$119 billion in projects up in smoke?

The AFR has released an excellent study of the next round of jeopardised mining projects:

Analysis by The Australian Financial Review of the federal government’s Bureau of Resources and Energy Economics’ major projects pipeline shows more than a dozen big developments in the less advanced category will be further delayed, endangering the next phase of the resources boom.

…The bureau’s executive director, Quentin Grafton, will tell the Association of Mining and Exploration Companies forum in Perth today that the outlook for projects has cooled while commodity prices will remain subdued.

“I will emphasise that prices are in decline relative to their peaks in 2011 and I don’t see that fundamentally changing. We might be in a bit of ­a down in terms of confidence at this moment of time in China, but nevertheless the issue is that prices continue to moderate and that is a function of increased supply coming on board now and into the future.”

…The government agency expects committed projects to remain near the $260 billion level: some have been completed but others have since been approveed.

However, some of the shelved projects which make up less advanced developments worth $240 billion could be taken off the list entirely when they come up for review.

Hmmm, well, if the big boys aren’t going to cut ore production, the ore price is going lower. I thoroughly recommend a trip over to check out the list of jeopardised projects.

David Llewellyn-Smith
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Comments

  1. I ve read an interesting comment somewhere else :

    Andrew
    “It is expansions, construction, planning, design, etc that are the mining boom, and that employ so many engineers, tradies, etc, and require droves of skilled and semi-skilled labour to be brought in. Mining from existing low cost operations, without the expansions, will not be a mining boom.”

    • He’s exactly right. The amount of capex that’s flowing in is driving this. Engineering, consulting and mining services companies will be cutting a fair bit of staff once the current projects in execution wrap up and there is nothing to go on to.

  2. The list of projects in study was always too big anyway. It didn’t look possible build it all. Gas capex is huge and they’ll be spending well beyond 2014. Inpex, Wheatstone and the 3 Gladstone projects will be a struggle to build to cost anyway. Browse and Shell Arrow, Roy Hill, BHP rapid growth iron ore all look a good chance to still get away. It’s not the end of the world. (Yet).

  3. another interesting comment from somewhere else.This guy doesnt post much but always seem to have great insight into the industry.

    Perthmouse
    “Hey sorry I haven’t posted in a while. We just finished several budget cuts for a few mineral companies (gold/copper, iron and diamond). To remain profitable it ranged from 20% – 60% cuts across about 7 sites on top of closing all new works. That is if prices don’t fall more than 10-15%. Its been crazy. On top of which I have an area working on an estimate for the worst case scenario for the recent iron prices which piss me off that they are falling so fast. We had a rep over in China for 2 weeks and he couldn’t find any demand for new orders on top of massive stockpiles of steel rusting in yards as far as the eye could see. So we have started work on a ore price of $40-$50 and the requirements for closure of the low yield mines. The figures look horrible I was hoping it would pick up with more stimulus from any of the big three countries but nothing. In particular WA is looking no so great, in fact its about to have its arse handed to it in the next year since it takes around that long for the purchases to be completed. Production is high but not rising, and sale price is falling while costs are going up 5-15% a year on some sites just to retain workers while the proportional gain from the assets are not rising to match. When I say stop work I mean every single site had all its projects, unless committed resources, canned on top of a hack and slash to their budgets. One crew of 30 we had on one site was just dismissed after working there 7 years all of them to meet the cuts all skilled but the savings went to retaining even older workers. No job is safe its every man for themselves as one person told me. Again do what you want but just giving you the news on what we’ve noticed. “

    • thanks Dam, and nothing like the truth to see what’s really going on. at work it’s similar for us and lots of deals falling over in many industries. at this rate I’ll be out of my second career in three years before long.

      I think things ar bad, but it looks to me that current projects, in production, are ok’ish, but new stuff won’t get up for a while.

      there is going to be some serious consequences soon for the economy. I see more taxes for us lot.

        • You mean APF? I didn’t realise such sensible sounding people as that ‘Perthmouse’ guy you quote posted there!

          He’s right. I work in a similar field and what he’s saying is spot on. Big trouble to come. A lot of worried faces around here.

        • You mean Australia Prop Forum? I didn’t realise such sensible sounding people as that ‘Perthmouse’ guy you quote posted there!

          He’s right. I work in a similar field and what he’s saying is spot on. Big trouble to come. A lot of worried faces around here.

    • sale price is falling while costs are going up 5-15% a year

      Hey, welcome to my world.

      Its tragic, just tragic, that the miners now have to experience the same pain non-resource exporters have been enduring during the mining boom.

      My heart bleeds. Really.

      • “Its tragic, just tragic” that the WA diamond mining mob passed up that “be happy people” bid as being two ball parks away from true value.
        Another great financial call by the “rockin in orbit” crew.