4. Projects

Overview

From 2003 to 2012, mining companies invested around $150 billion in over 330 minerals projects in Australia. This record high level of investment has already supported substantial increases in Australia's production and export of mineral commodities. Moreover, with $60 billion-worth of projects under construction, there is still substantial growth in production of mineral commodities to come. Although the current phase of the investment cycle is approaching its peak, there remain substantial opportunities for further mining investment in Australia. The depth of Australia's mineral resource base, and its proximity to key markets, suggests that the prospects for future investment remain positive.

Mineral projects in Australia undergoing development, redevelopment or expansion are listed in Appendix 2 and shown in Figure 4.1. The list includes start-up dates, development stage, estimated new capacity and indicative start-up costs. In 2012, there were 88 publicly announced mineral projects in Australia (Table 4.1), 143 projects at feasibility stage (Table 4.2) and 40 committed projects (Table 4.3).

Table 4.1 Publicly announced mineral projects in Australia 2012.
  No. of Projects Range ($m)
Source: Bureau of Resources and Energy Economics.
Aluminium, Bauxite, Alumina 4 2500 – 4500
Coal 19 24 335 – 28 085+
Copper 6 7503 - 9253
Gold 12 1779 – 2279+
Iron ore 19 35 400 – 55 650+
Lead, Zinc, Silver 4 135 - 635
Nickel 5 2500 – 5000
Uranium 4 2170 – 4170
Other Commodities 15 1000 – 2000
Total 88 77 322 -111 572
Table 4.2 Mineral projects at feasibility stage in Australia 2012.
Commodity No. of Projects Value ($m)
Source: Bureau of Resources and Energy Economics.
Aluminium, Bauxite, Alumina 3 3780
Coal 57 56 695
Copper 9 3088
Gold 12 1621
Iron ore 21 46 542
Lead, Zinc, Silver 2 417
Nickel 7 5490
Uranium 5 2100
Other Commodities 27 8882
Total 143 128 615
Table 4.3 Mineral projects committed to in Australia 2012.
  No. of Projects Value ($m)
Source: Bureau of Resources and Energy Economics.
Aluminium, Bauxite, Alumina 0 0
Coal 16 14 194
Copper 2 343
Gold 6 1416
Iron ore 8 22 022
Lead, Zinc, Silver 4 1933
Nickel 0 0
Uranium 1 98
Other Commodities 3 1595
Total 40 41 601

Throughout this section, a quantity in brackets after a project name is the estimated new yearly capacity; likewise, a dollar value in brackets after a project name is the indicative cost estimate, e.g., Hera (50 000 oz, $74 million).

Bauxite Projects

Investment in bauxite mines over the past 10 years has been low with growth in production coming mainly from higher production rates at existing mines as opposed to investing capital in the development of new sites. Since 2003, only two major bauxite projects have been developed in Australia: Rio Tinto's $235 million Weipa mine expansion in northern Queensland and Bauxite Resources Ltd's $50 million Darling Range project in Western Australia.

There are currently five bauxite projects being planned in Australia but there are no projects currently under construction. Three projects are at an early planning stage including Bauxite Resources's Aurora mine in Western Australia (2 Mt), Cape Alumina Ltd's Bauxite Hills project in northern Queensland (5 Mt) and Australian Bauxite Ltd's Goulburn Bauxite Project in New South Wales. The two projects at a more advanced planning stage are Cape Alumina's Pisolite Hills project (7 Mt, $380 million) and Rio Tinto's South of Embley project (22 Mt, $1.4 billion). Both are located near Weipa in Queensland and could deliver substantial economic benefits to the region if approved for development.

Black Coal Projects

Growing demand and higher coal prices over the past 10 years have resulted in 77 coal mining projects with a combined investment value of $24 billion being developed in Australia. Of these 77 projects, there are 16 with a combined value of $14.2 billion that are still under construction, along with a further $8.2 billion of coal-related infrastructure projects. When completed, these projects will increase Australia's black coal production capacity by around 60 Mt per year.

