Some planned mega-mining projects are at risk of being shelved due to a slowdown in Chinese metals/minerals demand, rising costs, and Australian politics, warns Deloitte Access Economics.
RENO (MINEWEB) – A report by one of Australia’s leading private-sector economic forecasters says the mining investment boom is about to peak and a slowdown is on the horizon within the next two years.
The quarterly Deloitte Access Economics Business Outlook highlighted the broad trend of “the increasing realization that China is no a permanent gravy train. Its future growth is less certain-perhaps particularly so in the short term-and its long term growth may be less resource intensive than some commentators had earlier expected.”
“Costs have risen fast and potential profits are being dialed down as commodity prices deflate and analysts reassess both shorter and longer term commodity demand from emerging Asia. That doesn’t necessarily say that some of the next found of mega mining projects may not get the green light,” said Deloitte Access.
Among the major mining projects now underway are Newcrest’s A$1.9 billion expansion of the Cadia East gold mine near Orange NSW, Xstrata’s A$1.1 billion Ulan Underground coal mine; the $900 million upgrade of the Newcastle coal terminal; BHP Billiton’s $4.2 billion Caval Ridge coal project in Queensland and the five and sixth stages of its Rapid Growth iron ore project, costing $6.7 billion and $3.2 billion, respectively, in Western Australia; and Fortescue’s $4 billion Solomon iron ore project also in Western Australia.
Nevertheless, the report noted, “Mining companies are making it clear the current spike in investment is due to decisions taken a while back, whereas we are getting few new mining mega-projects across the line.”
South Australia’s resource-related economic pick-up is threatened in particular if the Olympic Dam expansion gets pushed backed further in time. “The state is blessed with a world-class resource in Olympic Dam, and the economics will stack up at some stage for the mining sector to invest something like $20 billion (perhaps even $30 billion) to bring that potential to fruition.”
“Yet the timing of the Olympic Dam go ahead-something that had seemed on the cusp of being announced for some time-has been put into question by recent developments. Some of those are simply broader economic trends such as the strength of the $A. Other things equal, the $A makes building and operating a mine in Australia a little less competitive versus alternatives elsewhere,” said the report.
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