Mining

Cutting-edge technology at work in global operations

Thanks to abundant mineral resources, skilled industry professionals, advanced extraction processes and cutting-edge technology, Australia is a leader in the global mineral industry. Australia has the world’s largest reserves of lead, nickel, uranium and zinc. It is the world’s largest producer of bauxite and alumina (using the Economic Demonstrated Reserves (EDR) measure) the second largest producer of zinc ore and nickel, and the third largest producer of iron ore and gold.

Mining and minerals activity currently comprises approximately eight per cent of the Australian economy, and 40 per cent of exports. The sector is expanding, driven primarily by huge demand for raw materials from China and other parts of Asia. Earnings from Australia’s mineral resources exports increased by 11 per cent to $116 billion in 2007-08, (Source: Australian Bureau of Agriculture and Resource Economics, Australian mineral statistics, June Quarter 2008) partly owing to a 25 per cent rise in export prices (these factors helped off-set a 14 per cent fall in the value of the Australian dollar).

The scale of our resource industry has helped Australia become a world leader in the development and manufacture of mining equipment, technology and services (METS). Australian firms are competitive right across the supply chain, which includes exploration, engineering, minerals processing, environmental management, mine safety, R&D and training.

For example, Australian companies design and manufacture large capital items such as mining trucks. Australian developed mining software plays a prominent role in the planning and development of mines around the world. In total the METS sector generates sales of A$12 billion annually, and A$2.5 billion worth of exports.

Successful R&D in sectors such as radar exploration and minerals analysis has given birth to firms that now export niche technologies. As a result, the resources sector is one of the leading stimulants for R&D in the Australian economy, and foreign investors are increasingly focused on the potential for innovation as well exploration.

The Australian resources sector

Commodity	Reserves (Economic demonstrated reserves measure)	Production 2007–08 (Total metallic content of minerals produced)	Change in production	Production world rank (2005 production figures)	Change in export value (% change 2007–2008)
Bauxite	7.8Gt	63,131Kt	0.7%	1	+35%
Alumina		19,359Kt	4.6%	1	-7%
Black Coal	39.1Gt	325	0.3%	4	+23% (figure for thermal coal)
Copper	42.4Mt	862 Kt	0.3%	5	+3%
Gold	5,225t	227t	-8.8%	2	+6%
Iron Ore	16.4Gt	8,128Mt (iron and steel)	1.4 %	3	-10% (iron and steel)
Lead	23.8Mt	641Kt	-0.2 %	2	+33%
Nickel	23.9Mt	190Kt	-0.2%	2	-33%
Silver	44Kt	1867t	11.5%	4	-15%
Uranium Oxide	716Kt	10,151t	5.8%	2	+34%
Zinc	42Mt	1,571t	14.3%	2	-22%

Uranium

The global uranium market is undergoing a major expansion due to an increase in global demand, the highest uranium prices in the last 20 years, and recognition of the potential greenhouse benefits of nuclear power. Australia is well placed to benefit from this growth.

With a strong economic record, political stability, world-class industry capabilities, a culture of innovation, excellent research and development infrastructure and an open regulatory environment, Australia provides an attractive investment environment (Source: Uranium Industry Framework, Report of the Uranium Industry Framework Steering Group, Sept 2006).

Australia has the largest share of global uranium resources, holding approximately 34 per cent of the world’s reasonably assured uranium resources (RAR) recoverable at costs less than US$80/kg U. (Source: Department of Resources, Energy and Tourism, Australia’s Uranium Industry, June 2008). At December 2007, Australia’s RAR recoverable at less than US$80/kg U were estimated at 983,000 tonnes (t), an increase of 38 per cent over the estimates for the previous year, with a further 600,000t in inferred resources.

Other countries with large resources include Kazakhstan (12 per cent), Canada (11 percent), South Africa (7 per cent) and the Russian Federation (6 per cent) (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008).

Coal

Australia is the world’s largest exporter of coal, with black coal being the country’s largest export commodity worth around $24.13 billion in 2007-2008 (Source: ABARE, Australian Mineral Statistics, June Quarter 2008). It is estimated that Australia contains an accessible economic resource of around 38.8 billion tonnes, enough to last 95 years at current rates of production (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008). Economic resources occur in most states of Australia but are particularly abundant in New South Wales (NSW) and Queensland. Queensland has around 53 per cent of this resource and NSW, 42 per cent Minor resources of black coal are also located in Western Australia and Tasmania (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008).

Victoria has the world’s largest reserves of brown coal, which are currently used almost exclusively for power generation. The brown coal deposits in Victoria’s Latrobe Valley are a world-class resource. Its thick seams and low mining costs make it one of the world’s cheapest sources of energy.

In 2007-08 Australia produced 324.83Mt of raw black coal, about 6 per cent of the world’s production. As a coal producer, Australia ranks fourth after China (45 per cent), USA (19 per cent) and India (8 per cent) (Source: ABARE, Australian Mineral Statistics, June quarter 2008 and Geoscience Australia, Australia’s Identified Mineral Resources (2007). ABARE has projected that Australia’s saleable production will grow to 378Mt by 2011–12 and exports of coking and thermal coals are projected to rise to 156Mt and 148Mt respectively by 2011–12. The combined production of Queensland and New South Wales accounts for about 97 per cent of national production. While both states produce thermal and coking coal, NSW leads in thermal coal production, with the production of coking coal being significantly higher in Qld. At the end of 2007 there were 118 producing black coal mines in Australia, including 74 open cut mines and 44 underground mines. State, there were 62 mines in New South Wales, 49 in Queensland, 1 in South Australia, 3 in Western Australia and 3 in Tasmania (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008).

