2017 review of mineral and petroleum industry activity
Key indicators of the overall performance of the resources sector include the number of people employed, the level of investment and exploration activity, royalties received by the State Government and the number of principal mining projects.
According to data collected by DMIRS’ Resources Safety Division, the average number of persons employed in the Western Australian minerals sector in 2017 was 111,236. This was an increase of six per cent from last year. This is slightly higher than the previous peak in 2013, however total number of hours worked in the industry is approximately 17 per cent lower than in that year. The lower number of hours worked per person may be reflective of a trend towards contract workers; a move away from extremely long FIFO rosters which were common during project construction; or a combination of factors.
The average number of people employed by the State’s onshore petroleum sector has improved slightly from last year, increasing from 1,100 to 1,2671.
This figure comprises only operations subject to State petroleum legislation, and excludes LNG operations and land based service operations.
More than $20 billion was invested in Western Australia’s mining industry in 2017, representing just under 55 per cent of national expenditure.
Nationally, mining investment has fallen over 60 per cent in four years. The decline has been slightly less severe for Western Australia, with mining investment falling 56 per cent over the same period.
The substantial decline in investment is largely the result of the completion of major, multi-billion dollar projects committed to during the recent iron ore and LNG boom. Despite the relative lack of new investment in projects of this scale in these sectors, interest and investment in new sectors, such as lithium, continues to improve, and established industries such as gold and iron ore remain steady, if at a smaller scale.
While investment levels seen during the peak of the commodity cycle are unlikely to be repeated in the near future, the investments that are continuing are enough to ensure continuity of employment and royalties in Western Australia.
In monitoring investment activity in Western Australia, DMIRS also collects information on mineral and petroleum projects to estimate actual and possible investment. Where possible, information is collated relating to expected capital expenditure, project timing and employment during both the construction and operation phases.
As of March 2018, Western Australia had an estimated $103 billion worth of resource projects in the pipeline, down substantially from the September 2017 estimate of $148 billion. The majority of this decrease can be attributed to the completion of the Wheatstone LNG project between estimates.
A number of new projects have been announced recently including:
- Albermarle’s Kemerton lithium processing plant ($425 million)
- Diatreme Resources’ Cyclone Zircon Project ($161 million)
- Image Resources’ Boonanarring and Atlas Mineral Sands projects ($52 million)
- Capricorn Metals’ Karlawinda Gold project ($146 million)
- Tronox’s Dongara and Cooljarloo West mineral sands projects ($220 million).
The value of projects under construction or in the committed stage of development was an estimated $54 billion, down from $96 billion in September 2017. The value of planned or possible projects remained steady, from $49 billion to $50 billion over the same period.
The near future will see Shell's Prelude FLNG project and Inpex's Ichthys project completed, removing the last of Western Australia's wave of new LNG supply projects from the pipeline (both are expected to start production in 2018). The completion of these (and other) major projects will see the value of the State’s committed and under construction projects list decline by approximately $45 billion.
The completion of these projects will represent the end of the investment that could broadly be characterised as resulting from multi-billion dollar “megaprojects” spawned during the recent iron ore and LNG super cycle. Western Australia’s investment pipeline is expected to return back to a more typical makeup, with a large number of small and medium sized projects in a diverse range of commodities making up the bulk of investment. This change has already begun, with potential investments in gold improving 13 per cent, and lithium improving an enormous 172 per cent. Growing interest in newer sectors such as lithium and potash are also positive given the extent to which downstream processing is anticipated to occur in Western Australia.
Mineral and petroleum projects are categorised as follows:
- Projects under construction – those actually under construction.
- Committed projects – company has reached a final investment decision (FID)
- Planned projects – those undergoing advanced feasibility studies including definitive and bankable feasibility studies and Front End Engineering and Design (FEED).
- Possible Projects – comprise those raising capital but not yet conducting definitive and bankable feasibility studies.
Exploration expenditure and drilling activity is another indicator of the health of the minerals and petroleum industry. DMIRS currently reports data collected by the ABS around exploration expenditure, exploration by commodity and the location of drilling activity, i.e. whether it is occurring at new or existing deposits.
