3 July 2013

Opportunities for British Companies in Australia’s mining industry

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Introduction

Australia is one of the world’s largest mining and resource producers, a key market for opportunities for UK mining and mining-related businesses

─ Broad economic backdrop─ Current status of the mining

boom─ Specific areas of UK opportunity

Presented by

Linda MilesTrade Development ManagerUK Trade & InvestmentBritish Consulate Perth

Ian HamiltonSenior EconomistBritish High CommissionCanberra

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MINING IN AUSTRALIA: AN

OVERVIEW

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Minerals and resources extracted in Australia

─ Iron Ore

─ Black Coal

─ Uranium

─ Nickel

─ Gold

─ Bauxite / Aluminium

─ Copper

─ Silver

─ Diamond

─ Opal

─ Zinc

─ Rare Earth Elements

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The Australian minerals sector

─ The resources sector has grown from 5% to 10% of the economy in

the last decade.

─ World’s leading producer of bauxite, alumina, rutile and tantalum

─ 2nd largest producer of lead, ilmenite, zircon and lithium

─ 3rd largest producer of iron ore, uranium and zinc

─ 4th largest producer of black coal, gold, manganese and nickel

─ 5th largest producer of aluminium, brown coal, diamonds, silver and

copper

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A$mWestern Australia

QueenslandNew South WalesSouth AustraliaVictoria

Geography

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Major Companies in Australian Mining

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MINING: A BROAD ECONOMIC BACKDROP

The Economy• Economy has expanded 13% since the financial crisis

• avoided recession and a banking crisis

• China’s growth, and demand for resources, a key factor

• Mining sector is the big beneficiary – Mining Boom

• High commodity prices

• Surge of mining investment

• Economic growth slowing to 2.5% in 2013

• China slowing, growth questions

• Commodity prices have fallen

• A$ has been at record highs, now falling.

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THE CURRENT STATUS OF

AUSTRALIA’S MINING BOOM

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Phases of the mining boom

Phase 1: a spike in commodity prices delivering

export revenue windfall (2006 – 2011)

Phase 2: a surge of new investment in mining

capacity has followed, set to peak this year (2010 –

2016)

Phase 3: will see a significant uplift in output up to

2016, as new projects complete and the number and

size of mining operations rises (2013 – 2020)

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So far…

─ Enormous capital expenditure - £185 billion in all

projects (most in LNG)

─ Nearly £50 billion in minerals sector investment

─ Mainly coal and iron ore expansions

─ Plus related infrastructure, transportation

processing.

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New mines & expansions – committed projects

No. of projects Value $mil (AUD)

Iron ore 12 26 204

Coal 17 14 360

Gold 9 3 548

Lead, Zinc, Silver 3 728

Copper 3 643

Uranium 1 98

Aluminium, Bauxite, Alumina 0 0

Nickel 0 0

Other commodities 6 3 268

TOTAL 51 48 849

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Rationalisation underway…

─ The investment phase winding down sharply, amid

reassessment of project viability.

─ Many projects now at feasibility stage are shelved or

scaled back

─ 50%+ of Australia’s mines have costs above global

averages

─ Mining companies strong focus on containing costs

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“The next round of minerals

investments in Australia will, almost

without exception, be captured only if

costs are decreased and productivity

is improved”

– Marius Klopper, CEO, BHP Billiton

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Latest market developments

Lower commodity prices, rising volumes, falling currency

Production capacity rising - Iron ore and LNG particularly

Coal and gold under most pressure:

Gold and thermal coal price falls

Production cuts at smaller higher cost operations.

Some marginal producers won’t survive

A$ falling – cushioning the impact of lower commodity

prices

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Despite the challenges…

• Australia remains a good place to do mining

business.

• US analysts Behre Dolbeare rank Australia No 1.

• The world’s safest destination for mining

investment due to: political, economic, tax and

regulatory conditions.

• UK enjoys rising exports of hi-tech equipment,

services

• Threats and opportunities…

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AREAS OF OPPORTUNITY

FOR UK COMPANIES

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The nature of opportunity shifting

─ As the mining boom moves from phase 2 to 3

in 2013, the nature of opportunities is shifting

─ The focus on cost-control is critical for

identifying opportunities

─ Hi-tech machinery, eg. Automated, remote-

control equipment.

─ UK export potential is not limited to mining-

specific goods

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UK Capabilities for the Australian Mining Sector

─ Exploration / Analysis

─ Engineering Services

─ Communications

─ Remote Control Technology

─ Decommissioning

─ Construction Equipment

─ Recruitment Services

─ Occupational Health and

Safety

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UK Companies succeeding in Australia

─ BHP Billiton

─ Rio Tinto

─ Wood Group

─ Anglo American

─ Arup

─ Amec

─ Kentz

─ BG Group

─ Murphy Group

─ Laing O’Rourke

─ JCB

─ Fenner Dunlop

─ Hays Recruitment

─ Landrover

The Procurement Process

─ Products are written into the design specification

in the early stages at pre-FEED

─ Identify Mining Companies, Engineers and

Contractors and build relationships with them

─ Local presence required

– branch office/agent/distributor/partner

─ UKTI can assist with contact names, introductions,

visit programmes, setting up

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Access to Projects: ICN Gateway

www.gateway.icn.org.au; www.projectconnect.com.au

─ Industry Capability Network

─ Online service, lists project opportunities, industry

suppliers, new business opportunities

─ Names of successful bidders published

─ Includes Mining Directory

─ Local presence required - Possibilities for

partnerships/JV’s with UK companies.

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Listed on Project Connect:

Roy Hill Iron Ore Project, Pilbara WA

Project Manager: Parsons Brinckerhoff Project Owner: Roy Hill Holdings Pty Ltd Constructor: Samsung C&T

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Projects under Consideration – QLD

• Carmichael Coal Project ($6.8bn)

Adani Mining. Feasibility Stage.

• Alpha ($10bn) and Kevin’s Corner ($4.2bn) Coal Projects

GVK/Hancock Coal. First coal 2016. Work package on ICN Gateway

• Galilee Coal Project ($8.8bn). First coal 2016

Waratah Coal. First shipment 2015

• South Galilee Coal Project ($4.2bn). At Feasibility Stage

Bandanna Energy.

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Projects under Consideration – WA

• Roy Hill Iron Ore Mine & Infrastructure ($9.5bn)

Hancock Prospecting. Production expected 2015.

• Oakajee Midwest Development ($4bn)

WA State Govt/private. On hold pending review.

• West Pilbara Iron Ore Project ($6bn)

Australian Premium Iron JV. First shipment 2015

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Conclusion

─ Australia: a global mining heavyweight undergoing rapid

resource expansion

─ Billions being invested in new capacity, but also

rationalisation

─ Potential exists for UK exporters but a fiercely competitive

market means Britain must play well to niche strengths

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What can UKTI Australia do for you?─ Local knowledge: Tailored, experienced, impartial advice to maximise your

chances of succeeding in Australia

─ Product launch: In one of our boardrooms, available in most capitals

─ Introduction service: To prospective business partners, Aust Govt.

─ Promotion: PR to local media, UKTI e-newsletters, and social media help

─ Test the Market: Reduce the cost, risk and time of establishing your business

in Australia by working in one of our business centres

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What next?

• Ask questions at the end of this or

follow the conversation on LinkedIn

• Keep in touch with

the latest Australian business oppo

rtunities

• Follow us on twitter @uktiaustralia

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Linda MilesLinda.Miles@fco.gov.uk

Ian Hamilton

Ian.Hamilton@fco.gov.uk