Included among these projects are the BHP Billiton Mitsubishi Alliance's Caval Ridge and the just-completed Daunia mines in Queensland that will be among some of the largest metallurgical coal-producing mines in the world when completed. In New South Wales, Glencore Xstrata plc has invested over $2.4 billion on expansions to its Ravensworth North and Ulan West mines, which combined will provide over 14 Mt of thermal and semi-soft coal per year at full production.

Although growing construction costs and adverse market conditions over the past two years have resulted in a slowing in the rate of coal project approvals, there remains a substantial number of coal projects still being developed in Australia that could provide reliable, high-quality sources of black coal to world markets. There are 76 black coal projects currently being planned in Australia, 57 of which have at least completed a preliminary feasibility study and are developing more detailed project plans to gain regulatory and corporate approvals. These 76 planned projects have a combined value of over $81 billion and production capacity of over 520 Mt of both thermal and metallurgical coal per year.

Many of these planned projects are located in the existing coal-producing regions of New South Wales and Queensland. These planned projects include a mix of expansions to existing mines and new mines and can take advantage of already existing infrastructure. While further expansions of the coal terminals at the Port of Newcastle have been delayed, there still remains sufficient capacity at the recently expanded Newcastle Coal Infrastructure Group and Kooragang Island terminals to accommodate production growth from planned projects such as Whitehaven Coal Ltd's Maules Creek (10 Mt, $766 million) and Shenhua Energy Co Ltd's Watermark (6 Mt, $978 million) mines in the Gunnedah basin of New South Wales. Similarly, core export infrastructure already exists that could support planned projects in the Bowen basin in Queensland.

There are also a number of high-value new mines being planned in the Galilee basin in Queensland. One of the key advantages of these greenfield developments is that they are larger mines that can deliver lower costs of production through economies of scale and integrated management of the mine site, rail system and port. Significant mines being developed in the Galilee Basin include Adani Mining Pty Ltd's Carmichael mine (60 Mt, $7.1 billion), Waratah Coal Pty Ltd's Galilee Coal Project (40 Mt, $8 billion including infrastructure), GVK Industries Ltd's Alpha Coal Project (30 Mt, $10 billion including infrastructure) and Bandanna Energy Ltd's South Galilee Coal Project (17 Mt, $4.1 billion). If these projects are developed, together they would increase Australia's thermal coal exports by around 150 Mt per year and potentially provide the infrastructure for additional mines being planned in the region.

Copper Projects

Over the past decade, there has been more than $5 billion invested in 21 major copper projects in Australia. This investment comprises 14 projects to develop new mines, such as Sandfire Resources NL's DeGrussa mine (77 kt, $390 million) in Western Australia and Glencore Xstrata's Cloncurry project (28 kt, $300 million) in Queensland, and seven expansions to existing mines such as the Northparkes mine in New South Wales and Glencore Xstrata's Ernest Henry mine in Queensland.

There were two copper projects still under construction in Australia as at the end of April 2013. Although this number is lower than in recent years, there are also 15 projects with a combined value of over $10 billion being planned. The most significant of these is BHP Billiton Ltd's Olympic Dam expansion in South Australia. This project was delayed in 2012 to allow new, less capital-intensive designs to be considered, however, it still remains one the most significant projects being developed in Australia and is still expected to involve an investment of more than $5 billion. Previous plans targeted not only a doubling of copper production at the mine, but also substantial increases in gold and uranium production.

The next two largest copper projects under development are also located in South Australia. They are OZ Minerals Ltd's Carrapateena (100 kt) and Rex Minerals Ltd's Hillside (80 kt) mines. These projects are comparable to Olympic Dam and many other copper mines in that they are targeting significant gold production in addition to copper. Although not on the same scale as some of the very large copper mines being developed in other parts of the world, these projects still have very good prospects for producing large quantities of copper for export to key markets in the Asia-Pacific region.

