Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Speech at the Mid West International Mining Forum, Burswood Entertainment Complex Perth, Western Australia



Download PDFDownload PDF

Minister for Resources and Energy, Minister for Tourism

Mid West International Mining Forum 22 November 2012

Burswood Entertainment Complex Perth, Western Australia

* Check against delivery

Introduction

Thank you for the invitation to speak at this inaugural forum.

I wish the Geraldton Iron Ore Alliance and the Mid West Chamber of Commerce and Industry the best of luck for the future of this event.

This conference takes place at a time of transition for Australian mining.

We are all well aware that international commodity markets, including for iron ore, have cooled.

However, the industry is still operating from a base of great strength, owing to its past record of achievement.

Mining contributed about seven per cent of Australia’s gross domestic product in 2010-11, a year in which we continued to be the world’s largest exporter of iron ore, with shipments worth more than $60 billion.

There was also $47.2 billion worth of capital expenditure on new mining projects during the year, up from $37.5 billion in 2009-10 and just $7.9 billion a decade ago.

As a result, mining’s share of Australia’s overall capital expenditure has increased significantly during the past ten years, from 12 per cent to almost 40 per cent.

It is expected that national production will rise by six per cent this year.

So, while the mood might be a little less buoyant than this time last year, there is still great cause for confidence.

The Mid West

It is not now widely known, except perhaps by most in this room, that the export of iron ore from Western Australia’s Midwest predated the development of the Pilbara iron ore industry.

In fact, mining commenced at Koolanooka in 1966 with its production shipped out of Geraldton until 1972.

Increased prices for iron ore - flowing from the growth in Chinese demand, coupled with the decision of the Gallop Government to increase the capacity of the Port of Geraldton - has enabled the region to re-establish its iron ore industry, with production accounting for 25 per cent of overall Mid West exports in 2011, to a value of $2.5 billion.

This figure will be further boosted by Gindalbie and Ansteel’s $2.6 billion Karara project, which has shipped in in excess of 250,000 tonnes of DSO ore since it despatched its first trainload in August this year, and has recently produced its first magnetite concentrate.

There are also significant supplies of mineral sands, talc, copper, zinc, gold and nickel through the region.

And there are encouraging signs in the energy sector too, including the recent announcement of possible oil and gas discoveries south of Dongara.

Of course, my portfolio interest in the Midwest extends beyond resources and energy.

Australia welcomed over six million international visitors in the 12 months to September 2012.

Around 100,000 of these came to the Midwest regions, covering the Coral Coast and the WA outback, spending almost $100 million in the region.

Domestically, 1.2 million overnight trips were made to the region, almost three quarters of these being for leisure and visiting friends and relatives.

Infrastructure

Central to the future of regions which currently export bulk commodities or have ambitions to do so, is ensuring we have adequate infrastructure to facilitate new investment in production.

The Bureau of Resources and Energy Economics (BREE) recently released detailed projections of national export commodity volumes under different scenarios, as well as the infrastructure needed to support them.

This analysis indicated that, outside the Pilbara, future growth would largely occur in areas like the Mid West.

Areas where there are already significant volumes of bulk commodities exported, or the infrastructure to support such exports is under construction or consideration.

It found existing infrastructure would not deliver planned projects and forecast jobs growth—this would only occur if new capacity was built on time and without major cost overruns.

The most significant project from the Mid West point of view is obviously the Oakajee Port and Rail development.

Page 1 of 3 Mid West International Mining Forum

30/07/2013 http://minister.ret.gov.au/MediaCentre/Speeches/Pages/MidWestInternationalMiningF...

Oakajee is currently envisaged as a 45 million tonne per annum port and 570 km haulage rail line to link regional mines to the port.

The Western Australian and Australian Governments each committed $339 million to develop common user infrastructure at the site.

The recent approval of environmental management plans was a major step forward for the project, though this has of course been overshadowed by a number of setbacks, culminating in Oakajee’s indefinite shelving earlier this month.

This is an unfortunate turn of events and a significant concern for the Australian and Western Australian governments, not to mention the local community.

However, we must remember that there are always challenges and often delays in fully developing large-scale mineral provinces.

Just as in political life, it is often better to accept an outcome that is not all that you had originally hoped for, in order that your ultimate goal will be achieved, so it is with visionary projects.

Recognising that the management of bulk commodity ports and port ownership structures is particularly complex, and aligning the interests of various stakeholders is crucial in ensuring they operate efficiently.

Given the largely state nature of the Oakajee project, may I suggest that those involved give consideration to the possibility that a series of less ambitious outcomes might improve the likelihood of achieving the long term vision.

Let me also say that the long term vision I have is not so much a port at Oakajee - which I see as an essential means to an end - but as a Mid West home to as many as 300,000 people by 2031.

This would see Geraldton continuing to grow as a self-sustaining city where people can pursue specialist careers and tertiary education, and families need no longer see their children and grandchildren leave for Perth.

As grades from direct shipping ores decline, I can see Geraldton develop as a centre of excellence in the mining and beneficiation of magnetite ores.

