The success of West Perth as a natural resources hub is all about its ability to adapt.
WHEN resources sector investment guru James McClements talked recently about what government could do for the specialist resources cluster that has evolved in West Perth, he put up a slide with a picture of a Qantas jet.
“It would be nice to have a flight from Perth to Santiago,” suggested the co-founder of Resource Capital Fund, a major backer of minerals investment that is run out of West Perth and Denver in the US.
Mr McClements’ comment was not flippant. In fact, he might have gone further and demanded the state get on with bringing the airport itself up to the standards that would be expected of a major international destination with a resources focus.
Today, West Perth is home to some of the most internationally focused companies in Australia. The expertise and knowledge that was focused on the Goldfields around Kalgoorlie has kept pace with the globalisation of business.
West Perth-based companies are now heavily into all manner of minerals across the world, especially Africa and other regions where remote exploration and mining demands both the expertise and risk capital that these junior players can lay their hands on.
“West Perth is becoming acknowledged as a global mining centre,” Mr McClements told a University of WA Business School function last week.
“This is reflected in the number of international visitors to Perth.
“Technical and commercial personnel will travel here rather than the other way around, which reflects Perth’s importance.”
Just more than four years ago, WA Business News undertook a study of West Perth’s business sector, based on survey data from its sister publication the Book of Lists.
At the time, the district was home to listed resources companies worth about $16 billion. At the top of that list was Fortescue Metals Group, valued at the time at $1.7 billion. It was the only iron ore player in a top 10 dominated by nickel, base and precious metals groups.
How times have changed.
The latest data show that West Perth is now home to listed resources companies valued at more than $20 billion, including the likes of Emeco Holdings and Macmahon Holdings, which are very much focused on the service side of the sector.
It is worth noting that the 25 per cent increase in value of companies that have been spawned by the subset of Perth’s central business district is calculated after the departure of FMG from the suburb to East Perth. This week FMG was worth $13.8 billion, the equal of West Perth’s current top 20 combined.
But those that have filled the top of the void left by FMG are more like the area’s former resident. Iron ore in the Pilbara and Mid West dominates the group’s top rungs after Equinox Minerals, a diversified mining company with big interests in Africa.
What is also notable from four years ago is that several of the key companies from 2006 remain in West Perth but are no longer listed. Nickel players Jubilee Mines, which was taken over by Xstrata in late 2007 for $3 billion, and LionOre’s Australian assets, now renamed by new owner Norilsk, still have offices in West Perth. Admittedly, the past two years have not been good times for these producers.
Another major player of four years ago, Hardman Resources, was taken over by UK-based Tullow Oil for $1.5 billion.
Then again, a host of unlisted entities from the resources sector is also based in West Perth. Gina Rinehart’s Hancock Prospecting would be among the most significant of these, the corporate home for her fortune estimated to be worth at least $3 billion.
Another significant business is Oakajee Port & Rail, linked to Murchison Metals and Japanese conglomerate Mitsubishi, which is overseeing the huge infrastructure development north of Geraldton.
Italian oil company ENI calls West Perth home, as does Rio Tinto’s diamond subsidiary Argyle.
On top of that is a host of service players, from specialist mining software players such as Gemcom to a range of typical business professionals – often reflecting the area’s niche focus on the junior mining sector and, increasingly, oil and gas. West Perth hosts two of WA’s top 10 accounting firms, and two of the top 10 insurance brokers. It has four corporate financiers that fit into the second-tier bracket below the top 10. It is a similar result when you look at law firms and management consultancies.
Many of these players have been attracted to the hub that junior mining has built in West Perth.
Gresham Advisory Partners Perth managing director Justin Mannolini agrees that West Perth is a business cluster that has grown organically without any form of external direction.
“What we have seen created in West Perth over the last four decades is a particular know-how, how to package opportunities in the resources sector so that they are attractive to risk capital,” Mr Mannolini told the function.
“There is a system of harnessing and targeting risk capital to resource sector projects around the world which is unique to West Perth.”
This includes boutique venture capital groups like the Mitchell River Group, which alone has spawned a stable of listed companies that have generated billions of dollars of value.
The small scale of many of the West Perth companies is worth noting.
Patersons Securities head of research Alex Passmore highlighted the fact that so many of WA’s 844 listed companies were valued by the market below $20 million, with large number of these finding a home in West Perth.
Data compiled by WA Business News show West Perth is home to 227 of WA’s listed companies, 198 of which are focused on the resources sector. Of these resources companies, last week the market valued 99 at $20 million or less while 142 of them were worth $50 million or less.
Outside the resources sector, big organisations based in West Perth are grain cooperative CBH Group, RAC, St John of God Health Care, Australian Capital Equity, Australian Finance Group and Gull Petroleum.
The last of these, Gull, is a retailer; but it is interesting to see the rise in oil and gas players lured by some of the same factors that have drawn and built the mining focus of West Perth.
West Perth is home to about 20 oil and gas companies, as well as a handful of other non-mining energy companies involved in fields such as biofuels and hot rocks. It also has a couple of coal companies despite WA’s distance from major coalfields.
Carnavon Petroleum is the biggest of these, followed by Antares Energy and Tap oil.
Mr McClements said that West Perth didn’t have the long-term exposure to oil and gas it had with mining but that would spill over to boost the junior sector as the growing petroleum industry in WA attracted university graduates and experts chasing the local lifestyle.
“There’s not the depth there yet, I think it will come,” he said.
“People follow capital.”
