2018-19 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.
Principal resource projects
Western Australia’s (WA) mining industry consisted of 116 predominantly higher-value and export-oriented mining projects.
The State’s mining industry also comprised hundreds of quarries and small mines producing clays, construction materials, dimension stone, gypsum, limestone, limesand and spongolite for the local construction industry.
There were also 13 major mineral processing operations to transform bauxite into alumina; gold dore into gold bars; nickel concentrate into nickel matte, nickel powder and nickel briquettes; rutile and synthetic rutile into titanium dioxide pigment; zircon into fused zirconia; and silica sand into silicon metal.
The total number of principal mining projects has returned to the same level as 2017-18. The decline is predominantly due to the depletion of resources at several, mostly small-scale, gold projects that re-started in a high price environment. The number of gold projects was down to 47 in 2018–19 from 53 in 2017–18. The number of iron ore and nickel projects were also down due a combination of depleted resources, challenging market conditions and operational changes.
WA’s petroleum industry consisted of 23 projects producing oil, gas and condensates from 57 fields.
The total number of petroleum projects is down from 24 in 2017–18, with the end of production at Fletcher-Finucane, Mutineer-Exeter and Red Gully, offsetting the start-up of the Ichyths LNG and Prelude FLNG projects.
However, the number of producing fields has actually increased from 54 fields, largely due to the Greater Western Flank Phase Two expansion of the North West Shelf project coming on stream in October 2018.
WA resources exports have gone to over 150 countries in the past 12 years. The majority of these countries receive relatively small amounts, but the top 25 countries imported more than $1 billion worth of non-gold resources1 during the study period. Of the top 25, only six exceeded $10 billion.
In 2018-19 the State’s merchandise exports were the highest for any 12-month period since records began, with exports of more than $161 billion. China continues to have a massive role in the state’s trade. In June alone, the State exported about $9.3 billion of merchandise to the country with exports across the year totalling $81.3 billion, accounting for more than half of all the state’s shipments. Sales to Japan also strengthened with $24.1 billion of merchandise exports to Japan, compared to $18.9 billion in the previous 12 months.
Australia has benefited from the US-China trade war with exports to the US and China over the past year hitting record highs. The weaker Australian dollar has also helped.
Overall, Australia’s resources exports have doubled over the last ten years with a strong period of project investment now seeing record export volumes. Australia’s resources sector accounted for 58 per cent of Australia’s total, overall export revenue in 2018-19.
1 Gold is excluded primarily due to the distorting effect of re-exports of overseas material processed in Western Australia by the Perth Mint.
WA’s mining industry employed an average of 124,010 people during 2018–19, up from 112,008 the previous year. This figure included people employed in mine site infrastructure construction, mineral processing, mine site surveying, transport and catering – essentially those people operating on site2. Mineral exploration activities employed, on average, a further 3,086 people.
However, this figure should be used with caution as the full-time equivalent (FTE) employment in 2018–19 was 98,634. This is consistent with the disparity between FTE employment and the number of individuals (NoI) employed which emerged as the uptake of contract employment overtook full-time employment methods. In June 2009, the disparity between FTE and the NoI employed was just 1.8 per cent. That figure now stands at 25 per cent.
The iron ore sector remained the State’s largest mineral employer, with an average of 45,264 FTE’s, while gold and alumina were the next largest employers with 25,700 and 6994 FTE’s respectively.
The average number of people employed by the State’s onshore petroleum sector increased from 1472 to 1565 in 2018–19. The data represents the average number of people employed at operating sites, including contractor employees3. A similar disparity exists for the petroleum sector between the NoI reported and the FTE. In 2018–19, the number of FTEs employed across the petroleum sector was 1256, compared to 1156 the previous period.
The Dampier to Bunbury Natural Gas Pipeline is regularly the State’s largest petroleum employer with an average of 361 people (or 322 FTEs) employed in 2018–19. However, Quadrant Energy’s Devil Creek and Varanus operations were a close second with 315 people (319 FTEs).
2 DMIRS collects mining employment data from monthly accident reports, which all operating mines, as well as companies undertaking exploration activities on exploration and mining leases, are required to submit. The data identifies the number of direct employees and contractors and includes sites under State Agreement Acts. It does not include personnel in administrative locations not on operating sites. Employment data collected and published by the ABS is classified using ANZSIC and is not directly comparable to data collected by DMIRS.
3 This figure comprises only operations subject to State petroleum legislation, and excludes LNG operations and land based service operations.
