Bullion Miners Facing Tough Challenges

A new report from the world's largest gold producer Barrick Gold provides yet another illustration of the problems facing gold mining companies.

In South Africa, extraction of gold from depths of more than 6,000 meters has almost become the rule rather than the exception. Mining costs are being pushed up by the logistical challenges of drilling at great depths, as well as an increasingly militant work force which is demanding higher wages. Add exploration costs to this mix and it’s little wonder that companies’ profits are being squeezed, despite the high gold price. According to Barrick, total production costs for all mining companies exceeded the $8 billion mark last year.

While 1991 saw the discovery of 11 new gold mines, in 2011 only three mines with production potential were found. Aside from the drop in gold ore and rising production costs, a third factor is increasingly hindering gold production: producing countries' tedious licensing processes and sluggish bureaucracy. According to Barrick Gold, this is being exacerbated by increasing environmental regulations that could jeopardize many mining operations.

Many companies are also facing increasing hostility from residents in mining areas. This has been particularly evident in Peru, Bolivia or Ecuador – where there have been violent clashes between local people and police.

This is a  tricky set of factors for many companies. But given the gains in gold many expect in the coming years, great fortunes could still be made in the right gold mining investments.

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Thirty Hunter Jobs at XStrata Lost As Miner Wields Axe

Thirty Hunter Jobs at XStrata Lost As Miner Wields Axe

ABOUT 30 Hunter Valley coal miners face the axe after Xstrata announced plans yesterday to slash 600 jobs in NSW and Queensland in response to low coal prices, high production costs and the strong Australian dollar. 
 
Union officials in the Hunter Valley said the mining giant intended to shed about 15 frontline jobs at its Ravensworth underground mine with a similar number expected to go at its Ulan underground mine, north of Mudgee.

Construction, Forestry, Mining and Energy Union NSW northern district president Peter Jordan said members were told both mines would be scaled back from seven-day-a-week operations to five. He said delegates were "optimistic" affected staff could be re-deployed within Xstrata or managed through voluntary redundancies.

But he said there was no indication how many of the hundreds of contractors - who work at about a dozen of Xstrata's sites across the Hunter and the rest of NSW - would be impacted after the company said cuts would include both permanent staff and contractors.

BHP has also announced 300 jobs will go with the closure of its Gregory open cut at Emerald in Queensland.

"Xstrata Coal is undertaking a planned restructuring to respond to industry-wide pressures including low coal prices, high input costs and a strong Australian dollar against the US dollar. Following this review, and in keeping with the cost savings objectives announced at our half-year earnings, we will be reducing our employee numbers by approximately 600," Xstrata said.

Xstrata said cuts would also come from its corporate headquarters in Sydney and consolidating its office-based operations in Queensland.

"We do not expect a material impact on Australian production volumes," the company said.
However it confirmed growth projects at Ravens- worth North, Ulan West and its expansion at Rolleston were "proceeding"..

Mr O'Farrell said the loss of Xstrata jobs was "a body blow".

"It reflects not only national economic conditions, but it reflects a higher Australian dollar, lower prices for resources, and both are dictated by international conditions" he said.

Over Regulation Driving Mass Exodus in Australia's Resources Sector

 

The New Trend for Primary Sector resource Companies operating in Australia is to go offshore seeking reallocating their capital to projects with less overhead cost and greater certainty.

2012 Has seen the introduction of a Carbon Tax (Carbon Trading System) and a Mining Tax which combined with a heavily reduced Iron Ore price and weakening demand has seen any new or planned venture on paper, look far less economical.

There has been an incremental shift in Australian Companies increasing profiles overseas where the cost of business are seen as being significantly less such as Papua new guinea and South Africa.

The Australian Governments Justification for the Mining Tax (Resource Super Profits Tax) are basically two fold:

The Commodities Prices are rising so fast the taxation system is unable to stay in-line with the super normal profits mining companies are experiencing during this resources boom.

Most of our mining companies are majority foreign-owned and are receiving a huge windfall at the Australian taxpayer’s expense.

The Carbon Tax will also progressively increase the costs of production capabilities for miners and primary resource companies in an indirect way through increased costs such as electricity which is one key input to mining and yielding primary resources, some to a break even and shut down point where the cost of production is outstripped by costs and economics uncertainty. 

The outcome of these creeping legislation's are that incrementally Australian companies will and have been considering a more international approach as the disincentives to operate inside Australia grow to a level were companies will be forced into this position.

