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Cyclical challenges for mining



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M edia Release

GPO Box 1563, Canberra ACT 2601 Facsimile (02) 6272 2001

International code 616

http:/ / www.abare.gov.au

#OL99/21

18 March 1999

Cyclical challenges for mining

In speaking at the Minerals and Energy Overview session held in conjunction with the minerals and energy breakfast at Outlook 99, Mr Malcolm Broomhead, CEO of North Limited, reminded delegates that the Australian mining industry ‘is in a cycle, albeit a vicious one.’ In terms of minerals demand, he pointed out that the current downturn is not as severe, as those prompted by the oil shocks and the collapse of the Soviet Union. However, a range of extra costs, including environmental costs and those related to land tenure, ‘point to a period of shakeout in the industry’. Mr Broomhead said that companies which adapt best and change will emerge as winners when prices recover.

In his address, Mr Phillip Crowson, UK-based minerals economist and author, suggests that structural trends in the metals industry toward larger projects and the economics of high capacity utilisation, ‘have made the production of most minerals and metals ... even less flexible in response to changing market conditions’. As such, he points out that, ‘there will be a gradual attrition of [metals] supply, albeit more slowly than most people in the industry expect or hope ... Prices will then revive’.

Mr Satoshi Shiraishi, Managing Director of the giant Tokyo Electric Power Company, spoke on the dilemma facing Japan’s energy sector, Australia’s main energy export market. He noted that coal, while the cheapest fuel, is coming under pressure in ΜΓΓΙ forecasts because of greenhouse gas emissions. Mr Shiraishi noted that, ‘nuclear power is the basic pillar of Japanese energy projections produced by ΜΓΓΓ, but conceded that nuclear energy too faces

severe challenges in meeting future energy demand in Japan.

He also briefed delegates on important electricity market reforms in Japan which will lead to a substantial proportion of Japan’s electricity being supplied via competitive markets, with new independent power producers supplying a substantial share. ‘These market reforms may be expected to increase price pressures on Japan’s fuel suppliers in the future’, he noted.

Speakers at the Minerals and Energy Breakfast session, ‘Resources in Asia’, featuring an address by Senator the Hon Nick Minchin, Minister for Industry, Science and Resources, were: Mr Malcolm Broomhead, Chief Executive Officer, North Limited; Mr Phillip Crowson, Minerals economist, author; and Mr Satoshi Shiraishi, Tokyo Electric Power Company.

For further information contact: During the conference, Margaret Day, OUTLOOK Media Centre on (02) 6276 5242 or 018 487 825 After the conference, Tom Waring, ABARE on (02) 6272 2050

ABARE acknowledges the support o f its major OUTLOOK conference partner, Cisco Systems.