IS A MINING REVIVAL ON THE CARDS?

During the last three years, the resources sector has been dragged down a dark mine shaft, but a recent report has revealed the industry is hauling its way out with planned spending and increasing optimism.

Operational management consultancy group Newport Consulting recently released its annual report: Mining Business Outlook The report was developed after consultation with 50 Australian mining leaders who were interviewed between February and May 2016.

MINERS OPTIMISTIC ABOUT YEAR AHEAD

The report revealed Australia’s mining leaders are hopeful about the upcoming 12 months, which is a huge sentiment shift from recent years.

For the previous three years, the industry has been treading water in an attempt to remain afloat. However, this year’s Mining Business Outlook has shown most major resources leaders will be focusing on growth and acquisitions in the near future.

Industry morale was at an all-time low in 2014, with only 10 per cent of the leaders surveyed indicating they had confidence in the year ahead (2014-2015).

There was a huge change in attitude in this year’s leaders, with more than 40 per cent optimistic about the future.

STABILISING COMMODITY PRICES

A key factor boosting morale is a stabilising commodity market.

Of the 50 stakeholders surveyed, 58 per cent said they believed commodity prices had steadied and would remain level throughout the next 12 months. Also, 23 per cent of leaders speculated commodity prices may increase, compared to 19 per cent who thought prices still had more room to fall.

MORE SPENDING, LESS CUTS

Market stability has led to returning investment tenacity with many resources leaders saying they planned to begin purchasing assets again and bankrolling growth strategies.

Almost a third of leaders surveyed stated they would increase capital expenditure in the near future, which is up from 18 per cent in 2014-2015. About a third of leaders who intended to boost spending said they would allocate up to an addition 15 per cent for expenditure in their budgets.

In the previous year, almost 80 per cent of mining stakeholders said they would reduce capital spending. In this year’s survey (2016-2017), this number has dropped to 30 per cent, signalling cost cutting measures were petering out.

FEWER REDUNDANCIES

Decreased cost shaving, has led to fewer staff cuts, with 44 per cent of leaders saying they planned to eliminate jobs compared to 80 per cent the previous year.

Additionally, almost 10 per cent of those interviewed stated they would be looking to bring staff on board in the next 12 months.

SIGNS OF REVIVAL

“This is the first time in three years that the industry is clearly showing signs of a revival – not just a flicker of life but a distinct positive shift in sentiment and outlook,” Newport Consulting managing director David Hand said.

“Companies are spending again, have more confidence in stabilisation of prices, and have prioritised growth strategies.

Is a mining revival on the cards?

It’s a fine line, however, as at the same time, the industry wants to see government take a proactive stance in reducing red tape; especially surrounding mining and project approval processes, which are seen to hamper growth and Australia’s ability to return to a more competitive position globally,” Hand added.

Leaders identified Australia’s mining sector would find opportunities in international markets, consolidation, innovation and enhanced productivity, cost control, management and a stronger customer focus.

HANCOCK PROSPECTING CHAIRMAN GINA RINEHART

One of the mining leaders consulted was iron ore-focused Hancock Prospecting’s chairman Gina Rinehart. She told Newport Consulting the Australian Government needed to streamline regulatory processes relating to approvals, permits, licences and compliance in order for the country to remain a competitive global resources hub.

According to Rinehart, in the near-term, Hancock Prospecting will be focussing on ramping up its recently commissioned Roy Hill operation to its 55 million tonnes per annum capacity.

The company aims to achieve ongoing sustainable, low-cost iron ore that is consistent in quality and grade.

In addition to this, Rinehart said Australia’s mining sector could find many opportunities in rapidly developing technology and innovation, which can “drive optimum efficiency”.

Rinehart added Hancock Prospecting’s strategy to invest in technology that promotes efficiency is evident in the company’s purchase of GE Evolution Series diesel locomotives to haul its ore from mine to port.

The technology incorporated in the locomotives enables remote diagnostics and machine performance monitoring to pre-empt major repair work and downtime.

This technology supports optimal productivity and cost-effectiveness in a tight market.

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