Part of the incoming coalition governments plan to speed up mining investment and reinvigorate the mining boom will include telling resource giants to boost spending on massive new projects or being deprived of the right to tap the deposits they are targeting. Tony Abbott’s ‘rebooting’ of the mining boom includes utilising its power over Australia’s considerable gas deposits to accelerate as much as $180 billion in new investment, a very simple instruction to develop and not hoard resource stockpiles. Tony Abbott’s economic agenda is intent on lifting growth, but will be heavily reliant on greater business investment in order to attain intended results.
Analysts believe this sink or swim mindset will revitalise an oft-repeated cost pressure debate used by global companies that stall Australian projects in favour of diverting investment into cheaper offshore projects in Asia and Australia. Industry Minister elect Ian Macfarlane believes companies should instead focus on getting resources out of the ground and into the export and domestic markets. Far from a whim this is; in fact Mr Macfarlane has gone as far as to caution companies that shelving projects could lead to a loss of retention rights held over their various reserves. The government has the right to revoke ‘retention leases’ when they are due for renewal and soon to be Minister Macfarlane wants companies to know in no uncertain terms that assets must be developed if they are able to be developed.
A policy along these lines is expected to become a reality sooner rather than later, with Mr Macfarlane set to review retention agreements due to expire during the Coalitions first term of office. His next step will be to discuss with companies their intentions, with Woodside Petroleum’s Limited
(ASX:WPL) massive (and stalled) Browse project key to his interest. Browse is in interesting scenario, given Woodside’s motivation for pause is associated with West Australian premier Colin Barnett, who favours a job-creating hub at James Price Point for tapping the reservoir over Woodside’s preferred option of an offshore ‘floating’ facility. Mr Macfarlane is preparing to engage in compromise talks with the two parties in order to get things moving
Mr Macfarlane says he is intent on reversing what he describes as a slowing of the mining sector under the labor government, in which the China boom was declared closed, the carbon tax was implemented and drawn out stoushes with mining magnates was seemingly the order of the day. The coalition, Mr Macfarlane says, has closed that book and is intent on penning a new one, whereby it will work with the industry and unlock up to $180 billion in stagnated investment for LNG and coal seam gas projects alone. Mr Macfarlane also pledges to work with incoming environment minister Greg Hunt to streamline the green themed compliance hurdles that companies must tick off to attain environmental approval for their projects.
Commentary
FNN asked Fortescue Metals Group Limited
(ASX:FMG) CEO Nev Power if he believes mining investment in Australia has peaked:
“I think there’s been a very large amount of mining investment and now what we’re seeing is the production phase that follows that investment. From our own perspective the jobs that we’re created through the construction phase are now being replaced by jobs that are there long term, permanent jobs in the operations phase. And, we’re now entering that phase where we’re earning high amounts of revenue and will be paying increased taxes and increased royalties and that money will be distributed through the economy generally. So, from our perspective we’re just entering the boom phase, which is the boom in our production.”
To watch the whole interview, click
here:
Resource sector headlines
Lynas Corporation Limited
(ASX:LYC) has widened its full year loss to $107.4 million, associated in part with costs around the commissioning of its rare earths processing plant in Malaysia. Despite the loss, Lynas has set itself the lofty goal of becoming one of the world’s leading rare earths suppliers, after obtaining its first rare earths products pay cheque before the end of the fiscal year, albeit for a modest $900,000.
Yancoal Australia Limited
(ASX:YAL) has appointed Li Xiyong director and chairman of the group, following the resignation of Wiemin Li earlier this year. Yancoal says Mr Li has also been appointed as the chairman of the Yanzhou Coal Mining Company Limited, Yancoal’s majority shareholder. The news comes after Yanzhou Coal Mining announced it may privatise its underperforming ASX-listed subsidiary.
Boart Longyear Limited
(ASX:BLY) has had its corporate debt rating downgraded and its outlook revised from stable to negative. Standard and Poor’s downgraded the company’s credit rating from B+ to B, however Boart Longyear did not provide a reason for the downgrade. The news comes after Moody’s Investors Service downgraded its corporate rating earlier this month.
Aquila Resources Limited
(ASX:AQA) has rebounded to a full year profit of $317 million, from a loss the year before. The coal producer’s result was aided by $491 million of asset sales over the past 12 month while coal sales brought in $197 million. Aquila has also affirmed its Eagle Downs project is set to be producing in the first half of 2017.
Resource services company Sedgman Limited
(ASX:SDM) has announced a $186 million construction contract as part of the Thiess Sedgman Joint Venture (TSJV). The contract is for a coal handling plant for Boggabri Coal, part of an expansion for its operation in the Gunnedah Basin in New South Wales.
Santos Limited
(ASX:STO) has the tick of approval from the NSW Government to drill eight exploration coal seam gas wells as long as strict environmental conditions are met. The company won approval to drill two sets of four wells in the Pilliga Forest in north-west NSW.
New Hope Corporation Limited
(ASX:NHC) has generated a full year net profit of $74 million, a significant fall on last year’s result. The diversified energy company says the earnings were as a result of impairment to the carrying value of New Hope’s investments in Dart Energy Limited
(ASX:DTE), WestSide Corporation Limited
(ASX:WCL) and Quantex totalling $51.4 million.
The operating result was in line with expectations due in part to lower coal prices and a higher Australian dollar. New Hope Managing Director Rob Neale says the company has been focused on increased productivity and is well positioned withstand current coal market conditions.
Also this week, New Hope appointed Shane Stephan as its new CEO. Mr Stephan, currently the company’s CFO, will assume the mantle next year, replacing Robert Neale.
