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CEOs say mining boom still has steam

Editorial
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Australian chief executives are optimistic about mining’s future, saying the income stage of the boom will be to mining’s advantage as production for iron ore and liquefied natural gas ramps up over the next few years.

They hope any new government that is elected next week will concentrate on productivity boosts so that capital expenditure in iron ore and LNG expansion is given promptly.

Santos head David Knox said if the incoming government can polish the economic policy, it could potentially lure another $100 billion worth of investment from 2016.

“I sincerely hope not (boom’s not over) and as the CEO of a major resources company it’s not my intention that that occurs,” Knox said.

"To stop that occurring, we’re doing everything we can to lift productivity.”

Capital expenditure is set to be more than $260 billion.

Origin Energy CEO Grant King, who is handling a coal seam gas to LNG export facility in Gladstone, Queensland, told The Australian the mining sector still has steam since capital has not yet been given to see the projects through.

“It’s critical we have a productivity environment that allows these projects to be delivered,” King said.

“In respect to the LNG industry, there’s still at least half to be spent across the industry...and when it’s spent it’s turned into revenue and that’s still to come, so the revenue hasn’t even started.”

He agreed with Knox’s view that tweaking productivity and cost settings can lure investment.

“There’s no reason to believe we shouldn’t see continued investment in Australia in really making available to the world this incredible resource endowment we have as a nation,” King said.

CEO of Woodside Peter Coleman believed everyone pushed to invest when prices were high, which in turn put pressure on costs and on supply of labour, logistics and management.

“It’s time to take the heat out of that and get to more manageable levels. I think people are taking a pause, I wouldn’t say it’s over.”

Meanwhile, Arrium CEO Andrew Roberts said the steelmaker was still experiencing robust demand, especially in the Americas.

“It might be that the peak has passed us for a little while but there’s also more capital investment in Australia going forward,” Roberts said.

“We continue to see more positive sentiment coming out of China and therefore ongoing demand for iron ore and other materials.”

Mining contractors have felt the brunt of falling commodity prices and increasing costs as the giants like BHP Billiton and Rio Tinto slash billions of dollars from development and exploration to return to profit.

Boart Longyear recently reported 35 per cent revenue fall year-on-year in its first half results. Its revenue stood at just $US719 million in the first half of 2013, down from $US1.099 billion this time last year.

Over the past year the company cut its workforce size to 7147 workers, down from 11,440.

Transfield cut its profit estimates for the second time this year to $62 million for the year to June but said its CSG sector activity is still looking good.

According to Transfield’s new managing director Graeme Hunt, cuts in exploration funding meant equipment use at his company had plummeted from the 70 per cent level to single digits through 2012-13.

“That will come back because it has to (for mining companies) to prepare for new resources or replace resources as mines are depleted,” he said.

“The volume of production of resources has not dropped; it is the rate of growth that has slowed down.”

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