development projects MINERALS AND ENERGY major development projects Ian Haine and commodity analysts, Energy and Minerals Economics Branch • The record number of minerals and energy Total Australian minerals exploration expen- projects that are currently committed to or diture is estimated to have risen by 5 per cent in under construction in Australia will add sig- 2003-04 to $1.82 billion. This increase follows a nifi cantly to the sector’s production and ex- rise of 13 per cent in 2002-03. Among the major port capacity in the short to medium term. commodity categories, petroleum exploration expenditure is estimated to have increased in • In addition, the signifi cant number of large 2003-04, but expenditure for both gold and base scale projects at less advanced planning metals is estimated to have fallen. stages that are under active consideration Petroleum exploration expenditure is esti- is expected to provide the platform for mated to have risen by 6 per cent in 2003-04, to future sectoral growth in the medium term around $1057 million. In real (2003-04 dollar) and beyond. terms, this is higher than the annual average expenditure over the past decade ($981 million) but remains below the high expenditure years of Exploration expenditure 1997-98 and 2000-01 ($1148 million and $1121 It is important to recognise that the ability of million respectively). Australia’s minerals and energy sector to sustain Increases in petroleum exploration expen- its strong recent growth and expand its contribu- diture in the past two years are likely to have tion to national economic performance in the been encouraged, to some extent, by relatively medium and longer terms depends critically on the amount of investment in minerals explora- tion. Most of the strong growth in the minerals Australian private minerals exploration expenditure In 2003-04 dollars and energy sector of recent years, and most of A the expected growth implicit in ABARE’s list 3.5 Other of planned projects, is underpinned by minerals Base metals 3.0 Gold exploration expenditure of the past decade. Other energy Australian minerals exploration expenditure, 2.5 Petroleum in real terms (2003-04 dollars), for the period 2.0 1980-81 to 2003-04 is shown in fi gure A. The 1.5 2003-04 data are estimates based on actual data from the Australian Bureau of Statistics 1.0 for July–December 2003, combined with data 0.5 from the ABS survey of expected expenditure $b for January–June 2004. 1983 1988 1993 1998 2003 Contact: Ian Haine +61 2 6272 2031; [email protected] -84 -89 -94 -99 -04 australiancommodities • vol. 11 no. 2 • june quarter 2004 1 AC_June04_M&E_Article 1 19/05/04, 04:09:11 PM development projects high oil prices since mid-2002. However, the 2003-04. At around $367 million in 2003-04, oil price rise in this period is unlikely to have gold exploration expenditure is less than half been the sole reason for the rise in exploration the level, in real terms, of six years ago. For expenditure. Infrastructure requirements for off- much of the 1990s, gold dominated nonenergy shore petroleum exploration require long term exploration expenditure and in 2002-03 gold planning, and other factors, such as Australia’s still accounted for 56 per cent of the total. relative prospectivity, some recent (but rela- Base metals exploration expenditure is esti- tively small scale) exploration successes and a mated to have fallen by 3 per cent to $138 million longer term view of oil prices, are also expected in 2003-04. This expected decrease is caused by to have had a signifi cant bearing on exploration falls in expenditure on copper and zinc–lead–sil- expenditure decisions. ver more than offsetting a strong rise in expen- Expenditure on gold exploration is estimated diture on nickel. The increase in expenditure on to have fallen by 3 per cent in 2003-04, follow- nickel exploration refl ects the dramatic rise in ing a rise of 14 per cent in 2002-03. A decline global nickel prices, particularly in the fi rst half in Australian dollar denominated gold prices is of 2003-04 and, importantly, a reasonably posi- likely to have been a contributing factor to the tive outlook for Australian dollar denominated expected fall in gold exploration expenditure in nickel prices in the next year or so. ABARE’s list of major minerals and energy development projects The full list the gold industry, which typically has a relatively ABARE’s listings of major minerals and energy large number of smaller projects. For gold, the projects expected to be developed over the medium expenditure threshold for inclusion in the table is term are compiled every six months. Information $15 million. contained in the lists spans the mineral resources In general, projects identifi ed are at relatively sector and includes energy and minerals commodi- advanced stages of planning. That is, for new ties projects and minerals processing projects. The projects, stage of planning categories range from information comes predominantly from publicly ‘feasibility study underway’ through to ‘under available sources but, in some cases, is supple- construction’. mented by information direct from companies. Projects are listed by the principal mineral The lists are fully updated to refl ect developments commodity to be produced, under the broad head- in the previous six months. ings: ‘Mining projects – energy’, ‘Mining projects – minerals’ and ‘Minerals processing facilities’. What’s in the list The table includes new greenfi elds projects as well The latest projects list contains information on as expansions of existing projects. 