Australia’s mineral exploration expenditure was $1.75 billion in 2017, up from $1.42 billion in 2016. Western Australia contributed over $1.1 billion of this spend with the gold and iron ore sectors attracting the largest share. Gold exploration expenditure in Western Australia surged from $445.9 million in 2016 to $550.4 million in 2017, a new record. Iron ore exploration remained relatively steady, from $278.6 million to $280.2 million. Reflecting the slowly recovering nickel market and the surging cobalt price, exploration expenditure for these commodities doubled in 2017, adding $47.4 million.
National petroleum expenditure continued to decline, down from $1.4 billion in 2016 to $1.2 billion in 2017. Western Australia typically attracts 60 to 70 per cent of Australia’s petroleum exploration spend however this dropped to 40.6 per cent this period. The decrease in the State’s share is due to Quadrant’s aggressive 2016 drilling campaign ending at prospects in Western Australia and the start–up of a drilling campaign by ConocoPhillips at the off the coast of the Northern Territory.
A summary of total capital expenditure by commodity is provided however, it should be noted that investment in several projects is publicly reported in US dollar terms and the data may therefore vary over time in line with movements in the US$/A$ exchange rate.
The Western Australian Government received royalty revenue from the State’s mineral and petroleum producers totalling $6.06 billion in 2017, an increase of 28 per cent on 2016.
Iron ore provided the bulk of collections (80 per cent) for 2017 with strong prices and volume growth during the year, increasing iron ore royalty collections 33 per cent year–on–year. The gold sector was the second largest contributor, and also recorded growth, with royalty receipts totalling $267 million for 2017, an increase of over 5 per cent for the period. Other major mineral areas included alumina ($87 million, 13 per cent higher than 2016), base metals ($67 million, 32 per cent higher than 2016) and nickel ($51 million, 8 per cent higher than 2016).
Petroleum royalty receipts were up substantially in percentage terms, with a 20 per cent improvement on 2016, but the relatively low base set in the previous year meant that total receipts remained historically low at $4 million.
The State also received grants for North West Shelf projects which accounted for 10 per cent of Western Australia’s royalty receipts with $622 million, nearly 10 per cent higher compared with 2016.
It should be noted that royalty receipts are offset compared to sales value figures. Royalty receipts are reported for the December quarter in 2016 and the March, June and September quarters in 2017.
For an overview of how Western Australia’s key commodities performed, please see Mineral and Petroleum Commodity Review 2017.
Principal mining projects
Western Australia’s 116 principal mining projects produced 99 per cent of the industry’s total production, by value, of $85.9 billion in 2016-17.
The number of principal mining projects is up marginally from 114 in 2015-16, and 113 in 2014-15.
The number of principal gold projects has increased from 33 in 2014-15 to 43 in 2016-17 due to the commencement of new operations over the last few years including:
- Kalgoorlie North
The number of principal iron ore projects has declined from 36 in 2014-15 to 29 in 2016-17 with the Nullagine JV, Cockatoo Island, Ridges and Koolanooka-Blue Hills all ceasing operations amid challenging market conditions. Other operations have reached the end of their life including Mt Dove, Phil’s Creek and Spinifex Ridge. These suspensions and closures have been offset by the start-up of the Roy Hill project.
The number of principal mining projects for most other commodities has been fairly steady with the exception of tin-tantalum-lithium, which saw the start of three new projects – Mt Cattlin, Mt Marion and Wodgina – in 2016-17, and base metals due to the temporary suspension of Paroo Station and reduced sales from the reprocessing of heap leach ores at the Whim Creek copper project.
The nickel sector has also experienced challenging market conditions leading to the suspension of sales from the Mariners/Miitel and Lanfranchi projects. However, a positive development was the start-up of the Nova project.
For a listing by financial year of Western Australia’s principal mining projects, as well as the principal producers of basic raw materials and the State’s major mineral processing projects, please see the series of files below.
Each principal mining project produced commodities valued at over $5 million (or more than 2500oz of gold). Projects on private land, for which production values are not required to be reported, are included where employee numbers were greater than 50.
Hundreds of quarries and small mines also produce the basic raw materials required for the local construction industry including clays, construction materials (aggregate, gravel, rock and sand), dimension stone, gypsum, limestone, limesand and spongolite.
The State’s major mineral processing projects produce alumina, refined gold, nickel matte, silicon metal and titanium dioxide.