Minerals industry overview
The NSW minerals industry, which comprises coal, petroleum, metallic and industrial minerals exploration and production plus established minerals processing operations, makes a major contribution to the state's economy in terms of business activity, investment, regional development, job creation and export revenue. The ‘minerals industry’ includes a range of commercial operations based on the discovery, development, management and utilisation of mineral resources. It includes mineral and petroleum exploration, mining and beneficiation and other downstream value-added processing, such as smelting and refining.
NSW is a low-cost supplier of coal, gold, base metals, mineral sands and gemstones to world export markets and is consolidating its position as a value-adding centre for processed metals and mineral products.
Complete statistics for mineral production in NSW can be found in the NSW Minerals Industry Annual and NSW Coal Industry Profile.
NSW minerals industry
NSW produces a diverse range of minerals including coal, metals, industrial minerals and construction materials. The total value of this production in 2005‑06 was $11.7 billion. Preliminary figures for 2006-07 suggest that the estimated value of NSW mineral production could be around $12 billion and the value of major mineral and processed metal exports close to $11 billion.
Coal production, valued at about $8.5 billion in 2005-06, accounts for around 73% of the total value of mineral production. Metallic and industrial mineral production is also significant, valued at $2.7 billion in 2005-06. The minerals industry is NSW’s largest export industry, accounting for export revenue of $10.8 billion, which represents around 38% of total NSW merchandise exports. Coal, iron and steel and aluminium are NSW major mineral and processed metal exports.
The mining industry plays a vital role in the NSW economy, providing jobs in regional and rural areas and sustaining entire communities. In fact, the NSW minerals industry provides around 20,000 direct jobs and at least three times this number indirectly through related services and flow-on industries.
The NSW Government provides enormous incentives for explorers to invest in NSW through its seven year $30 million “Exploration NSW” and $8 million “New Frontiers” exploration initiatives. In fact, surveys carried out through the NSW Government’s Exploration NSW initiative have meant that the state now has 80% coverage with high resolution airborne geophysical data, a critical information asset for the exploration industry.
Private mineral exploration expenditure in NSW is on track to reach about $145 million in 2006-07, a 27% increase over 2005-06 and a doubling over two years. In addition, with forecast petroleum exploration expenditure of around $47 million, total expenditure on exploration should be around $190 million in 2006-07. The number of exploration licence applications received in 2006-07 was more than double the number received in 2004-05.
The Lachlan Orogen continues to attract large exploration budgets. Zinc and other base metals have been added to copper and gold as the major exploration targets. Increases in prices for a range of metals such as tungsten and tin have boosted exploration in the New England region. Some areas in NSW are now being actively explored for the first time in more than 20 years.
As a result of NSW Government initiatives, there has been an unprecedented level of petroleum exploration activity within NSW; $20.7 million spent in 2003‑04, $29.0 million in 2004‑05, $27.8 million in 2005-06, and a projected expenditure of around $47 million for 2006‑07
NSW minerals industry facts 2005-06
Total value of mineral production was $11.7 billion.
Full-time direct mining employment for 2005-06 was 18 120 (a 13% increase on 2004‑05).
Saleable coal production was 124.7 Mt (a 2.1% increase over 2004‑05), valued at $8.5 billion in 2005-06.
Coal exports increased to 89.8 Mt (compared to 86.6 Mt in 2004‑05) valued at $6.7 billion.
The value of metallic mineral production was $2.7 billion (compared to $1.7 billion in 2004-05).
The value of construction materials production was $371 million (compared to $308 million in 2004-05).
The value of industrial minerals production was $133 million (compared to $106 million in 2004-05).
Private mineral exploration expenditure in NSW in 2005-06 was $114 million.
The wealth generated by the NSW minerals industry is based on 60 coal mines, 12 major metalliferous mines, 11 significant industrial minerals operations, plus a large number of smaller metallic and industrial mineral mines and numerous construction materials operations.
Mining operations are spread throughout NSW, though coal mining is mainly concentrated on known resources of high quality black coal in the Sydney‑Gunnedah Basin within the Hunter, Newcastle, Gunnedah, Western and Southern Coalfields. Metallic mining operations and projects are concentrated in three main areas of the NSW – Broken Hill, Orange and Cobar – all well served by existing infrastructure and rural communities.
