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Bernie Hogan, AMEC - The Future of Mining and Exploration in Australia

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Bernie Hogan, AMEC delivered the presentation at the 2013 Mining the Territory Conference. …

Bernie Hogan, AMEC delivered the presentation at the 2013 Mining the Territory Conference.

Mining the Territory Conference is part of the Northern Territory Resources Week. It provides the perfect platform for stakeholders in the NT mining industry to hear the latest information on this booming region.

For more information about the event, please visit: http://www.miningnt.com.au/miningnt2013conference

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  • 1. THE FUTURE OF MINING AND EXPLORATION IN AUSTRALIA Bernie Hogan Regional Manager Association of Mining & Exploration Companies
  • 2. About AMEC • Established 32 years ago • Over 360 company members and growing • Members include explorers, producers, and service industries • National coverage – offices in Brisbane, Perth and Sydney • Policy development and advocacy AMEC is totally committed to obtaining the best business environment for the mining and exploration industry across Australia 2
  • 3. And a new era begins… 3
  • 4. Australia’s challenge unchanged • Australia is losing exploration market share • Australia must be internationally competitive • Costs spiralling - Governments using resource sector as a source of additional revenue. • Increased uncertainty and regulation • Scarce capital – abroad and domestic 4
  • 5. Effect of Greenfields Exploration • Provides the pipeline of mines of the future • Is in serious decline in Australia – Centre for Exploration Targeting - paper Sept 2012. • “The progressive shift of funding from greenfield to brownfield exploration….is worrying as in the long run it will affect the metal contribution to the national resource inventory and with it the sustainability of the mining industry.” • “It is estimated that in the absence of new significant discoveries, based on current reserve and resources, about half of Australia`s non-bulk commodities mines would be exhausted between 7 and 18 years.” 5
  • 6. Estimated Remaining life for Major Australian Mines (based on all operations mining >1 Mt ore in 2010. Excludes Bulk Minerals) 6 2011 2015 2020 2025 2030 2035 2040 Closure Date based on current Reserves Estimated Mine Lives are approximate only and are based on dividing the current P&P Reserves and MI&I Resources by the production rate reported for 2011 Half of Australia’s existing mines could close down within 7 to 18 years Closure Date based on current Resources Source: MinEx Consulting © August 2012
  • 7. Brownfield vs Greenfield Exploration in Australia 20% 30% 40% 50% 60% 70% 80% Sep-2003 Jan-2004 May-2004 Sep-2004 Jan-2005 May-2005 Sep-2005 Jan-2006 May-2006 Sep-2006 Jan-2007 May-2007 Sep-2007 Jan-2008 May-2008 Sep-2008 Jan-2009 May-2009 Sep-2009 Jan-2010 May-2010 Sep-2010 Jan-2011 May-2011 Sep-2011 Jan-2012 May-2012 Sep-2012 Jan-2013 May-2013 Percentage of Total Metres Drilled % Green % BrownSource: ABS 8412.0
  • 8. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2008 2009 2010 2011 2012 2013 Percentage % Australian Projects % Global ProjectsSource: To 30 June 2013 ASX raised funds for Australian projects Destination of Exploration Funds Raised on ASX 8 ASX raised funds for overseas projects More ASX raised funds are heading overseas!!
  • 9. 9 Australia’s Share of Worldwide Exploration Expenditure (non-ferrous) 9 Source: Metals Economics Group Australia 12% Canada 18% USA 8% Latin America 25% Pacific/SE Asia 6% Rest of World 16% Africa 15% 2011 Australia 20% Canada 14% USA 11% Latin America 27% Pacific/SE Asia 11% Rest of World 6% Africa 11% 1996 Source: Metals Economics Group
  • 10. Soaring Costs of Production • Xstrata recently stated that in 2007 it cost $61 to produce a tonne of thermal coal in Australia, and today it is $176 with a global average of $106. (WEEKEND Oz 23rd Feb) • Average C1 Gold Production Costs $1208/ oz (Deutsche Bank March 16th 2013 West). Includes Exploration. Using Goldman Sach formula Costs can be even higher • Hard Coking Coal – 2008 - us$60/t; 2012 – us$120/t (UBS GAM) 10
  • 11. Soaring Costs of Production • Cost recovery mantra from governments State, Territory and Federal • Cultural and Heritage Surveys (estimated at over $1Billion) • Infrastructure – capacity needs to build and access needs to be assured for junior entrants. • Productivity Commission report Remove obstructions to exploration and development with outcome based policy. Gov’t to focus on compliance instead of regulation 11
  • 12. Certainty and Clarity • Constant tinkering with regulation in all forms has undermine investor confidence • Environmental Approvals has been highest profile battle ground • Tax reform has been high-jacked. Need to encourage exploration, innovation and research Vital that workable bi-lateral agreements for approvals be enacted and fundamental tax reform has industry consultation. 12
  • 13. Release Exploration Capital • Huge issue for all explorers and emerging producers • Government policy must be geared to getting capital injected into drilling programs • Security Bonds / Financial Assurance for environmental performance can be improved across the country. • Exploration Development Incentive (AMEC’s METC) Pooled fund model for environmental security is working in WA and is on the agenda in other states. 13
  • 14. Exploration Development Incentive • AMEC proposal prior to the election • Opens up another source of capital • Investors derive a benefit through tax deduction • Australian project, Australian investor • In-ground expenses only • Capped $100M, starts 1 July 2014. AMEC will be directly consulting with the Australian Government on the implementation 14
  • 15. 15 THANK YOU Visit www.amec.org.au for more information Bernie Hogan Bernie.hogan@amec.org.au