WA industries digging deep

WA’S resource industries have achieved improved returns in the past year, after the commodities slump caused largely by the Asian crisis.

Productivity has risen spectacul-arly, to offset a long-term fall in prices, but it is still awaiting the next construction boom.

The annual review of the resource industries, Bedrock of the Economy, produced by the WA Chamber of Minerals and Energy, shows Aust-ralian mining companies more than doubled their rates of return in 1998-99, to a still modest 3.7 per cent.

To survive, and even improve their performance, WA resource companies have increased their productivity by 150 per cent in the past five years, five times the rate of the rest of the non-rural economy.

As the authors of the survey point out, without such gains, miners would be in a poor state.

The chamber notes that 37 per cent of the State’s economy is accounted for by resources, compared with a national figure of 13 per cent.

It follows that we are essentially more a part of the global economy than the national one.

Not all the trends favour the local mining sector though. The study points out that increasingly Australian companies are being acquired by global giants, with a relatively small number of com-panies dominating each commodity.

Examples are the current, apparently successful, bid by De Beers for Ashton Mining,

Rio Tinto’s takeover of the Australian company North, and Billiton’s increased holding the Worsley alumina refinery.

In the Pilbara iron ore industry there are now only two producers, where there were once four.

The study says that a major factor in keeping prices – and profits – low is the number of marginal or unprofitable plants around the world.

These stay open for “social” reasons such as providing hard currency for a country, but they help keep commodity prices low.

A glimmer of hope is that producers are now demanding much higher returns from proposed ventures than existing ones and this offers the promise of improving industry performance.

Another crumb of comfort is offered in a paradox not usually noticed in WA mining exploration.

While it was true spending on this had fallen in recent years, one positive factor was that improved processing and exploration techn-iques had reduced the cost of finding new resources – we are getting more minerals for our dollar.

In the past decade, for example, the cost of finding mineral deposits had fallen by about half (measured as dollars per ounce, for gold, dollars per tonne for other minerals).

The comforting note for motorists was offered by a contributor to the study, John Akehurst, managing director of Woodside Energy Ltd.

He predicted oil prices would fall and declines would continue in the long term.

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