In addition to existing mining operations, presently there are more than 30 coal projects and 20 metallic and industrial mineral projects proposed for development over the next decade in NSW. Together these potential developments, if all were to proceed, would involve a cumulative investment of more than $7 billion and generate over 5500 direct jobs.
Value-added mineral processing (including established steel and aluminium smelting and refining operations) is an important component of the NSW minerals industry, with good potential for further development. The value of annual output is estimated at over $5 billion, with much of this production exported. The Tomago aluminium smelter for example, employs over 1000 persons directly and generates operating revenue in excess of $1.1 billion. Meanwhile the Kurri Kurri aluminium smelter employs around 500 people. Mineral processing, like mining, is an important sector of the economy with a number of new projects under development or planned.
One of the factors behind minerals processing investment in NSW is the availability of electricity at world-competitive prices. In 1996 the NSW Government created a number of statutory state-owned corporations, as part of the restructuring of the electricity industry, to compete for supply to NSW consumers. This provided world-competitive priced electricity, which significantly improves the economics of mining and minerals processing in NSW. Together with competitive costs for rail freight and port charges, its well-established infrastructure, prospective geology and other advantages, NSW has consolidated its position as a primary international location for investment in the minerals sector.
Outlook
Strong global economic growth, particularly in China has driven the demand for mineral and energy commodities. As a result prices for a number of mineral and energy commodities have reached record or near record highs during 2006. China’s apparent demand for commodities continues to expand rapidly. China’s crude steel consumption is forecast to grow by 13% in 2007 and a further 10% in 2008. Meanwhile Chinese aluminium consumption is forecast to grow by around 30% in 2007. In the first quarter of 2007, Chinese copper consumption is estimated to have increased by 36% year on year.
The most significant growth in the value of NSW mineral production in recent years has occurred in copper, which has increased substantially since 1991‑92, largely due to the development of the Cadia Valley Operations near Orange in the Central West of NSW. The value of NSW copper production for 2005‑06 exceeded $1 billion for the first time and was some 88% higher than the previous year.
Forecasts for 2006‑07 suggest the value of NSW copper production could increase further to over $1.7 billion on the back of higher prices and production.
Copper prices during 2006 averaged a substantial 83% higher than the average price of 2005 and hit a record high in May of around US$8800 per tonne as a result of continued strong global demand, low inventories and production disruptions.
The copper price eased somewhat in the second half of 2006 as the tight demand supply balance eased. However over the first half of 2007 prices firmed again on the back of strong demand conditions and touched US$8000 per tonne in early May. Overall, the price of copper in 2007 is expected to average around US$5500 per tonne.
Gold production in NSW is forecast to exhibit the fastest rate of growth of all mineral commodities in coming years. Improving gold prices resulted in a 25.5% increase in the value of NSW gold production for 2005‑06 to $659 million. Forecasts for 2006‑07 indicate that the value of NSW gold production is likely to increase further on the back of higher production, resulting primarily from the ramp up of production at the Cowal gold mine, and ongoing firm prices. NSW is now the nation’s second biggest gold producer after Western Australia.
Underlying the strong growth in the value of mineral production since 1991-92 has been a combination of an increased level of mining activity in NSW and generally higher commodity prices. Mineral production (tonnage) increased by 48% between 1991-92 and 2005-06.
Meanwhile, while the average Australian dollar exchange rate against the US dollar has generally appreciated over the 2003-2006 period, substantial rise in US dollar mineral commodity prices over this time has outweighed the exchange rate affect and lead to a substantial increase in the value of NSW mineral production.
The minerals sector in NSW as a whole is expected to experience relatively buoyant growth over the next few years. However, growth prospects amongst commodities differ. In contrast to increases in coal, copper and gold production over coming years, base metals production (excluding copper) is forecast to remain relatively flat or increase only modestly from current levels. Between 1991-92 and 2005-06, silver, lead and zinc production in NSW fell by 63%, 48% and 44% respectively.
Despite the rapid growth of copper and gold production in NSW, coal will remain the most significant contributor in terms of value of production. With coal prices forecast to remain healthy in the medium term, the value of mineral production is forecast to remain at buoyant levels, exceeding $12 billion in 2006‑07.