In the next five years Australia should earn an extra $55 billion from resource exports despite slower-than-expected growth in demand for its LNG, coal, gold and oil, according to the Bureau of Resources and Energy Economics. BREE has downgraded the value of Australia's anticipated resource export earnings by almost $US130 billion since its previous update in March. The forecast covers the next five years to 2017-2018. Simultaneously, BREE upgraded the local value of export earnings owing to a reduced outlook for the Australian dollar, which is expected to drop by more than 15 per cent to 86 US cents from 2014.
In its quarterly report, the bureau says that- "...a more rapid recovery in the US economy, a longer period of low interest rates in Australia and more rapid decline in the terms of trade could result in an (even lower) exchange rate.” Executive Director Burce Wilson believes that0- “Growth in resource export revenue will be driven by two main factors: substantial growth in bulk commodity export volumes, particularly for LNG and iron ore, and a lower Australian dollar exchange rate."
BREE anticipates the total value of resource exports- underpinned by iron ore and coal- to surge by 11 per cent to $203.8 billion in fiscal 2014, in the face of an expected slump of as much as 20 per cent in the global coal price. The Bureau expects export value to grow at an average annual pace of 7 per cent in coming years. The quarterly report noted that the outlook for Australia's mineral and energy exports remains positive.
Economic news
The Commonwealth Bank’s Future Business Index recorded a significant drop in the mining sector for the September quarter, with the reading decreasing to -15.9 from 4.5 in the June quarter, driven by declining demand and commodity prices.
Company headlines
Whitehaven Coal Limited
(ASX:WHC) has entered into a contract with Leighton Contractors Pty Ltd to construction the rail loop for the Maules Creek mine. Whitehaven says the rail loop is a key part of the mine infrastructure and the longest lead time item for the project. Whitehaven chief executive officer Paul Flynn says this is an important milestone for the project. Mr Flynn says the company’s position will strengthen once production begins in the first quarter of calendar 2015.
Resource services company Worleyparsons Limited
(ASX:WOR) has flagged declining earnings in the current half following a quiet period of order flows. CEO Andrew Wood says earnings in fiscal 2014 will be more biased to the second half than in recent years, and shareholders didn’t enjoy the revelation, sending shares down 6 per cent on the news before they recovered somewhat in afternoon trade.
A BHP Billiton Limited
(ASX:BHP) executive says the mining industry needs to shoulder the blame for its shrinking competitiveness. The miner’s health, safety, marketing and technology president Mike Henry told a Bureau of Resources and Energy Economics conference that while China's prospects were bright, its demand was shifting towards those commodities in which Australia had less of an advantage, such as copper. He says while Australia leads the world in supplying iron ore, copper is eclipsed by other suppliers including Chile and Peru.
Fortescue Metals Group Limited
(ASX:FMG) is challenging a regulator’s decision forcing it to negotiate access to its rail line with fellow miner Brockman Mining Australia Pty Limited
(ASX:BRM). The iron ore miner has gone to Western Australia's Supreme Court to ask for a judicial review of the state's Economic Regulation Authority's decision last month. Fortescue's chairman Andrew Forrest says that Brockman's Pilbara iron ore project is not viable and its presence would block access for more economic projects. Fortescue also wants to charge up to $576 million a year for access instead of the limit of $316.9 million a year the ERA allowed.
Beach Energy Limited
(ASX:BPT) says it would be willing to pay a royalty to Australian landowners if required to under a review of the industry. The shale oil and gas aspirant’s managing director Reg nelson says he would be amenable to a royalty if it was a requirement. Former workplace minister Peter Reith is reviewing the industry and how it could affect farmland and groundwater systems in Victoria. He is expected to recommend the advancement of the industry so long as there are controls and royalties for landowners.
Oil Search’s Limited
(ASX:OSH) co-venturer in a Papua New Guinea liquefied natural gas project, Exxon Mobil, has completed financing arrangements. The energy group says Exxon subsidiary Esso Highlands Ltd has raised $US1.5 billion of project financing, taking the total project financing facility to $US15.5 billion. The funds were sourced from co-venturer and commercial bank lenders and will be used to finance the debt component of the project cost increase, which was announced in November last year.
Linc Energy Limited
(ASX:LNC) has boosted its coal portfolio though inking a deal to buy the Blair Athol Mine tenure in central Queensland. The mine is expected to annually produce up to 3 million tonnes of thermal coal and has been acquired from a joint venture including Rio Tinto Limited
(ASX:RIO). The announcement comes after Linc Energy revealed plans to shift from the Australian Securities Exchange to the Singapore Exchange.
