Latest Resources Investment Release
Mining and Petroleum Investment – Update as at March–April 2013
Australian Bureau of Statistics (ABS) private new capital expenditure statistics indicate that the State’s mining industry invested a record $39 billion in 2012. This represents a 12 per cent increase compared to 2011 and highlights the level of resource construction activity in Western Australia which continues to be a major driver of the economy.
Western Australia remained the nation’s leading mining investment destination in 2012 attracting 54 per cent of total capital spending by the industry in Australia valued at $95 billion. Fuelled by strong demand for resource commodities from Asia, new capital expenditure by the State’s mining industry has grown at an annual rate of 21 per cent during the five years to 2012.
In 2012, new capital expenditure in Western Australia by mining, manufacturing and other selected industries increased by 38 per cent to $62 billion and accounted for 38 per cent of the Australian total. The vast majority of this investment is attributed to the mining industry which represented 82 per cent of the State’s total private new capital expenditure in 2012. This dominance is expected to continue given the large pipeline of major resource projects under construction.
It is important to note that the figures reported above do not capture all mining investment as the ABS uses classifications specified in the 2006 edition of the Australian and New Zealand Standard Industrial Classification (ANZSIC) (ABS catalogue number 1292.0). Accordingly, mining is broadly defined as the extraction of minerals occurring naturally as solids such as coal and ores, liquids such as crude petroleum and natural gas. Downstream mining activities such as smelting of minerals or ores (other than preliminary smelting of gold) or refining are classified as manufacturing activities under the ANZSIC. Products such as coke and alumina are also included in the ANZSIC manufacturing category.
As part of monitoring resource investment activity in Western Australia, the Department of Mines and Petroleum collects information on mineral and petroleum projects to track actual and possible investment. Where possible, information is collated relating to expected capital expenditure, project timing and employment during both construction and operation.
Information is obtained from various sources including the Bureau of Resources and Energy Economics’ (BREE) list of major mineral and energy projects, Deloitte Access Economics’ Investment Monitor, REPS’ Major WA Projects Listing, on-line company research consultancy systems, media announcements and company websites. Currently, information on mineral and petroleum projects comprises approximately 111 projects.
Projects are ranked according to understood project potential and level of advancement towards production. Mineral and petroleum projects are categorised as follows:
- Projects Under Construction are those actually under construction at the time of updating the estimates of total capital expenditure.
- Committed Projects have company commitment including a final investment decision (FID) but are waiting for approvals to proceed with construction.
- Planned Projects encompass those undergoing advanced feasibility studies including definitive and bankable feasibility studies. For oil and gas projects, the planning phase typically involves detailed engineering design which is also referred to as Front End Engineering and Design (FEED).
- Possible Projects comprise those raising capital and not yet as advanced as those projects conducting definitive and bankable feasibility studies as well as projects on hold for various reasons.
Based on information available in March–April 2013, a summary of total capital expenditure by commodity is provided in the table below. It should be noted that investment in a number of the projects is publicly reported in US dollar terms and the data may therefore vary over time in line with movements in the US/A$ exchange rate.
During this review period, Western Australia had an estimated $177 billion worth of resource projects under construction or in the committed stage of development. A further $120 billion has been identified as planned or possible projects in coming years.
Cost revisions have pushed project values higher and some projects have been cancelled due to falls in global commodity prices. This has resulted in the total value of investment in major projects remaining relatively constant compared to September 2012.
The $52 billion Gorgon LNG project continues to lead resource construction followed by the $29 billion Wheatstone LNG project, while the $5 billion North Rankin natural gas redevelopment is still underway.
Major iron ore projects under construction include Hancock Prospecting’s Roy Hill mine ($9.5 billion) and its Hope Downs 4 mine expansion ($2.0 billion) in joint venture with Rio Tinto, BHP Billiton’s Jimblebar mine expansion ($3.3 billion) and CITIC Pacific’s Sino Iron Pellet Project ($7.7 billion) which is nearing completion.
Continued expansion of the iron ore industry is supporting high levels of construction in major infrastructure. This includes Rio Tinto’s expansion of Pilbara mines, ports, railways to 290 million tonnes per annum (Mtpa) valued at $9.5 billion, with further expansion to 360 Mtpa ($5.7 billion) by 2015.
Additional major infrastructure developments include BHP Billiton’s Port Blending and Rail Yard facilities ($1.6 billion) and Fortescue Metals Group resumption of its Pilbara mines and infrastructure expansion plans including the Kings deposits at Solomon mine and Christmas Creek Phase two to support increased capacity to 155 Mtpa ($8.7 billion).
Other significant mineral projects under construction include AngloGold Ashanti/Independence Group’s Tropicana gold project ($700 million) and the soon to be commissioned Rio Tinto’s Argyle Diamond Underground Development ($2.0 billion).
Investment in Major Projects (as at March–April 2013)
|MAJOR PROJECTS||CAPEX Millions|
|Other Minerals and Infrastructure||24,561||22,484|
|Crude Oil and Condensate||1,464||820|
|Pipelines and Infrastructure||1,435|
Total Forecast Investment