Australia Mining Report Q1 2010

Latest News China continues to acquire stakes in Australian metals producers, with news in November 2009 that Wuhan Iron & Steel is to acquire a 13.04% stake in South Australia’s Centrex Metals. At the same time, Baosteel was successful in its AUD287mn bid for a 15% stake in diversified miner Aquila Resources.

These two latest deals follow Hunan Valin Iron & Steel Group’s AUD1.2bn purchase of a 16% stake in Fortescue Metals Group, China Minmetals’ US$1.69bn takeover of OZ Minerals and Yanzhou Coal’s US$3bn takeover of Felix Resources earlier in 2009. Although Aluminium Corporation of China (Chinalco)’s US$19.5bn bid to increase its stake in Rio Tinto ended in failure in mid-2009, the report expects China to increase its investments in the Australian mining sector during 2010.

New Data For 2010, the report has made significant changes to the way in which we forecast mining data. As well as using local statistics agencies and associations, we now also draw on the expertise of the UN’s Industrial Commodity Statistics Database, the US Geological Survey and the World Bureau of Metal Statistics for our historical export and production data. We then forecast this data using our own proprietary econometric model. Human intervention also plays a necessary and desirable role in our mining forecasting; experience, expertise and knowledge of industry trends and developments ensure that we can spot likely future changes and anomalous data that a purely mechanical model would not.

Country Overview Hosting a gamut of metals and minerals including iron ore, nickel, bauxite, copper, gold, silver, uranium, diamond, opal, zinc and coal, Australia continues to be a world leader in mining. Australia lies within the top five for production of most of the world’s key minerals. The mining industry is a significant contributor to Australian GDP.

Owing to its exceptional geology, Australia is home to some of the biggest names in the global mining industry. Multinationals operating in the Australian mining industry include locals BHP Billiton and Newcrest, Rio Tinto, and Xstrata.

Foreign investment rules are liberal and encourage inward investment. Mergers and acquisitions (M&As) are subject to scrutiny by the Australian Competition and Consumer Commission (ACCC). The country has well-defined regulatory bodies and a well-established legal system that can be described as investorfriendly. In the case of specific mineral exploitation, the authorities now consider uranium mining proposals on a case-by-case basis.

Industry Forecast After a difficult 2009, the report is more optimistic on the outlook for Australia’s mining industry over our newly-extended forecast period to 2014. We believe that growth can average just over 6% over the coming five years. We see mining’s contribution to GDP increasing from 6.79% in 2009 to some 8.17% by 2013, although it may then fall back slightly in 2014.

Our in-house research leads us to predict that the strongest performing sectors (in terms of percentage growth for production) will include hard coal, iron ore and uranium. The strongest performing sectors (in terms of percentage growth for exports) will include aluminium, iron ore and zinc. Demand for Australian minerals will remain strong from Asian nations, notably China. A full data table can be found in the forecast section of this report.