Mining investment in Australia is set to decline sharply over the next three years, resulting in 20,000 job losses.<\/p>\n
A new report by BIS Shrapnel \u2013 Mining in Australia 2015 to 2030 \u2013 predicts the current state of contraction to continue in mining, falling a further 58 per cent over the next three years.<\/p>\n
Despite this grim outlook for investment, and the corresponding effect on junior miners and explorers, mining production is actually expected to increase six per cent annually over the next five years, in turn driving an increase in operational activities and export volumes.<\/p>\n
\u201cWe haven\u2019t hit bottom yet on commodity prices or investment, which will continue to be a key drag on Australian economic growth from here,\u201d Adrian Hart, BIS Shrapnel Infrastructure and Mining Unit senior manager, said. <\/p>\n
\u201cWhile mining production will continue to rise strongly, led by new LNG exports, the facts are that this growth will be far less employment intensive than the investment phase, albeit offering contractor opportunities for maintenance and facilities management.<\/p>\n
\u201cIndeed, we are forecasting a further 20,000 job losses in the mining industry over the next three years, on top of the 40,000 direct job losses since the investment peak.\u201d<\/p>\n
Previously speaking to Australian Mining, Hart explained the current state \u2013 and future \u2013 commodities in Australia.<\/p>\n
\u201cWe\u2019re near the trough for coal, iron ore, and base metals,\u201d Hart, told Australian Mining.<\/p>\n
\u201cCoal is still likely to see another 12 to 18 months before stabilisation, but when it comes to oil and gas there is still a way to fall, and it will damage the [Australian] economy for years,\u201d he said.<\/p>\n
\u201cThe investment downturn will continue in oil and gas, and will hurt the Northern Territory and Western Australia.<\/p>\n
\u201cIt reached a peak of $40 billion, and is slated to fall to $16 billion at the trough, and we aren\u2019t yet near that point.\u201d<\/p>\n
The BIS report aligns with a study by Newport Consulting that found investment is at an all-time low but is showing some very early signs of \u2018green shoots in a cold market\u2019.<\/p>\n
Built from interviews with 50 mining executives, Newport suggested there was a \u201cslight revival\u201d in attitudes towards the state of the market.<\/p>\n
Of those interviewed, 16 per cent of mining leaders said they were cautiously optimistic about growth prospects in the next 12 months, and leaders who showed no signs of optimism fell from 93 to 84 per cent.<\/p>\n
Regardless of these minor improvements on the impoverished sentiment of the last three years, capital expenditure continues to plunge, as the number of leaders reporting a reduction in capex jumped from 44 per cent up to \u201can overwhelming\u201d 78 per cent, which Newport said was the most pronounced capex reduction seen in five years of reporting.<\/p>\n
According to one president of a $34 billion company: \u201cNo Capex is being approved. As a new business we are seeking to reduce our back office costs. We will become lean and mean while supporting essential Capex spend in production.\u201d<\/p>\n
Four out of five mining leaders are planning workforce reduction, in line with BIS Shrapnel\u2019s findings, and up 50 per cent on last year\u2019s retrenchment intent, while none indicated plans increase boots on the ground or administrative and managerial roles.<\/p>\n
For junior miners and explorers this dearth of investment may spell doom.<\/p>\n
Access to capital, investment, and funding are the number one concerns for junior miners and explorers according to the annual junior mining and exploration (JUMEX) companies report.<\/p>\n
\u201cThis has been the number one constraint for the past three years,\u201d Association of Mining and Exploration Companies (AMEC) CEO Simon Bennison explained.<\/p>\n
According to a recent report by SNL Metals, there has been a 50 per cent drop in the number of financings by companies with annual revenue of less than US$500 million; this represented the lowest number of financings by exploration companies since at least January 2012.<\/p>\n
\u201cThings appear most dire in Australia, which attracted 15 per cent of total financings in 2013-2014 but has fallen to only 5 per cent of 2015 financings to date,\u201d SNL stated.<\/p>\n
When it comes to actual cash on hand, the situation is grimmer still.<\/p>\n
Approximately 30 per cent of Australian juniors have less than $500,000 in capital while close to 10 per cent have less than $100,000.<\/p>\n
\u201cWith half of our respondents planning a fund raising within six months and 29 per cent having a cash balance of less than $500,000 competition for capital remains extremely fierce and unfortunately there appear to be few positive signs of any improvement in investor interest in the short term,\u201d Grant Thornton\u2019s JUMEX report said.<\/p>\n
However the BIS Shrapnel report was not completely pessimistic about the state of mining.<\/p>\n
It predicted that the growth in production, as the industry shifts from the investment heavy construction phase into a new era of output, and the growth in maintenance operations aligned with this development, will expand over the next five years.<\/p>\n
\u201cOverall, BIS Shrapnel estimates the mining industry represents around 20 per cent of the national economy, given strong growth in production and related services combined with a (falling) level of investment,\u201d BIS stated.<\/p>\n
\u201cIn terms of production alone, the mining industry represents nine per cent of the national economy.\u201d<\/p>\n
\u201cA significant volume of capital that has been injected into the mining industry is still to fully translate into expanded mine production,\u201d BIS Shrapnel economist and report author, Rubhen Jeya said.<\/p>\n
\u201cThe value of mining production has grown at an annual average rate of 7.1 per cent over the past five years \u2013 and there is more growth to come. Mining production is forecast to expand by over one third again over the next five years \u2013 around double the pace of the national economy \u2013 taking the value of industry output to $186 billion in Gross Value Added terms (GVA) by 2019\/20.\u201d<\/p>\n
However the continuing oversupply affecting the market coupled with a slowdown in Chinese demand and expected growth in Indian demand not materialising is continuing to choke the market.<\/p>\n
Eventually, the current strike in investment will eradicate the oversupply and allow stabilisation and recovery in commodity prices, but this is not expected until towards the end of the decade,\u201d Jeya said.<\/p>\n
\u201cEven at sub-seven per cent per annum economic growth, China is still adding the equivalent of another Australia each year to the value of its economy; as China continues to shift its engine of growth from investment to consumption, we will eventually see a staggered recovery across most metals and minerals, particularly those which will service the growth in middle class consumer demand, such as copper, gold, and base metals.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"