State’s mining output rebounds

Western Australia’s resources sector is continuing to experience exponential growth, despite the volatile state of the world economy, a new report has shown.

The ‘WA Resources and Economics Report’, compiled by the Chamber of Minerals and Energy of Western Australia in conjunction with KPMG, has shown a rebound in production levels, an increase in the export value of several commodities and increased expenditure on exploration projects for the June quarter. 

An expected surge in resources investment in WA, coupled with a very strong outlook for commodity exports, have resulted in a forecast gross state product (GSP) of 4.3 per cent for the 2011-12 year and 6 per cent for 2012-13.

These forecasts were bullish compared to those outlined in the Treasury’s ‘Economic and Fiscal Outlook’ released in May, which predicted GSP growth of 4 per cent for both 2011-12 and 2012-13.

CME chief executive Reg Howard-Smith said there was strong growth in WA production of major minerals in the 2011 June quarter, compared to the previous quarter, which was significantly affected by cyclonic weather. 

“This growth in production was also supported by several expansion projects coming on line, especially in iron ore which translated to a 15.4 per cent increase in export value for that mineral,” Mr Howard-Smith said.

Iron ore production was supported by increases in output at several Pilbara mines, including the ramp up in production from 40 to 55 million tonnes at Fortescue Metals Group’s Chichester Hub. 

The report also showed an increase in nickel, gold, liquefied natural gas and bauxite production. Nickel production increased 16.4 per cent for the June quarter to 54 kilotonnes. Iron ore output was up 14.8 per cent to 117 megatonnes. 

The increase in nickel production was attributed to a strong performance from BHP Billiton’s Nickel West mines and Western Area’s Forestania mines. 

Mineral and petroleum exploration expenditure also rebounded strongly in the June quarter.

The largest increases in expenditure were on iron ore and copper, with a total spend of $190 million and $21 million respectively, compared to $124 million and $16 million in the previous financial year.

Collectively, BHP Billiton, Rio Tinto and Fortescue Metals Group have invested more than $30 billion in their current iron ore expansion projects. 

Aside from iron ore, significant investment has gone into other projects, including an $803 million investment to extend the mine life of Rio Tinto’s $1.6 billion Argyle Diamond Mine and a $740 million investment in the construction of AngloGold Ashanti Australia and Independence Group’s Tropicana Gold Mine. 

Meanwhile, the report said the engineering construction spend in the state was looking robust over the medium term, with resources-related construction projects expected to drive activity over the next few years.

With the continued construction of mining facilities in WA, engineering construction was expected to rise from $24 billion in 2009-10 and peak at $40 billion in 2013-14.

The continuation of the Gorgon gas development and the future development of the Roy Hill iron ore and Wheatstone LNG projects would boost engineering construction to a high level, the report said. 

Chevron’s $29 billion Wheatstone gas plant received the final go-ahead last week, while Woodside’s James Price Point expansion project and Japanese company Inpex’s Ichthys gas field development still face hurdles.