North Australia Digest – 21/12/2012

by 21 December 2012

The Australian

Metallurgical Corporation of China is putting a $3 billion iron ore project in Western Australia on hold and will pull its staff out of Perth by the end of next month – effectively closing its Australian office – as soaring costs and delays have led to low performance at the project. Zhang Jiabin, an analyst at Umetal.com, said MCC had “been hit persistently by high labour and development costs”. A number of Chinese iron ore interests in WA have all been hit by delays and cost blowouts.

In his opinion piece, Barry Fitzgerald writes about the pressure the big miners are feeling to increase returns to shareholders in the sector’s “hard times”. The “new found conservatism on capital expenditure and the focus on cost-cutting,” he says, “is not going to go away any time soon.”

The Australian Financial Review

A report released by Trade Minister Craig Emerson says Chinese investment will be vital in boosting Australian food production, but green tape, government approval processes and other challenges could deter any potential investors. The report, titled Feeding the Future, outlines the necessity to lift productivity in Australian agriculture as the world faces the “humanitarian challenge of feeding an extra 2 billion people by 2050”, with a particular focus on development in North Australia.

A report released by Deloitte says cost cutting will be the biggest trend for mining companies next year as profit margins remain under pressure. The report identifies the “top 10 trends for 2013” in the resource sector, including “managing demand uncertainty” and “plugging the talent gap”.

Western Australian Premier Colin Barnett has said the legal action launched against Woodside Petroleum’s Browse LNG project, which challenges the environmental approvals processes on the site, will pose little threat. The site development plan had “gone through an exhaustive process and has received environmental approval,” Mr Barnett said.

In response to slipping share prices, OZ Minerals has warned it faces lower production and higher costs next year. Lower commodity prices, lower gold sales, reduced copper production and increased costs mean the company is expecting next year’s operating result to be more than 15 per cent lower than last year.

The Age

The Foreign Investment Review Board’s  annual report shows that real estate has replaced mining as the major destination of foreign investment in Australia. Though the interest in the mining sector had declined from previous years, it still managed to attract $51.7 billion of foreign investment. The agricultural, forestry and fishing sector accounted for only 2 per cent of foreign investment.

The West Australian

Moody’s Investors Service warned Western Australia that growing debts and volatile resource-related revenues were undermining the State’s triple-A financial standing.  This comes as Treasurer Troy Buswell prepares to reveal a series of public sector cuts to “offset sagging mining royalties”.

The Courier Mail

The mining industry is calling for the “cargo cult” mentality – that led to BHP “paying out about $900 million to meet 1100 conditions” imposed on one of its operations in Queensland – to end. The sector, which has faced about 5000 cuts to jobs this year alone, says managing the cost of doing business in Queensland is one of its highest priorities.

This will be our last North Australia Digest for the year.

We will return January 7 next year. Hoping you have a safe Christmas break.

 

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