Planning Institute of Australia (Qld) Brisbane 21 September 2012
News from the frontline: Queensland’s resource regions
Jim Devine Director Communications Who is the Queensland Resources Council (QRC)?
> Since 2003 the peak body representing the commercial developers of Queensland’s minerals and energy resources > 88 full members – explorers, miners, mineral processors, site contractors, oil and gas producers, electricity generators > 172 service members – companies providing goods and services to the sector > Peak policy-making body: elected 32-member QRC Board covering Queensland’s diversity of resource commodities and activities: coal, base and precious metals mining and processing, CSG/energy, explorers, contractors > Policy developed through specialist committees (infrastructure, skills, exploration, energy & climate change, safety & health, environment, indigenous affairs)
A multi-commodity peak body specialising in Queensland-based advocacy
Aberdare Collieries Cement Australia Lagoon Creek Resources Rio Tinto Coal Australia 88 Adani Mining Civil Mining and Construction Leighton Contractors Santos/TOGA A.J. Lucas Coal Technologies Clean Energy Australasia Liberty Resources Sibelco Australia full Alcyone Resources Clean Global Energy Linc Energy Sojitz Coal Mining members Allegiance Coal Coalbank Macmahon Holdings Sonoma Mine Mgt Stanmore Coal Altona Mining Cockatoo Coal MacMines Austasia Ambre Energy CuDeco Mastermyne Strait Resources Anglo American Exploration Downer EDI Mining Mega Uranium Summit Resources 172 Anglo American Metallurgical Coal Eagle Downs Coal Mgt Metallica Minerals Superior Coal service Aquila Resources Ensham Resources MetroCoal Tata Steel Resources Australia members Arrow Energy ERM Power Millmerran Power Mgt Thiess Bandanna Energy Evolution Mining Minerals and Metals Group Undamine Industries BHP Billiton Cannington Exco Resources Mitsubishi Development Vale BHP Billiton Mitsubishi Alliance Golding Contractors New Hope Group Vital Metals 38 Birla Mt. Gordon Guildford Coal Norton Gold Fields Watpac Civil & Mining associate Blackwood Corporation Hancock Coal Origin Energy Wesfarmers Resources Caledon Coal Investigator Resources Paladin Resources members Westside Corporation Cape Alumina Ivanhoe Australia Paradise Phosphate Whitehaven Coal Cape Flattery Silica Mines Jellinbah Resources Peabody Energy Xstrata Coal Australia Carabella Resources Jindal Steel & Power QCoal Xstrata Copper Carbon Energy John Holland QER Xstrata Zinc Australia Carpentaria Gold QGC Yancoal Australia Rio Tinto Alcan
Economic contribution of the Queensland resources sector
Directly and indirectly 2010-11:
• One in every $5 of the state’s economy • One in every 8 jobs
• $20.5 billion in purchases ($18.8b 2009-10)
• $4.7 billion in wages to 40,630 direct resource workers
Indirect or second round impacts:
Further supply chain purchases and associated workers spending incomes on domestic goods and services: www.queenslandeconomy.com.au • $56b in 2010-11 (est.)
Where in Queensland and why?
• World-class minerals and energy endowment (in constant need of exploration replenishment)
• High-tech industries and support • Willing to sell • Reliable supplier • Competitive (through technology) • High quality • Environmental advantages Global context: Qld’s metallic mineral production
Silver Zinc 1467 tonnes 858,000 tonnes 83.9% Australian 63.0% Australian 6.6% Global 7.2% Global #5 in the world #4 in the world Lead 437,000 tonnes 72.4% Australian 10.7% Global #2 in the world Bauxite Copper 17,707,000 tonnes 246,000 tonnes 26.2% Australian 30.0% Australian 8.4% Global 1.5% Global
#5 in the world #11 in the world
Source: ABARES Queensland Rest of Australia Why Queensland coal? Queensland 3% of global coal production but:
• 60% of Australian coal exports • 25% of internationally traded coal • 75% of internationally traded coking coal
Queensland coal exports to 38 countries Provides electricity to tens of millions Coking coal underwrites significant proportion of global steel industry Why Queensland gas? World first: coal-seam gas to export LNG
Four major CSG-LNG proposals (Three projects under way with total investment $45b) Potential production: 59 MTPA ‘Enough gas for 1,000 years’ Unconventional fuel options > QER’s shale oil demonstration processing facility at Yarwun, near Gladstone
> Linc Energy diesel and aviation fuel at pilot gas-to-liquids plant at Chinchilla – using proven UCG technology
> Carbon Energy has completed Bloodwood Creek electricity pilot
> Shale gas – Beach Energy, Queensland Gas Company
> New Hope Corporation coal to liquid technologies
> All projects ‘new’ and subject to political pressures Full growth scenario outlook to 2020 (November 2011)
Source: 2020-21 estimates from QRC Growth Outlook Study (Nov 2011) Strong sample of new projects Global fundamentals Title Subtitle Global fundamentals Oil import dependency is growing
SOURCE: ABARE, Australian Energy Projections to 2029-30, March 2010 Actual land disturbance 0.09% of Queensland’s land mass physically disturbed by mining
Land use comparison: 86% grazing 4.5% nature conservation 2.1% cropping 1.9% production forestry