Gold Projects

Over the past 10 years, there have been 56 gold projects undertaken in Australia to develop new mines or extend existing operations. This is second only to iron ore in terms of the number of projects, however, the value of gold projects is considerably lower at around $8.8 billion. This is because many gold projects are lower in cost owing to their shorter project life and because they can operate economically on a much smaller scale. However, there have been some very large investments made in Australian gold mines in the past ten years, such as Newmont Mining Corp's $2 billion Boddington mine in Western Australia and Newcrest Mining Ltd's $1.9 billion Cadia East mine in New South Wales.

There are currently six gold projects under construction in Australia that have a potential combined output of around 1 Moz and total cost of $1.4 billion. The $750 million Tropicana joint venture between Anglo Gold Ashanti and Independence Group NL in Western Australia is the largest of these projects. Valued at $845 million it will produce around 480 000 oz per year when it ramps up to full production.

In Australia, there are 24 projects worth around $4 billion being developed that are targeting gold as a principal resource. This includes high-value projects such as Vista Gold Australia Pty Ltd's Mt Todd project ($656 million) in the Northern Territory and Bullabulling Gold Ltd's Bullabulling project ($346 million) in Western Australia as well as nine projects that will each cost less than $100 million and target lower production levels. There are an additional 10 projects that could produce gold while extracting other minerals such as copper. The largest of these are BHP Billiton's multi-billion dollar expansion to the Olympic Dam mine and OZ Minerals's Carrapateena mine, both located in South Australia.

Iron Ore Projects

Iron ore mining and related infrastructure projects have been one of the main drivers of the mining investment boom, with more iron ore projects committed to in Australia than projects for any other mineral over the past 10 years. Since 2003, 58 iron ore projects, with a combined value of around $70 billion, have been committed to in Australia with projects worth $35 billion currently under construction. Some of the largest single-project investments have included Citic Pacific Ltd's Sino Iron Project ($8.4 billion), BHP Billiton's Western Australia Iron Ore Rapid Growth Project 5 ($5.5 billion) and Rio Tinto's Cape Lambert port expansion ($4 billion). All of these projects are located in the Pilbara region of Western Australia. There has also been a substantial investment of over $11 billion by Fortescue Metals Group in greenfield developments and infrastructure in the Pilbara region, which has established the company as one of the largest iron ore producers in the world.

Mines developed in the Pilbara have some of the lowest operating costs in the world as a result of project proponents' investment in innovative technology and single-user infrastructure. For example, Rio Tinto's use of driverless trucks as well as its ownership of both rail networks and port terminals have contributed to an average cash cost of under $40 per tonne for its Pilbara iron ore operations.

Although market volatility in 2012 led to a number of iron ore projects being cancelled, such as BHP Billiton's Outer Harbour development at Port Hedland, there are still 52 iron ore projects with a combined value of over $90 billion being planned for development in Australia. While it is not expected that all of these projects will proceed through to construction, significant opportunities remain for further investment in iron ore projects in Australia.

One of the largest of these planned iron ore projects is Hancock Prospecting Pty Ltd's Roy Hill project in the Pilbara. If it receives a positive final investment decision, this $9.5 billion project could support around 55 Mt of additional (hematite) iron ore being exported from Australia and provide up to 3600 jobs during construction and 2000 ongoing jobs when the mine is operating. Although still in early stages of planning, the three principal iron ore producers in the Pilbara (Rio Tinto, BHP Billiton and Fortescue Metals Group) have plans to further expand the capacity of their operations by a combined total of 210 Mt under the right market conditions.

Western Australia is not the only state with iron ore projects planned. South Australia currently has five iron ore mining projects and two related infrastructure projects under development that have a combined value of over $6 billion. If these projects were developed, they could produce up to 25 Mt of magnetite concentrate, which generally attracts a premium price for its higher iron content.

Nickel Projects

Record high nickel prices have supported the development of a number of new nickel mines, as well as expansions to existing operations, over the past ten years. However, there has been a noticeable decline in nickel-mine investment since the global financial crisis (GFC). This has coincided with nickel prices dropping from around US$50 000 a tonne in 2007 to less than US$15 000 a tonne in 2013.

