The Revival In Mining
By Thomas Timlen
One could be tempted to look at the Adani Carmichael mine, rail and infrastructure projects planned for Queensland as the linchpins to an upswing in Australia’s mining sector. All of them promise opportunities for those servicing the project’s heavy-lift and project transportation needs relating to the import and positioning of mining equipment and components.
The Carmichael mine is expected to produce 60 million tonnes of coal a year at its peak, with an output of 2.3 billion tonnes over its 60-year life. If it comes to fruition it will be the largest coal mine in Australia and one of the largest in the world. It’s also being seen as the catalyst for further large mine development in Queensland’s Galilee Basin. The new mine and railway will also create demand for new equipment to be imported by sea and hauled to its final destination by road.
But project cargo specialists do not need to lump all their eggs in one Adani-sized basket when it comes to Australian mining prospects. These projects will undoubtedly create demand for transport service providers and other stakeholders, but they represent only one driver among many that have improved the outlook for mining across Australia; mining that looks beyond coal. Australia also mines and exports alumina, aluminum, bauxite, copper, gold, lead, silver and zinc.
Electricity Costs
While the market ultimately determines the level of demand for such commodities, factors that impact their extraction and sale cannot be overlooked. Find a cheaper way to bring your product to the surface, and you can sell it at a lower cost. One such factor is electricity.
In its latest State of the Sector report, the Queensland Resources Council, or QRC, remarked that as wholesale electricity costs rise, the industry cannot simply pass on these increases to customers. The QRC understands that the Queensland resources sector is trade-exposed and must remain globally competitive. Unchecked high electricity costs will price Queensland projects out of global commodity markets.
The QRC report points out what some would call the obvious: in the face of increases to electricity costs, energy-intensive operations are forced to reduce costs or they go out of business. “This is what we saw at the Boyne Island aluminum smelter earlier in 2017, where 100 workers were stood down and production was cut by 14 percent,” the QRC report states.
The cost of electricity is a concern that, if left unchecked, could stymie mine sustainability. However, other developments, including cost reduction initiatives, show that stakeholders in this sector have been proactive when it comes to identifying sustainable avenues to move forward.
The latest edition of PwC Australia’s Aussie Mine report concludes that Australia’s mid-tier mining sector has an opportunity to prosper in this new, more positive environment. PwC Australia notes that the recovery in the coal price and other factors, such as flat operating costs (the electric bill did not tip the scale nationally), all set the stage for the mid-tier mining sector’s first profitable year since 2012.
PwC Australia added that gains from technology could be pursued, ranging from data management and storage systems to the use of bots, drones and automation wherever it is feasible. Investments relating to data have already been made, while there is room for further investment aimed at automation, in particular with robotic process automation, or RPA. Larger players have implemented RPA, with mid-tier companies now taking an interest.
These developments help to explain other drivers and indicators that bolster optimism, such as an increase in exploration, a noted decrease in unemployment of mining professionals, as well as new investments in infrastructure.
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Cyclical Trends Evident
Paul Kelly, director for ALE’s Australia branch, attributed the present signs of improvement to the cyclical nature of the sector’s performance.
“The mining industry in Australia follows a cyclical trend,” he said. “There are certainly good opportunities forecasted in the years to come, as the major miners develop new reserves and as potential new entrants to the market set up new mining infrastructure. There has been a trend for new infrastructure to be preassembled, either offshore or in Australia, and transported by sea and road to remote mine site locations. ALE has been involved in numerous projects, such as the Jimblebar and Roy Hill projects in Western Australia.”
Kelly’s views align with several indicators including strengthening commodity prices, reduced unemployment in the mining sector, and an increase in spending and exploration by mining companies. Together, all point to expansion of existing mines and development of new mines.
Existing and reactivated equipment will likely be inadequate, necessitating the purchase, import and fabrication of new equipment, stimulating increased demand for heavy-lift and project transport services by ocean and road.
New equipment is sourced primarily within Asia, with onward movements involving several regions in Australia. Kelly said equipment “tends to arrive from an offshore origin, for example China or Thailand, via local ports like Port Hedland or Karratha typically in Western Australia or Mackay in Queensland, to the mine site locations. Alternatively, we also transport modules from local fabrication facilities to mine site locations. The modules are typically transported by road using modular hydraulic trailers.”
The distances covered by road haulage, however, are kept to a minimum, with forwarders preferring sea transportation instead.
“A lot of the mining equipment work is coastal shipping from local manufacturers trying to get closer to the mining center ports and not utilizing long-haul land transport to their customers in the mines,” said Garry Scanlan, CEO of the Greater Whitsunday Mackay Queensland Economic Development Board. The board is part of the Greater Whitsunday Alliance, an independent economic development body to represent and advocate for the Mackay, Isaac and Whitsunday region.
ALE is familiar with mining equipment projects in Australia, having transported hundreds of oversized and over-mass modules for numerous projects for BHP Billiton, Rio Tinto, Roy Hill and Fortescue Metals. Kelly noted that modules tend to be preassembled and are received and transported from Port Hedland to staging areas, before making their way to the mining sites.
A Dose of Reality
But before project cargo specialists get ahead of themselves, it has not been plain sailing for the Carmichael project and there is no guarantee that the project will ever see the light of day. Obtaining the required financing has proved to be a major stumbling block for the Adani Group. The delayed launch of Adani’s Carmichael mine in October 2017 bought Adani time to work on Chinese financing. But by early December hopes of obtaining Chinese funding were dashed when two of China’s “Big Four” banks ruled out any funding for the Adani projects. The Chinese banks said they were shifting their focus on to investments in renewable energy initiatives.
While the news was welcomed by groups in Australia that oppose the Carmichael projects, Adani did not see it as the death knell for the project and continued to pursue financing solutions. The group expected to have financing in place by March 2018, at the end of the Indian fiscal year.
Adani’s optimism is shared by specialists. “In relation to the recent news about the Chinese Banks and Adani we feel that Adani has proven to be an extremely patient and resilient organization that is committed to the Galilee Basin development,” Scanlan said. “Therefore we are confident they will continue to use their best endeavors to make the project a reality.”
And Scanlan is not the only one maintaining that Adani will overcome the recent setbacks. “The critical mass of Adani will allow them to succeed,” Ian Macfarlane, CEO of the Queensland Resources Council, said, adding that there is more to the situation than financing alone. “The crazy thing is if they don’t get the coal from Australia they will get it from somewhere else and it will be dirtier.”
Scanlan said the project will also bring welcome jobs to the region, as well as economic opportunity.
Regardless of the outcome of Adani’s efforts to secure financing for its Carmichael projects, there are sufficient indicators to conclude that demand for Australia’s transportation providers should increase in the short term, with a welcome enhancement should Adani’s efforts succeed.
Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.
Photo credit: ALE
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