WA’s share of national mining investment has averaged about 57 per cent for the past 10 years. In 2018–19, almost $17 billion was invested in the State, representing about 51 per cent of national expenditure.
Nationally, mining investment fell for the sixth consecutive year, down from $94.7 billion in 2012–13 to $33.4 billion (65 per cent).
In terms of new capital expenditure (i.e. new buildings and other structures as well as plant and machinery), WA’s share is 20 per cent ($24.3 billion) of Australia’s total ($122 billion). This is below the State’s average share over the last ten years which has been 31 per cent.
The completion of major multi-billion dollar iron ore and LNG projects has resulted in the substantial decline in investment. The scale of investment between 2010–11 and 2013–14 is unlikely to be repeated soon. Nevertheless, interest and investment in the resource sector, albeit at a smaller scale remains buoyant.
In monitoring investment activity in WA, 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 phases4.
As of September 2019, WA had resource projects in the pipeline valued at an estimated $108 billion, down slightly from the March 2019 estimate of $113 billion.
Recently announced new projects include:
- Australian Vanadium’s $500 million vanadium project
- Stage 1 of Caravel Minerals’ $481 million namesake copper mine
- EcoMag’s $130 million hydrated magnesium carbonate processing plant
- Red 5’s $218 million King of the Hills gold mine
- Atlantic’s $127 million Windimurra vanadium pentoxide plant rebuild
- Stage 1 of Kibaran Resource’s $32.5 million Kwinana graphite Plant
- Metal X’s $27 million restructure of the Nifty copper mine which aims to improve performance and reduce costs at the mine.
The value of projects under construction or in the committed stage of development was an estimated $25 billion, up from $24 billion in March this year. This minor change is attributed to projects like FMG’s $3.6 billion Iron Bridge magnetite mine progressing through the development pipeline while other projects like Woodside’s Greater Western Flank expansion ($2 billion) and Greater Enfield ($2.5 billion) projects were completed.
The number of planned or possible projects decreased from $88 billion to $82 billion between March and September. The decrease is due to the movement of projects through the pipeline and suspension of projects like the planned stage 3 expansion at Greenbushes and the 3rd, 4th and 5th stage expansions at the Kemerton lithium plant amid challenging market conditions.
4 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.
Consistent investment over time and access to land for exploration are important. Exploration and subsequent mine development is needed to sustain WA’s position as a leading mineral producer.
Australia’s mineral exploration expenditure was $2.3 billion in 2018–19, up from $2 billion in 2017–18. WA contributed $1.4 billion (61 per cent) to this with the gold, iron ore and base metal sectors attracting the largest shares. Gold exploration expenditure in WA increased eight per cent from $591.5 million in 2017–18 to $641.6 million in 2018-19. Iron ore exploration increased marginally from $274.1 million in 2017–18 to $289.5 million in 2018–19.
Nationally, petroleum exploration expenditure was falling each year since 2013–14. 2018–19 marks the first increase in petroleum exploration expenditure with almost $1.3 billion spent across Australia. High oil prices in Australian dollar terms are thought to be behind the modest return of confidence in the oil and gas industry.
WA’s petroleum expenditure also increase year-on-year, up from $562 million in 2017-18 to $734 million in 2018–19 (a 3 per cent increase). WA’s share of the petroleum exploration spend also increased to 58 per cent in 2018–19, the highest it’s been since 2015–16.
Royalties for all minerals and petroleum produced on State land and in State waters are paid into the Government’s Consolidated Revenue Fund. The State also receives about 65 per cent of the royalties from the petroleum produced by the North West Shelf Project, in the form of Commonwealth grants, in accordance with an agreement between the WA and Australian Governments.
The WA Government received royalty revenue from the State’s mineral and petroleum producers totalling $5.6 billion in 2018–19, an increase of ten per cent on 2017–185.
Iron ore accounted for the bulk of collections (74.5 per cent), up 9.1 per cent on the previous year’s receipts. Consistent with the strong market conditions seen in the gold sector across the past few years, contributions rose almost seven per cent to $291 million in 2018–19.
Petroleum royalty receipts have been falling for the previous two years, but the start-up of new projects saw petroleum royalties increase 264 per cent from $3.2 million to $11.7 million in 2018–19. The State also received $889 million in grants for the North West Shelf project, an increase of 30.4 per cent on 2018–19.
For an overview of how Western Australia’s key commodities performed, please see 2018-19 mineral and petroleum commodity review.