The eventuation is that the price put on commodities in Australia will ensure that they are plentiful for generations to come as the opportunity cost of mining in Alternate resource rich countries becomes too much. 

This Legislation is effectively creating commodities world where 3rd world countries seek out cheaper countries to do business in and in a way at least its almost like Australian Government was slow to catch on to Globalisation and outsourcing production to countries with cheaper labour and less Government Bureaucracy where businesses and economies thrive.

Australian Mining Boom Peak Years Away

THE government's efforts to talk up the longevity of the mining boom will be boosted today by an influential report that predicts mining industry investment is still several years away from peaking. 

And the report by economic forecaster BIS Shrapnel predicts other sectors of the economy will lift to fill the gap when the mining sector inevitably slows.

A series of cabinet ministers insisted yesterday the mining boom had further to run, in an attempt to counter fears of a slowdown after BHP Billiton's decision last week to shelve its $30 billion Olympic Dam expansion and Resource Minister Martin Ferguson's controversial declaration that the boom was over.

Against a dreary outlook for the prices of Australia's key exports, BIS Shrapnel believes the value of contracted resource projects means mining investment would not peak until 2014, with Queensland and Western Australia tied up with major projects for three to five years.

"After that, non-mining investment will stabilise and start to pick up, taking over as the engine of growth and smoothing the transition," says the BIS report, to be released today.

It suggests lower interest rates will boost retail spending, which had been held back by low confidence and weak demand rather than the Australian dollar.

"Over time, capacity constraints outside mining, such as those already evident in the construction sector, will prompt a broadening of investment beyond mining," it says.

Frank Gelber, chief economist at BIS Shrapnel, said the realisation that the investment mining boom was finite would cause people to "overreact on the pessimistic side".

"All of a sudden, the glass seems to have become one-quarter full, but nothing has changed," he told The Australian in a reference to Reserve Bank governor Glenn Stevens's optimistic glass-half-full depiction of Australia's economy.

"Our report aims to dispel some of the panicky discussion about the end of the boom," Mr Gelber said, predicting economic growth of 3 per cent this year and next.

BIS Shrapnel believes continued strong commodity prices will keep the Australian dollar high "for a few more years", putting pressure on other trade-exposed industries.

Trade Minister Craig Emerson said yesterday the mining boom was not even halfway through, while Workplace Relations Minister Bill Shorten noted that his department was projecting that another 100,000 jobs would be created in the mining industry over the next five years.

"Mr Ferguson is right: we might have reached the peak in prices, but volumes are still increasing and there are still plenty of projects," Mr Shorten said, attempting to paper over any divisions in cabinet.
"I don't think that the contribution that mining is going to make in jobs and economic output for Australia has at all peaked." Wayne Swan said the mining boom was better understood "as a series of booms - a boom in prices, a boom in investment and a boom in exports".

The Treasurer said that while the price boom had passed its peak, "the investment boom still has some way to run" and the Bureau of Resources and Energy Economics had forecast commodity export earnings to reach a record $209 billion this financial year as higher volumes offset lower prices.

JPMorgan chief China economist Haibin Zhu, visiting Sydney last week, told Sky Business's Australian Business on Friday night Chinese demand for Australia's resources would slow but remain at a very high level over the next five to 10 years.

"What follows the recent boom is going to be far from a bust," he said, pointing out the Chinese government was intent on stabilising the country's growth at a lower but more stable level.
He warned that China's one-child policy would sap its potential economic growth rate by about one-quarter within the next five to 10 years.

"The share of working-age people in the population is shrinking and the number of workers will start to decline in the next few years," he said.

Mr Gelber also dismissed the impact of the carbon tax on BHP's decision to shelve its Olympic Dam copper, gold and uranium mine expansion, arguing it would go ahead once construction costs eased. "Such a long-term project means it is hard to predict ultimate prices and demand," he said.

Mr Swan said he was "pleased" to see discussion about the longevity of the mining boom. "But behaving as if the investment pipeline has suddenly run dry is not only false, it's irresponsible," he said, pointing out the Reserve Bank governor had said mining investment would not peak for a few years yet.

S.Africa should brace for a mining revolution: Malema

South African politician Julius Malema, a vociferous opponent of President Jacob Zuma, warns the country's mines should brace for a revolution unless workers' conditions improve.