There were 17 nickel projects, with a combined value of more than $5 billion, committed to and completed in the ten year period from 2003 to 2012. The majority of these projects have been located in Western Australia; with Avebury in Tasmania and Lucky Break in northern Queensland the only two projects not in that state.

Most of the 17 nickel projects commenced construction prior to the start of the GFC in 2008. This included BHP Billiton's Ravensthorpe operation ($2.6 billion) and the Yabulu refinery expansion ($731 million), and Western Areas Ltd's Forrestania project (stages 1 & 2, $165 million). There have been four nickel projects committed to since the GFC, including a redevelopment of the then mothballed Ravensthorpe project by new owner First Quantum Minerals Ltd in mid-2010 and Western Areas's Spotted Quoll mine in mid-2009.

There are currently plans to develop 12 nickel projects in Australia. These are mainly new mines in Western Australia, such as Norilsk Nickel Group's Honeymoon Well (45 kt) and Metals X Ltd's Wingellina (40 kt) projects; however, current market conditions make the schedule for such projects uncertain. In the short term, it is more likely that mines that have recently been placed on care and maintenance will restart to fill any supply shortfalls in world nickel markets.

Uranium Projects

Restrictions on exploration and production have limited the development of uranium projects in the past decade. Regulatory changes in Western Australia and Queensland now permit for uranium mines to be developed, while changes to exploration policies in New South Wales may allow mine development in the longer term. Although regulatory barriers have eased, uranium miners are currently faced with challenging market conditions following the Fukushima reactor incident in 2011 and subsequent idling of most of Japan's nuclear reactors. Current low uranium prices are not supportive of many projects proceeding, even though the long-term outlook is for substantial growth in uranium consumption as a result of rapid expansion in China's nuclear power industry, coupled with the winding down of the "megatons to megawatts” program resulting from disarmament agreements over the past 20 years.

The Four Mile project is the only uranium mine currently under construction in Australia. This joint venture between Quasar Resources Pty Ltd and Alliance Resources Ltd is located near the existing Beverley uranium mine in South Australia and is targeting an eventual production level of 2300 tonnes per year. BHP Billiton's Olympic Dam expansion, also located in South Australia, is one of the most important uranium projects being planned around the world. As one of the largest known uranium deposits, production from this site will be critical in supplying the forecast growth in nuclear power generation over the next decade. Another of Australia's existing uranium mines is also subject to plans for redevelopment. Energy Resources Australia Ltd is currently developing plans for a new underground mine to replace its closed open cut mine at its Ranger mine in the Northern Territory. If developed, this new underground mine could extract around 3000 tonnes of uranium oxide a year from 2015.

Toro Energy Ltd's Wiluna project (820 tonnes, $280 million) is the first uranium project in Western Australia to gain both Federal and state government approvals and could be the state's first operating uranium mine. Cameco Corp's Kintyre and recently acquired Yeelirrie projects are also being developed in Western Australia. With planned production levels of around 3500 tonnes a year, these projects are some of the largest planned uranium mines in the world. However, like many uranium projects, their development has stalled due to current market conditions.

In Queensland, projects such as Summit Resources Ltd and Paladin Energy Ltd's joint venture Valhalla mine (4100 tonnes) and Laramide Resources Ltd's Westmoreland mine (1400 tonnes) are still in early planning stages, but recent regulatory changes that allow uranium mining could result in them starting production in the medium term.

Figure 4.1 is a map of Australia showing the locations of major mineral projects in 2012. Developmental hotspots are clustered around the Pilbara region of Western Australia, the Gladstone to Townsville region of Queensland and the Newcastle-Hunter region of New South Wales. All the projects, their locations and details are listed in Appendix 2.

Figure 4.1 Major mineral projects in Australia 2012.
Source: Bureau of Resources and Energy Economics.