The development of a more substantial regional centre, outside the south-west corner of the state, could also see positive outcomes such as increased domestic tourism.

The key to achieving this will be retaining the industry’s attractiveness to investment, especially from international sources.

Australia’s Foreign Investment Review Board received 222 resources proposals in 2010-11, to a value of $54.9 billion.

This is a strong level of interest, but unfortunately down from the 248 proposals submitted in the previous year.

We must acknowledge that we are competing in a very heated market and must work harder than ever to avoid valuable capital flowing to our competitors.

Central to our competiveness will be controlling costs and ensuring continual improvements in productivity.

Efficiency

As all in this room know there are significant and growing cost pressures across the whole mining industry, from iron ore to gold.

In this regard I hope that the lessons learned from the Karara project, which following a major review part-way through, was completed in accordance with the revised budget and time schedule, are made known widely.

It is important that our skills in project delivery and cost control improve - skills are particularly vital to the future of the Mid West, given the grade of ores and capital intensity of iron ore developments in this region.

Of course the development of projects like Oakajee based on an integrated logistics chain can make exporting resource commodities much more efficient.

Advances in mining technology can also play a major role in limiting expenditure.

Governments can support these efforts by reducing the regulatory burden on projects.

At the most recent Council of Australian Governments (COAG) meeting, the Federal and state and territory governments agreed to tackle green tape, or unnecessary environmental regulation, as a priority.

This led to the formation of the National Productivity Compact: Reform for a More Competitive Australia, which commits to continued consultation with business in developing a new environmental protection agenda.

It also promotes improved governance to ensure reforms don't detract from proper environmental management.

There is considerable room to remove the duplication and cumbersome nature of regulation, particularly where there is overlap between different levels of government.

The Government is well aware these can cause unnecessary delays and investment uncertainty.

Federal, state and territory treasury departments are now investigating benchmarking major development processes against international best practice.

This will consider timelines for approvals, the cost of administration and compliance, and additional costs arising from conditions imposed on projects.

The COAG Business Advisory Forum is also looking to reducing regulatory burden in carbon reduction and energy efficiency schemes.

Employment

Achieving the potential of our resources industry also depends on having the workers needed to deliver on the pipeline of new investment being created.

Skills Australia estimates mining operations across Australia will need an additional 89,000 workers in the five years to 2016 to meet expected construction and operation of new projects.

Here in Western Australia the Chamber of Minerals and Energy indicates the workforce for resources projects will peak at more than 119,500 this year, which is about 43,800 above the 2009 level.

The Mid West will feature prominently in this, with amongst the highest labour force growth rate in the state—the region expects to gain an average of 4500 construction and 10,800 operational jobs annually in coming years.

A partnership between the Federal, state and territory governments, industry, training organisations and other stakeholders is tackling these needs through the National Resources Sector Workforce Strategy.

Page 2 of 3 Mid West International Mining Forum

30/07/2013 http://minister.ret.gov.au/MediaCentre/Speeches/Pages/MidWestInternationalMiningF...

This strategy contains a range of actions such as planning and information sharing, training more tradespeople and university graduates, and linking education within industry.

It also acknowledges that the Australian labour market will not always meet peak demands, and contains a number of resources-specific initiatives to facilitate skilled migration.

This includes Enterprise Migration Agreements, or EMAs.

EMAs are a custom-designed, project-wide migration arrangement uniquely suited to resources industry requirements during the construction phase.

They apply to projects with capital expenditure of more than $2 billion and a peak workforce above 1500.

The Government is committed to ensuring Australian employees have the first opportunity to fill vacancies, and has created a jobs board to advertise opportunities that exist in communities around resources projects.

We also require successful EMA applicants to implement training commitments that contribute to the future skills needs of the resources sector.

The first EMA issued covers the Roy Hill mine here in Western Australia.

The project will provide up to 2000 training places for Australians, including more than 230 apprentices and trainees, and preparing 110 Indigenous Australians to work in the construction industry.

This last outcome is highly important and I note that training and employing Indigenous Australians is also a core objective of the Geraldton Iron Ore Alliance.

Mining activity in the Mid West has already achieved important goals in this respect.

Indigenous Australians, including traditional owners, are spurning welfare and looking at more lasting approaches to solving disadvantage in their communities.

They are seeking to develop their own businesses or explore joint venture or contractor arrangements with exploration, mining companies and service providers.

Prominent Indigenous-operated companies active in the Mid West include Yamatji Mining and Civil P/L.

I encourage all industry members to continue translating corporate goals into on-the-ground results in these ways.

Conclusion

I would like to thank the Alliance and all Mid West miners for the hard work you put into promoting the industry.

Your support will become increasingly important in light of the changing market conditions and in seeing Oakajee and other major developments come to fruition.

Despite a few recent setbacks, I believe there is a strong future in the Mid West and in the entire Australian resources industry.

Thank you.

Page 3 of 3 Mid West International Mining Forum

30/07/2013 http://minister.ret.gov.au/MediaCentre/Speeches/Pages/MidWestInternationalMiningF...