore bought Isaac Plains for a peppercorn fee of $1 earlier this year, under agreement to take on contractual obligations including $32 million worth of mine rehabilitation.

In 2011 Sumitomo paid $430 million for Aquila’s 50 per cent stake in the mine, in expectation of good returns, however it accepted the loss at the mine’s closure as am $11 million writedown on its other Australian investments.

Isaac Plains will have a three year lifespan, however Stanmore have plans to open a new operation called Isaac Plains East.