Sustainable Technologies in the Mining Sector Brisbane 15 September 2014 QLD Resources sector outlook David Rynne Director Economic and Infrastructure Policy Presentation outline > Overview of the QRC > Tough market conditions and industry’s positioning > Long term demand fundamentals for resources > State and Federal Government policy reform agenda Who is the Queensland Resources Council? > The Queensland Resources Council (QRC) is a not-for-profit peak industry association representing the commercial developers of Queensland’s minerals and energy resources > 79 full members – explorers, miners, mineral processors, site contractors, oil and gas producers, electricity generators > 161 service members - providers of goods or services to the sector > State-based multi-commodity advocacy group formed in 2003 as successor to the Queensland Mining Council Aberdare Collieries Civil Mining and Construction Kalimati Coal Company Rockland Resources Adani Mining Coalbank Linc Energy Santos/TOGA 79 Allegiance Coal Cockatoo Coal Lucas Group Senex Energy full Altona Mining ConocoPhillips Australia Macmahon Holdings Shell Development (Australia) members Anglo American Downer EDI Mining Mastermyne Sibelco Australia Anglo American Exploration Eagle Downs Coal Mgt Metallica Minerals Sojitz Coal Mining Aquila Resources Ensham Resources MetroCoal Stanmore Coal Areva Resources Australia ERM Power Millmerran Power Mgt Summit Resources 161 Arrow Energy Evolution Mining Minerals and Metals Group Thiess service Bandanna Energy Exco Resources Mitsubishi Development U & D Mining Industry (Australia) Beach Energy Glencore Coal New Hope Group members Vale Bengal Coal Glencore Copper Norton Gold Fields Valiant Resources BHP Billiton Cannington Glencore Zinc Origin Energy Wesfarmers Resources BHP Billiton Mitsubishi Alliance Guildford Coal Paladin Energy Westside Corporation 39 Caledon Coal GVK Peabody Energy Whitehaven Coal associate Cape Alumina International Coal QCoal Yancoal Australia Cape Flattery Silica Mines Investigator Resources QER members Carabella Resources Isaac Plains Coal Mgt QGC Carbon Energy Jellinbah Resources Queensland Coal Investments Carpentaria Gold Jindal Steel & Power Rio Tinto Alcan Cement Australia John Holland Rio Tinto Coal Australia The changing playing field in Queensland resources > The almost decade-long and unprecedented investment cycle has peaked > Coal and LNG in particular moving from investment to production phases > Supply has caught demand in most commodities with prices currently too low to encourage another significant supply response – especially for coal 5 Coal prices’ long journey south Coal market imbalances the 2014 reality > Thermal and coking coal prices weak as market over-supplied > Demand still growing steadily – global thermal coal trade up by 5% pa – driven by India and China. Japan desperate to ensure supply given nuclear uncertainty. > Marginal suppliers to Asia (e.g. USA) being squeezed out > Costs and shareholder returns focus > Australian producers waiting for someone else to blink, but can it last? > Signs that rail providers willing to share some pain on ‘take or pay’ > 25 per cent of all Qld coal produced at a loss (and half of all thermal coal) > 10 per cent of all Qld coal produced at a loss of more than $US14/tonne 7 Industry positioning (the ‘here and now’) > SURVIVAL! > Companies working their way back down global cost curves by removing costs > The majors are increasing production to lower their marginal costs and increase market share…but how long can it last given price impacts? > Maintain tenements by doing bare minimum > Respond strongly to ideological opposition (masking as environmental activism) to shore up social licence now and into the future Industry positioning (medium to longer term) > Wait for price recovery and attract capital > Put capital into sustaining production and focus on brownfield expansions > Look for more gas for existing project > Look for acquisition opportunities > Get project approvals – a pre-condition for attracting capital > Complete feasibility studies > Diversify: other commodities, countries Global demand fundamentals Title Subtitle Global demand fundamentals 12 Government reforms to encourage production > Abolish the carbon tax > Abolish the MRRT (difficult to do given Senate resistance) > ‘One stop shop’ for environmental approvals > Reduction in green and red tape > Government’s fiscally are very constrained so unlikely to see direct investment but perhaps recycled capital from privatisations.