2017-18 review of mineral and petroleum industry activity
Key indicators of the overall performance of the resources sector include the number of people employed, the level of investment and exploration activity, royalties received by the State Government and the number of principal mining projects.
According to data collected by DMIRS, the average number of persons employed in the Western Australian minerals sector in 2017-18 was 112,008.
This was an increase of 5 per cent from last year, and the second year in a row the sector has seen employment growth. Together the iron ore and gold sectors account for 74 per cent of mineral sector employment.
The average number of people employed by the State’s onshore petroleum sector has improved slightly from last year, from 1,203 to 1,2531.
This figure comprises only operations subject to State petroleum legislation, and excludes LNG operations and land based service operations.
More than $19 billion was invested in Western Australia’s mining industry in 2017-18, representing just under 53 per cent of national expenditure.
Decreasing investment is not just a local issue. A study by PwC found that capital expenditure by the world’s 40 largest miners is at 10-year lows. This is despite revenue surging 23 per cent and profit rising 126 per cent in the last year.
Nationally, mining investment has fallen for the fifth consecutive year, down more than $58 billion (62 per cent) in just five years. The decline has been only slightly less severe for Western Australia, with mining investment falling 60 per cent over the same period.
The substantial decline in investment is largely the result of the completion of major, multi-billion dollar projects committed to during the iron ore and LNG investment boom. While the scale of investment seen between 2010-11 and 2013-14 is unlikely to be repeated soon, there is still interest and investment in the resource sector, just at a smaller scale. Lithium and other battery material related sectors have attracted much of this investment, while the more traditional gold and iron ore sectors continue to be a target for mergers and acquisitions as well as new and expanded projects.
In monitoring investment activity in Western Australia, DMIRS also collects information on mineral and petroleum projects to estimate actual and possible investment. Where possible, information is collated relating to expected capital expenditure, project timing and employment during both the construction and operation phases 2.
As at September 2018, Western Australia has an estimated $108 billion worth of resource projects in the pipeline, up $5 billion on the March 2018 estimate following recent announcement of investment in local iron ore and LNG projects.
These announcements included:
- FMG’s $1.7 billion Eliwana iron ore project
- The start of construction at BHP’s $4.2 billion South Flank iron ore project which will replace production from its depleting Yandi operations
- A further $516 million expansion at the Greenbushes lithium mine
- A $9.7 billion expansion of the Pluto LNG project
- Regis Resources approved development of an underground mine at Duketon with a capital cost of $29 million
- $28 billion for Woodside’s Browse LNG project.
A number of resource projects were completed since the March updated including:
- Mt Morgans gold project ($197 million)
- Dalgaranga gold project ($86 million)
- Tawana’s Bald Hill Bald Hill lithium project ($42 million)
- Altura’s Pilgangoora lithium project ($139.7 million)
- Pilbara Minerals Pilgangoora lithium project ($274 million)
- Browns Range Pilot Plant ($60 million)
- Initial Works at the Yandi South Flank iron ore project ($244 million)
The value of projects under construction or in the committed stage of development is an estimated $36 billion, while the value of planned or possible projects is estimated to have increased to $72 billion. The increase follows proposed investment in the Gorgon and Pluto LNG projects.
Mineral and petroleum projects are categorised as follows:
- Projects under construction – those actually under construction.
- Committed projects – company has reached a final investment decision (FID)
- Planned projects – those undergoing advanced feasibility studies including definitive and bankable feasibility studies and Front End Engineering and Design (FEED).
- Possible Projects – comprise those raising capital but not yet conducting definitive and bankable feasibility studies.
Western Australia accounted for 61 per cent ($1.2 billion) of Australia’s total mineral exploration expenditure ($2 billion), meaning its share of national expenditure actually fell by 4 per cent despite an increase in the dollars spent.
Gold exploration drove the bulk of increased investment spend with $591.5 million in 2017–18 compared with $509 million in 2016–17.
Western Australia’s share of national petroleum exploration expenditure was 55 per cent ($562 million), up from 47 per cent in 2016–17. National petroleum exploration expenditure continues to decline rapidly, having fallen 9 per cent ($3.8 billion) since 2013–14.
The Western Australian Government received royalty revenue from the State’s mineral and petroleum producers totalling $5.8 billion in 2017–18, a small increase of less than 2 per cent on 2016–17.
Iron ore provided the bulk of collections (76 per cent) for 2017–18, however this was down 3 per cent on last year’s receipts. Consistent with the better market conditions seen in the gold sector, contributions rose almost 4 per cent to $272 million in 2017–18.
Petroleum royalty receipts were down for a consecutive year after, declining almost 53 per cent in 2015–16, the decline was a more modest 6.4 per cent in 2017–18 with $3.2 million in receipts. The State also received $681 million in grants for North West Shelf project, was an increase of 19 per cent from 2017–18.
It should be noted that royalty receipts are offset compared to sales value figures. Royalty receipts are reported for the December quarter in 2016 and the March, June and September quarters in 2017.
For an overview of how Western Australia’s key commodities performed, please see 2017-18 mineral and petroleum commodity review.
Principal mining projects
Western Australia’s mining industry consists of 127 predominantly higher-value and export-oriented mining projects, hundreds of quarries and small mines producing clays, construction materials, dimension stone, gypsum, limestone, limesand, spongolite, gems and semi-precious stones, as well as major mineral processing projects that produce alumina, refined gold, nickel matte, silicon metal and titanium dioxide.
The principal mining projects accounted for 99 per cent of the State’s $88 billion in mineral sales in 2017-18.
The total number of principal mining projects is up almost 10 per cent from 116 in 2016-17.
The increase in the number of principal mining projects is largely due to the start-up and re-opening of several gold projects.The number of principal gold projects numbered 53 in 2017-18, up from 43 in 2016-17.
At the same time, continuing its growth from 2016-17 amid anticipated demand for battery technologies, the lithium sector saw the start-up of another two new projects at Bald Hill and Pilgangoora.
In the iron ore sector, for the first time in several years, the Phil’s Creek project produced low grade ore that was used to supplement feed from the Iron Valley project. Mining operations at Iron Hill commenced, replacing production from the depleted Extension Hill mine, while sales from the Wodgina and Tallering Peak projects both ceased. As a result, there were 28 principal iron ore projects in 2017-18, down from 29 in 2016-17and 36 in 2014-15.
While the numbers of principal mining projects for most other commodities were fairly stable, there were some exceptions:
- There were three silica sand projects in 2017-18, up from two in 2016-17, following an increase in sales from the Moora project that resulted in it qualifying as a principal project.
- There were nine nickel projects in 2017-18, down from 10 in 2016-17 with the Savannah project ceasing sales of stockpiled materials after it was suspended in May 2016 amid challenging market conditions.
- The Yoogarillup mineral sands mine commenced operations in the December 2017 quarter, replacing output from the depleted Dardanup mine.
- Campaign manganese mining operations commenced at Horseshoe Range, while ad-hoc sales from Nicholas Downs were completed.
In the past year, there were also several sales and acquisitions in the State’s minerals sector, with the following projects changing owners:
- Darlot gold project
- Edna May gold project
- Eureka gold project
- Jaguar base metals project
- King of the Hills gold project
- Koolyanobbing iron ore project
- South Kalgoorlie gold project
For a listing by financial year of Western Australia’s principal mining projects,as well as the principal producers of basic raw materials and the State’s major mineral processing projects, please see the series of files below.
Each principal mining project produced commodities valued at over $5 million (or more than 2500oz of gold). Projects on private land, for which production values are not required to be reported, are included where employee numbers were greater than 50.