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Australia Minerals and Mining

Australia was one of the world's leading mineral producing countries and ranked among the top 10 countries in the world in the production of bauxite, coal, cobalt, copper, gem and near-gem diamond, gold, iron ore, lithium, manganese ore, tantalum, and uranium. Since mid-2008, the global financial crisis had sharply weakened world economic activities, and the slowdown had been particularly pronounced in the developed countries in the West. Emerging Asian economies were also adversely affected by the sharply weaker demand for exports and tighter credit conditions. After a period of strong expansion, Australia's economic growth decreased by 0.5% in the final quarter 2008. Overall, Australia's economy grew at a rate of 2.4% during 2008. During the past several years, owing to anticipated higher prices of mineral commodities in the world markets, Australia's mineral commodity output capacities expanded rapidly. As a result of the slowdown in demand for such commodities as iron ore, nickel, and zinc in the world, surplus productive capacity was expected and export earnings for Australia's energy and mineral commodities were expected to decline during the subsequent years.

Australia's total mineral exploration spending, excluding that of the petroleum sector, was US$2,000.9 million (A$2,223 million) in fiscal year 2008-09, which was a decline of 9.7% from that of fiscal year 2007-08 (the Australian fiscal year runs from July 1 to June 30). The decline in exploration spending was the result of decreases in spending for base metals, gold, and uranium. Exploration spending for coal, iron ore, and other commodities, such as manganese, molybdenum, phosphate rock, and tungsten, increased. The Northern Territory was the only Australian State or Territory that recorded an increase in exploration spending. Spending on coal exploration in New South Wales and Queensland increased but spending on other commodities decreased. Western Australia remained the leading destination for exploration spending and accounted for about 56% of the total exploration expenditure followed by Queensland, 16%; South Australia, 10%; New South Wales, 8%; and others, 10%. Total Australian petroleum exploration (onshore and offshore) spending was US$3.4 billion (A$3.8 billion) in fiscal year 2008-09, which was an increase of 26% from that of fiscal year 2007-08. About 66% of the country's total exploration expenditure was spent on existing deposits and the remaining 34% was spent on new exploration.

As a result of the spending on exploration, significant mineral resources were discovered. These included the Henry George zinc deposit at Broken Hill in New South Wales, the Hillside copper deposit on the Yorke Peninsula in South Australia, the Prairie Downs zinc deposit at Newman in Western Australia, the Reedy Creek gold deposit near Melbourne in Victoria, the Bungalow mangnetite deposit near Cowell in South Australia, and the Brockman iron project in the Pilbara region of Western Australia.

Australia's mining sector contributed more than $105 billion to the country's gross domestic product (GDP), or 7.7% of the GDP during fiscal year 2007-08. In 2008, the mining sector employed 173,900 people who worked directly in mining and an additional 200,000 who were involved in supporting the mining activities. Expectations of sustained levels of global demand for minerals led to increased production of minerals and metals in Australia, and the mineral industry was expected to continue to be a major contributor to the Australian economy in the next several years.

The powers of Australia's Commonwealth Government are defined in the Australian Constitution; powers not defined in the Constitution belong to the States and Territories. All powers that relate to mineral resources and their production belong to the States and Territories. Except for the Australian Capital Territory (that is, the capital city Canberra and its environs), all Australian States and Territories have identified mineral resources and established mineral industries. The Australian Government sets a company tax rate of 30% on profit and a 10% tax on goods and services. Royalties for metals are levied as a percentage of the sale value-concentrates, 5%; uranium, 5%; and pure metals, 2.5%. The royalty paid by a company is allowed to be deducted from reported income for income tax purposes. The amount of royalty paid can be reduced by deducting the costs incurred in the transportation of the mineral ore concentrate or metal.

In 2008, owing to the global financial crisis, Australia's manufacturing activity declined for 6 consecutive months as companies reduced production. The Federal Government announced that it would fund a A$42 billion nation-building and jobs plan in 2009 to strengthen employment and economic growth in the country. The Reserve Bank of Australia lowered the official interest rate to 3.25% in early 2009, which was a 400 percentage point reduction since September 2008. The Western Australian government announced an A$80 million exploration incentive package to encourage exploration in underexplored Greenfield regions of the State.

The Australian Government permits uranium mining, provided that all the relevant environmental safeguards and health requirements are met. Regulation of Australia's uranium mines is mainly a State and Territorial government responsibility. Uranium mining had been permitted only in the Northern Territory and South Australia but in 2008, the Western Australia government lifted an 8-year ban on uranium mining.

Australia continued to be one of the world's leading producers of such commodities as bauxite, coal, cobalt, copper, gem and near-gem diamond, gold, iron ore, lithium, manganese ore, tantalum, and uranium. The country's refined metal production capacity was moderate compared with that of China and Japan in the Asia and the Pacific region. Because of its large mineral resources, Australia was virtually self-sufficient in most mineral commodities. Petroleum production, however, met only about 70% of the country's consumption. Australia was one of the leading exporting countries for alumina, coal, iron ore, and uranium in the world. In 2008, production of such commodities as refined copper, iron ore, lead metal, lithium and tantalum increased significantly. An increase of refined copper output was a result of the startup of the Lady Annie solvent extraction and electrowinning operation and increased output from the Townsville refinery and the Olympic Dam operation. The commissioning of the BHP Billiton Ltd., Fortescue Metals Group Ltd., and Rio Tinto Ltd.'s iron ore operations contributed to an increase in iron ore production. The increase in lead production was from the Mount Isa smelter. Production of chromate, diamond, mined gold, nickel metal, ilmenite, magnesite, and mined and refined tin decreased significantly. The rebuilding of the Kalgoorlie nickel smelter and the reduced availability of gas associated with the Varanus Island gas explosion caused the decrease of intermediate nickel output. The decrease in mined tin and tin metal production was caused by the shutdown of the Collingwood tin mine and smelter.

The Australian mineral industry is characterized by free enterprise in which private companies are involved in exploration, mine development, mineral production, mineral processing, and marketing. A number of Australian mineral companies were affiliates or subsidiaries of European and U.S. companies, which controlled a large part of the mining, smelting, and refining sectors and a significant portion of the mineral fuels sector.

Ownership of the mineral rights in Australia generally are vested in the government of the relevant State or Territory or the Commonwealth Government for Federal lands and waters, regardless of ownership or tenure of the surface area. Mineral ownership is divided between State ownership in the State onshore areas and Commonwealth ownership in the Territories and in offshore areas beyond Australia's 4.8-kilometer (km) territorial limit. Each State and Territory government administers the mineral industries within its own borders, which includes registering land titles; issuing exploration and development permits; conducting inspections and assuring compliance with health, safety, and environmental regulations; and levying royalties and taxes. Because the Commonwealth may restrict mineral exports for the good of the country, however, it effectively has control over most mineral production.



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Page last modified: 11-07-2011 15:32:19 ZULU