The Reserve Bank of Australia has announced commodity prices increased in November after a decline in October. Overall, the commodity price index rose 1.7 per cent after falling 2.9 per cent in October. The biggest price increase was in iron ore and coking coal.
Economists also say Australia’s mining boom should remain strong throughout this fiscal year. Official data released this week showed new private mining capital expenditure rose 2.8 per cent in real terms, seasonally adjusted, in the September quarter.
While investments will hold steady for the rest of the year, there are signs the boom may be at its peak. The Australian Bureau of Statistics said some miners have slashed their capital investment plans for the current year by more than 8 per cent, compared to three months ago. A number of large scale mining projects have been cancelled or in response to cost blowouts.
While the government forecaster, the Bureau of Resources and Energy Economics, reported several large liquefied natural gas project investments reached a record $268 billion, it also warned cost blowouts could constrain future spending growth.
Insolvency specialist PPB Advisory says mining services companies that expanded aggressively through the boom years are finding it difficult to downsize as the industry slowdown hits the market for second-hand equipment.
Economic forecasters BIS Shrapnel confirmed in their “Mining in Australia 2012-2027” report pressure from lower commodity prices, high and rising costs and the lowest labour productivity in a generation had ignited a new war on costs within the mining sector.
Senior manager Adrian Hart said growth in employment will not keep pace with the expansion in production as miners seek to restore productivity lost. Mr Hart said labour productivity in the mining sector is an absolute disaster.
Mining services industry contractors are already feeling the heat with Boart Longyear Limited
(ASX:BLY) and MacMahon Holdings Limited
(ASX:MAH) cutting earnings, suffering share price slides.
Production disruptions Discovery Metals Limited
(ASX:DML) has flagged a potential disruption to its mining schedule and production plans at its Boseto copper mine in Botswana. The Africa-focussed copper explorer and producer has stopped mining in section of the mine following orders from a Government agency to cease deepening the Zeta open pit.
Straits Resources Limited
(ASX:SRQ) says heavy rain and flash flooding has impacted its Mt Muro gold mine operations in Indonesia. 166 millimetres of rain in 72 hours has affected mining in the short term, with Straits suspending milling operations until the situation is stabilised.
New deals Woodside Petroleum Limited
(ASX:WPL) has struck a deal to pay an initial $US696 million for an interest in Israel’s biggest natural gas field. The oil and gas producer will acquire a 30 percent interest in the Leviathan field and oversee the liquefied natural gas development. While the deal is still subject to a number of conditions and approvals it could be worth more than $1 billion after a final investment decision is made.
Extending partnerships Australia’s largest gold producer Newcrest Mining Limited
(ASX:NCM) has inked a deal with its long standing partner, Indonesian mining and minerals processing company Aneka Tambang
(ASX:ATM), also known as Antam. Antam will pay Newcrest pay $US160 million to increase its ownership in the Gosowong gold mine in north eastern Indonesia to 25 per cent.
Capital raisingWestern Areas NL
(ASX:WSA) has announced plans to raise $65 million to capture growth opportunities in the year ahead and repay a loan facility. The nickel mining company will undertake a fully underwritten ordinary share placement to raise $50 million and a share purchase plan to raise a maximum of $15 million.
Interview FNN spoke to Saxo Bank Chief Economist, Steen Jakobsen.
Mr Jakobsen discussed how Australia needs to convert our one-trick pony, mining, into a more long term sustainable model with higher degrees of SME’s (Small and Medium Enterprises) and innovation.
To watch more of the interview click
here.
