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Mining & Resources

What are the biggest challenges for the resources sector in South Australia?

27 Aug 2013, by Informa Insights

In the lead up to our 7th Annual Mining South Australia Conference, , we will be showcasing 3 editions of interviews with the event’s key supporter organisations: Civil Contractors Federation SA, Whyalla Chamber of Commerce & Industry, South Australia Freight Council, Port Pirie Regional Council & Whyalla City Council. In this first edition, we asked them what they believed are the biggest challenges facing the South Australian resources industry. You can hear from them and others in full detail at the renowned event to be held in Whyalla on the 26-27 November.

Phillip Sutherland, Chief Executive Officer, Civil Contractors Federation SA BRANCH

Cr-Phil-Sutherland2_2Global commodity prices aside, the absence of power, transport and other infrastructure is a serious impediment to an expansion of the resources industry in South Australia particularly to the north and west of the State. Getting a mine into production is an expensive business at the best of times.

What is not well-known is that transporting the product to market can be just as expensive as operating the mine. The availability of a skilled workforce to support the expansion of the resources industry also looms large as a serious obstacle. Many skilled workers are now entrenched in mining projects in Western Australia and Queensland. The re-regulation of the labour laws has come at a time when flexibility should be the name of the game if South Australia is to be globally competitive. The cost of labour and the cost of production in Australia diminish our competitiveness. Skilled immigration has recently become politicized. Companies relying on workers from overseas will have to think again.

 Allan Kane, President, Whyalla Chamber of Commerce and Industry 

Allan KaneThe biggest challenges for the South Australian resources sector lie in the financability of many of the projects. Growth in capital and operating expenditure for Australian resources projects is amongst the world’s highest, making local projects less attractive for global investment.

In South Australia, we lack critical infrastructure in strategic areas that ultimately would de-risk and reduce capital requirements for many smaller resource projects. The development of land and sea transportation infrastructure, local supply of key inputs (water, energy, reagents) and dedicated economic hubs for resource projects to develop within would greatly assist many of South Australia’s emerging resource projects.

Neil Murphy, Chief Executive Officer, South Australian Freight Council

South Australia is an emerging mining province with some global scale deposits and a host of smaller volume opportunities. Neil MurphyVirtually the whole state is covered by exploration licenses and investigations of mineral potential are proceeding apace. The challenge will be bringing this newly discovered mineral opportunity to fruition and the provision of key infrastructure, in the right place at the right time, is the key challenge confronting the industry and the community in general, and this will require collaborative efforts between industry and governments at all levels.

The South Australian Freight Council (SAFC) believes that the South Australian mining industry’s ability to achieve its maximum growth potential is inextricably linked to the development of efficient and cost-effective freight transport infrastructure.

New and existing mines, especially those producing iron ore will require significant road and rail transport infrastructure investment in order to move outputs to new and existing ports and processing facilities, and workers and supplies (fuel, food and mining inputs) back to the mine efficiently.

Mining South AustraliaThat leads us to a conundrum. The infrastructure requirements are large, but the available government funding is limited. Their ability to fund new and enhanced infrastructure is limited by budgetary constraints, the reticence to assume new debt, even for productive infrastructure investments, and the relentless pursuit of balanced budgets and surpluses.

There are many ways to augment public funding for infrastructure, including bonds, superannuation funds, and PPPs and it is vitally important that the private and public sectors work collaboratively to choose the best funding sources for the various infrastructures proposed.

Brenton Vanstone, Mayor, Port Pirie Regional Council

Brenton VanstoneAfter extensive exploration over many years, most of the mineral and gas resources in SA are well-defined. So the “Number 1” problem now is capital. Quite simply, resource companies now need cash in order to take them from exploration phase to full commercialisation.

Most companies would talk about the “red tape” legislation and compliance costs that are now crippling the Australian business sector. We used to be the “can do” country now we are the “can not” country.

The other major concern is that we have fallen behind the rest of the world in relation to our rail, road and port facilities along with inadequate and inconsistent supply of power and water.

Jim Pollock, Mayor, Whyalla City Council

Jim PollockAs with any market situation, the biggest challenges are the economic forces of demand and supply.  With demand, the resources sector in South Australia will be impacted on very much by the continued demand (or otherwise) from markets such as China and also the international price for commodities, and of course, the value of the AUD.  Last year, when the iron ore price fell to the mid-$80’s and the AUD was above parity, the mining of iron ore, and more particularly steelmaking, were seriously challenged.

Moving on from market forces, the resources sector in South Australia will be challenged by the principles of comparative advantage and business competitiveness and it is in these two areas that the Upper Spencer Gulf (USG), via the Placed-based Memorandum of Understanding process, is developing Strategies and Actions to assist local industries/businesses meet the challenges from interstate and overseas competition.

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