Australasian Mining Review

River stage three (zinc and lead) were completed. despite the relative stability of metals prices over the past two years there are now no projects at the Committed stage for aluminium, bauxite, alumina, copper or nickel. there were three lead, zinc and silver mines at the Committed stage with a combined value of $2.0 billion. the number of infrastructure projects at the Committed stage has increased by one and now totals ten. this is the result of two new projects that were previously not on the major projects list being added to the Committed stage and one progressing to the Completed stage. the two new projects are both being developed by Fortescue Metals and will develop a fifth berth at anderson Point (Port Hedland) and a gas pipeline to their solomon Hub facility. sUMMARY oF PRojeCTs AT THe CoMPLeTeD sTAGe In the six months to october 2014 five resources and energy projects with a combined value of $1.2 billion progressed to the Completed stage. this is the lowest value of completed projects over the past decade. one oil and one infrastructure project were completed in the period. the Balnaves development Project, an oil joint venture between apache energy and KuFPeC, valued at $429 million began production during the period. once fully operational, Balnaves will produce around 30 thousand barrels of oil a day. the townsville Port upgrade valued at $81 million was also completed. three non-ferrous minerals projects were completed during the period. this included aurelia Metals' Hera mine which will produce over 200 000 ounces of gold and silver. Glencore's Mcarthur River Phase three zinc mine was also completed and will increase zinc concentrate production by approximately 440 000 tonnes a year(bringing total annual zinc concentrate production to around 800 000 tonnes a year). Cudeco's Rockland Copper project was completed and will produce around 3 million tonnes of copper ore annually. together, these three projects had a combined value of $684 million. No lNG, coal or iron ore projects were completed in the past six months. However several high profile projects are scheduled for completion in the next 12 months including Roy Hill, australia Pacific lNG, Gladstone lNG and Gorgon lNG. as the 'mega' lNG projects enter the Completed stage, the total value of resources and energy projects under construction in australia will start to decrease rapidly. oUTLooK FoR ResoURCes & eneRGY InVesTMenT World demand for raw materials and energy is projected to grow over the medium term, particularly in emerging economies that are investing in housing, infrastructure and manufacturing to support growing populations and industrial bases. However the surge in global investment activity over the past few years has contributed to large volumes of supply entering commodity markets, putting considerable downward pressure on prices. BRee's investment pipeline model indicates that there is an emerging bottleneck of projects at the Feasibility stage. While the Government is implementing measures to streamline and expedite the approvals process, the current operating environment of lower prices and high costs is not conducive to project development or further investment in the sector. Reporting by australian project developers indicate that the progression of projects to the Committed stage is slowing as they implement cost-cutting measures and alter project plans to accommodate current operating conditions. although developers have undertaken Bankable/definitive Feasibility studies that indicated favourable project economics, many are now revising study parameters and price assumptions due to deteriorating market conditions and escalating construction costs. lower interest rates in australia are unlikely to stimulate investment in the resources and energy sector. In most business models, this will not be sufficient to offset the effect of lower prices in their decision-making. Given these factors, the outlook for resources and energy investment is subdued over the short to medium term. the value of australia's stock of investment in the resources and energy sector is projected to moderate as high value lNG projects currently under construction are completed. at best, the decline in value from these projects will be partially offset by the addition of projects assessed as 'likely' and 'possible' as they progress through to the Committed stage. However, the growing incidence of project schedule delays is likely to result in a more rapid decline in the stock of mining investment. over the medium term there is less certainty about the scheduling and feasibility of projects, which makes it difficult to assess projects in early stages of development as 'likely'. the potential for schedule delays and decisions to reassess project parameters will be a key risk to the investment outlook, which has been based on current announced schedules. It is evident that australian project proponents are starting to delay project schedules as they review their feasibility studies to account for current market conditions. In an environment of low prices, it is likely that project schedules will continue to be delayed in the near term. as project proponents revise their timelines and projects are delayed the profile of the stock of investment depicted in Figure 12 is expected to shift further to the right. It is important to note that business investment is cyclical. While the stock of investment in the sector is declining, there remains the potential for further investment in the future. australia has many world class mineral and energy deposits that can be developed when market conditions permit. the cost pressures that have affected the sector are beginning to abate in response to reduced construction activity and cost-cutting measures undertaken by companies. In addition, proponents are reassessing the plans for projects that are currently on hold, such as the scale of the project or its mining methods, with a view to reducing capital costs. these revised plans may better position the project in a climate of lower commodity prices in the future. looking forward, australia will continue to compete with other resource-rich countries to secure investment to allow the development of new projects. to secure a share of this investment, australia will need to remain a leading destination for attracting capital. For the full report visit http://www.bree. gov.au/files/files// publications/remp/ remp-2014-10.pdf © Commonwealth of Australia 2014 Barber, J., Penney, K., Witteveen, B., 2014, Resources and Energy Major Projects, October 2014, Bureau of Resources and Energy Economics, Canberra, November 2014 49 www.miningreview.com.au / Issue 11 / AUST R A L AS I A N M I N I N G R E V I E W

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