192 projects. Details listed against each project include: Where to get the list • project name Up to December 2001, the lists were released in • proponent company or joint venture conjunction with each June and December issue • location of Australian Commodities. Since June 2002, the • project status complete lists (around 12–14 pages) have been • expected startup date released separately. Commencing in 2003, the lists • additional output capacity have been released around May and October each • capital cost of the project year. The lists are available only as an electronic • additional employment, where available. product on subscription. With one industry exception, ABARE’s listing The list can be purchased from ABARE at: provides details of announced projects for which www.abareonlineshop.com total capital expenditure is expected to exceed enquiries: [email protected] $40 million (in 2002-03 dollars). The exception is or phone +61 2 6272 2010. 2 australiancommodities • vol. 11 no. 2 • june quarter 2004 AC_June04_M&E_Article 2 19/05/04, 04:09:22 PM development projects Expenditure on base metals exploration in erals and energy sector, both historically and in 2003-04 was the lowest, in real terms, since the short term. 1987-88 and the third lowest on record. Based on ABS survey data, new capital expen- Apart from the main exploration sectors diture in the mining industry is estimated to have referred to above, two other commodities — coal been around $10.5 billion in 2003-04, signifi - and iron ore — are expected to show signifi cant cantly higher (by 17 per cent) than in 2002-03. In expenditure increases in 2003-04. Spending on real (2003-04 dollar) terms, new capital expen- iron ore exploration is estimated to have risen diture in 2003-04 is estimated to have been the by 39 per cent to $62 million and coal expendi- highest since the record expenditure in 1997-98 ture by 13 per cent to around $88 million. These (fi gure B) and around 43 per cent above the aver- expected increases refl ect a positive outlook for age annual expenditure for the past 23 years. Chinese demand for these commodities. There are strong indications that capital Over the medium term, exploration expendi- expenditure on mining will remain strong next ture in each of the main exploration sectors is year. Based on industry intentions canvassed expected to be infl uenced by a different set of in the March quarter 2004, ABS data indicate factors. that capital expenditure on mining in 2004-05 In the petroleum sector, oil prices over the may again be around $10.5 billion. The scale medium term will be a key factor in determining of this expenditure and its order of increase is future exploration activity and expenditure. For consistent with the development trends shown in gold, factors such as the US dollar/Australian ABARE’s April 2004 list of major minerals and dollar exchange rate and movements in global energy projects (see fi gure H). equities markets and their infl uence on the out- Capital expenditure in the metal products look for gold prices will be important. sector, which includes the minerals processing In the base metals sector, the price outlook activities covered in ABARE’s projects list, is will clearly be important, as demonstrated by estimated to be around $2.56 billion in 2003- the recent rise in nickel exploration expenditure. 04, 18 per cent above 2002-03 expenditure. Apart from nickel, a relatively positive outlook Surveyed industry intentions suggest that metal for copper, lead and zinc prices over the next products expenditure could rise by 7 per cent in couple of years may provide some impetus for 2004-05 to around $2.74 billion. In real terms, exploration expenditure increases, although estimated expenditure in 2004-05 would be expenditure decisions may also be affected by about 29 per cent above the 23 year annual aver- movements in the US dollar/Australian dol- age of $2.07 billion (in 2003-04 dollars). lar exchange rate. Other important factors are expected to be: the apparent trend toward com- pany rationalisation of exploration capacities New capital expenditure (not only in Australia but also globally); expec- B In 2003-04 dollars tations of the future strength (or otherwise) of Chinese demand for base metals; assessments 14 Metal products Mining of the development potential of several known 12 (but as yet undeveloped) base metals deposits in Australia; and Australia’s relative attractiveness 10 for exploration.