The Australian coal industry continues develop with exploration activity increasing year-on-year. Data published by ABS indicated that exploration expenditure for 2006 totalled $198.7 million, up from $145.6 million in 2005. Expenditure in Queensland was $110.6 million or 56 per cent of the total and $68.2 million in New South Wales or 34 per cent of the total. Exploration also occurred in South Australia, Western Australia and Victoria (Source: ABARE, Minerals and Energy Major Development Projects, April 2008 Listing).

Both Government and industry have an active and long-term commitment to research and development in the coal industry. This has ensured that Australian coal producers are amongst the most competitive, efficient and environmentally advanced in the world. The Australian Government, in partnership with industry, has established a number of R&D organisations to develop new clean coal technologies, which when implemented, will significantly reduce greenhouse gas emissions as well as improving the efficiency of new generation power stations.

Zinc and lead

Australia has the world’s largest share of Economic Demonstrated Resources (EDR) of zinc (24 per cent) and lead (30 per cent), and ranks second in terms of production after China (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008).

Australia's EDR of zinc is the world's largest holding at 42.5 million tonnes (Mt), which accounts for over 24 per cent of global EDR. Queensland is the largest holder of zinc, with 64 per cent of the national total at 27.4 Mt. The Northern Territory has the second largest EDR (24 per cent), with 10.2Mt in 2007. New South Wales had the third largest EDR with 2.2Mt, and Western Australia has the fourth largest EDR at 1.8Mt.

Australia's EDR of lead decreased slightly to 23.3Mt, which is the largest in the world. Queensland has the most EDR increasing to 15.6Mt in 2007 (67 per cent), followed by the Northern Territory with 4.9Mt, New South Wales with 1.6Mt, and Western Australia with 1.0Mt. Of Australia’s EDR of lead, 45 per cent occurs in JORC code ore reserves categories (Source: Ibid).

Iron ore

In the past few years, Australia has benefited from unprecedented global demand for minerals and commodities, mostly driven by the growth of the Chinese economy and the surging demand from its steel industry for additional supplies of high-quality iron ore. This is driving increasing expenditure on minerals exploration and record investment in mining and minerals processing projects in Australia. While Australia offers many advantages for investors, the market potential within Australia in particular, but also in the Asia Pacific region, is a strong driver for establishing operations in Australia.

Australia's iron ore industry is export oriented (over 90 per cent exported) and is dominated by BHP Billiton and Rio Tinto's wholly-owned subsidiary, Hamersley Iron, in the Pilbara Region of Western Australia. Other important local iron ore projects include Koolyanobbing, Cockatoo Island, Tallering Peak, Koolanooka, Jack Hills, and Koolan Island, Middleback Ranges in South Australia, Frances Creek in Northern Territory and Savage River in Tasmania.

In 2007, Australia had some 13 per cent of world EDR of iron ore and was ranked fourth after Ukraine (19 per cent), Russia (16 per cent), and China (14 per cent). In terms of contained iron, Australia has about 15 per cent of the world’s EDR and is ranked second behind Russia (19 per cent). Australia produces around 16 per cent of the world’s iron ore and is ranked third behind China (32 per cent) and Brazil (19 per cent) (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008).

Western Australia has about 99 per cent of Australia’s Economic Demonstrated Resources (EDR) of iron ore, with about 89 per cent occurring in the Pilbara district. In 2007 EDR increased by 8.9 per cent to 20.3 gigatonnes (Gt), due to the inclusion of Marillana, Mungada, Phils Creek and Red Hill-West Pilbara for the first time and large increases at the Cape Lambert deposit and the undeveloped Rio Tinto deposits. Magnetite ore currently constitutes 24 per cent (4.8Gt) of Australia's EDR. At current production levels the resource life of accessible EDR exceeds 65 years (Source: Geoscience Australia, Australia’s Identified Mineral Resources 2008).

Australia’s iron ore production in 2007 was 299.1 million tonnes (Mt), (275.1Mt in 2006). Virtually all of Australia’s iron ore is mined in Western Australia (around 97 per cent), with most of this product being exported. Small quantities of iron ore are mined in South Australia (around 2.5 per cent of total output), with production being dedicated to the domestic steel industry. The importance of South Australia has increased since 2006-07, due to a decision by OneSteel to develop and mine a magnetite iron ore resource in that state. The output is used by the company in its steel making operations. Iron ore is also mined at Savage River in Tasmania and is processed into iron ore pellets (Source: IbisWorld, Iron Ore Mining in Australia, October 2008).

In 2008-09, Australia’s iron ore production is forecast by ABARE to reach about 327Mt.

The volume of Australian iron ore exports has increased steadily since 2003, with the value of exports increasing dramatically (reflecting dramatic price increases from 2003 to 2008). In 2008-09, the value of iron ore exports is forecast to increase by 52 per cent to $31.0 billion, mainly reflecting the effects of high contract prices in place until March 2009 (Source: ABARE, Australian Commodities, Vol 15, No. 4, December Quarter 2008).

In 2007 exports of iron ore products totalled 267.2Mt (248.4Mt in 2006), with a value of A$16 billion. Five markets account for virtually all of Australia’s iron ore exports: China (60 per cent), Japan (25 per cent), South Korea (10 per cent), Taiwan (3 per cent) and the European Union (2 per cent) (Source: ABARE, Australian Commodities, Vol 15, No. 4, December Quarter 2008).