Properties ‘instant buffer’ for mine and related infrastructure – usually leased back to owner
Miners legally bound to rehabilitate mined land to agreed standard (e.g. pre-European); financial assurance (bond) held by state now exceeds $1 billion Central Queensland Regional Plan Area
Current footprint: Land area of 114,400 km.2 Resources sector footprint 50,000 ha or 0.4% of total Contribution to the region in 2010/11 • $8 billion GRP (direct and indirect) • 55,250 FTE jobs, or 50% of workforce (direct and indirect) • Every resource sector job creates another four indirect jobs • Royalties $481m pa (estimated current) : (full-growth scenario) 2020 forecast Sources: QRC and member companies • Land disturbance:120,000 hectares or 1% of total land area • Royalties: $1.5 billion pa Darling Downs Regional Plan Area
Current footprint: Land area of Darling Downs 170,710km2. Resources sector footprint 6,500ha or 0.04% of total Contribution to region in 2010/11 • $1.6 billion gross regional product (direct and indirect) • 10,500 full-time equivalent jobs, or 10% of workforce (direct and indirect) • Every resource sector job creates another 8 indirect jobs • Royalties: $130m (estimated current) : (full-growth scenario) 2020 Forecast Sources: QRC and member companies • Land disturbance: 42,000 hectares or 0.25% of total land area • Royalties: $1 billion
Key take-aways
> Resource developments – high yielding sequential land use
> Physical footprint – tiny by comparison with other land uses inc. conservation
> Wealth creating and sharing – www.queenslandeconomy.com.au
> Land rehabilitation – obligatory, not voluntary
> Co-existence with agriculture – foundation of statehood; two of state’s contemporary economic pillars
What’s slowing Queensland? • Global macroeconomic uncertainty – knock-on from Euro debt, patchy US growth, lower output from China, India
• High construction and operating costs compared with global competitors
• Persistently high $AU and $US-written contracts – currency judged against economic performance of others – most of which are poor to uninspiring
• Capital – more attractive global and Aust investment options (eg WA iron ore)
• Increasing global competition – 6% met. coal lost to US during floods unrecovered; new provinces Mozambique, Mongolia on the rise.
• Skills shortages – small pool, unsustainable wages (up 4.6% past year)
• Australia’s ‘sovereign risk’ reputation – unpredictable tax regimes Current Qld coal mines are uncompetitive
Source: Port Jackson Partners (2012) Regaining our competitive edge in minerals resources for Minerals Council of Australia – Minerals Week 30 May 2012 New coal development projects in Qld are costly
Source: Port Jackson Partners (2012) Regaining our competitive edge in minerals resources for Minerals Council of Australia – Minerals Week 30 May 2012 Queensland’s 50% effective tax rate post-budget Effective Tax Rate comparison of competing coal jurisdictions
60.0% 50.6% 50.0% 48.2% 44.2% 45.2% 42.7% 40.4% 40.0% 35.6%
30.0% 25.8%
20.0% Effective Tax Rate
10.0%
0.0%
Source: Expert analysis by global professional services firm for the QRC (2012) Immediate outlook
• Coal royalty hike has added to price fall/cost rise squeeze
• Industry costs over past 5 years: materials +26%; wages +38%; royalties +48-61%
• Concern over where federal government will be tempted to look beyond disappointing MRRT returns
Queensland Budget Outlook and Strategy 2011-12 Qld project ‘balance’ sheet – September 2012
o Norwich Park coking coal mine closed o Peak Downs expansion shelved o Wandoan thermal coal mine deferred
New and majority of existing projects under review Many thermal and some coking coal mines losing money
Caval Ridge & Daunia (BHPB) coking coal open-cuts ($4.2b + $1.6b) Vale’s Eagle Downs underground coking coal ($1.25b) GVK-Hancock’s federal environmental approval for Alpha mine and rail ($6-7b) Rio Tinto Alcan South of Embley waiting on above ($1.5b stage 1) $45b CSG-LNG industry contracted and delivering 2014-15 Further challenges and opportunities
• Reliable cost effective energy supply for North West Queensland • Exploration effort (living off past discoveries) • Land access : New planning regime in Qld • De-watering of coal mines • Anti-industry campaigns • Broader environmental agenda • Health and safety harmonisation • Sustainable resource communities and non-resident workforces • Uranium mining and export
The long view
• 4 billion people in continental Asia
• Striving to achieve in decades what took centuries for the ‘west’
• Both new markets and new (cheaper) competitors in the region
But right now….
‘The days of easy money on the back of high commodity prices are behind us.
‘The hard work is ahead of us now in growing volumes, boosting productivity, getting costs down and holding onto or growing our market share.
‘It’s a tough market globally and will be right through 2012 but we’re very confident about long-term growth prospects.’
QRC Chief Executive Michael Roche in response to claim that ‘mining boom is over’, 23 August 2012
Planning Institute of Australia (Qld) Brisbane 21 September 2012
News from the frontline: Queensland’s resource regions
Jim Devine Director Communications