Supporting sustainable resources development
Building mining services clusters in Australia Ian Satchwell, Director 15 May 2012
Peru International Gold Symposium And Silver Forum
Outline
• Overview of the Australian mining sector
• Growth of the mining equipment, technology and services (METS) sector
• Building a sustainable local economic base from mining
• Case study: Kalgoorlie
• Case study: Darwin
• Case studies: Indigenous development
• Lessons from experience
2
Australia’s minerals and energy markets are strong…
Australian LNG production
Major iron ore exporters
1500
1000
1250
3
Major thermal coal exporters
Source: ABARES
…leading to the largest investment wave since the 1800s gold rushes*
HOBART
Western Australia
Northern Territory
South Australia
Queensland
New South Wales
Victoria
SYDNEY
CANBERRA
MELBOURNE
BRISBANE
ADELAIDE
DARWIN
BROOME
PERTH
WA & NT projects to 2018**: US$190 billion+
Queensland projects to 2018**:
US$90+ billion
Alumina, gold
Iron ore, uranium, nickel, gold
LNG, iron ore, infrastructure
LNG, mining
Base metals
Coal, CSG, LNG
South Australia projects to 2018**:
~US$25 billion
4 *Reserve Bank of Australia **committed and proposed projects
Coal, CSG, polymetallics
Western Australia case: investment will result in decades of increased production with lower volatility
* At ten year average prices
Historic and forecast production value* for WA’s key
resources
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2005 2009 2013 2017
Valu
e in $
M*
Gold
Iron Ore
Nickel
Oil/Gas
Alumina and Bauxite
Double 2011 value
Long-term contracted supply
$m
Source: ACIL Tasman analysis 5
Increased sustaining capital and
services
Trade & foreign investment
3
Service and technology sector
growth
2
It’s not only about mining: other growth drivers
Corporate shift to Australia
1
Agriculture and food sector growth
4
6
Mining and related sectors are bigger than most people think: changing the conversation
METS output is growing at 15 to 20% a year
• 4% of national output in 2002-03
• 8.4% in 2011-12
METS contribution to GDP
• 6.7% in 2010-11
• Est. 9.4% in 2012-13
Many METS are knowledge- and technology-intensive
Source: Australian Treasury and Ed Shan / Minerals Council of Australia 7
A new way of thinking about value-adding
Employment growth: driven by mining, but more than just mining jobs – Western Australia example
Source: CCIWA: Building Western Australia’s Workforce for Tomorrow, June 2010
0 50,000 100,000 150,000 200,000 250,000 300,000
Other
Administration and Support
Hospitality
Transport
Manufacturing
Education
Professional Services
Mining
Retail
Healthcare and Social Services
Construction
0 500,000 1,000,000 1,500,000
Non Mining and Construction
Mining and Construction
Current workforce (2010) Additional workers until 2020
8
Employment growth by industry sector 2010-2020
Australian mining employment multiplier is 3 – 4 Africa 7 – 10
9
Indirect Induced
Direct Local
manufacturer or service provider
Purchasing expenditure for local goods and services
Payments to employees
Subsequent backward expenditure for local goods and services along the supply chain
Income of supply chain employees
Taxes paid by suppliers to the Government
Household consumption as direct and indirect employees spend their income within the local economy
Taking a broad view: indirect and induced benefits
Economic output
Local dealer
Income of dealer’s employees Taxes paid by dealer to the
Government
Household consumption as direct and indirect employees spend their income within the local economy
Adapted from Saipem 2011
In Australia, for every $1 of mining revenue, 40¢ is spent on goods and services: Reserve Bank
Most mining occurs in regional areas, far from large cities…and close to, or on Indigenous lands*
HOBART
Western Australia
Northern Territory
South Australia
Queensland
New South Wales
Victoria
SYDNEY
CANBERRA
MELBOURNE
BRISBANE
ADELAIDE
PERTH
Alumina, gold
Iron ore, uranium, nickel, gold
LNG, iron ore, gold infrastructure
LNG, mining
Base metals
Coal, CSG, LNG
10
Coal, CSG, polymetallics
*60% of mining is on or near Indigenous lands
Case studies of development of mining services clusters and indigenous business
HOBART
Western Australia
Northern Territory
South Australia
Queensland
New South Wales
Victoria
SYDNEY
CANBERRA
MELBOURNE
BRISBANE
ADELAIDE
PERTH
Alumina, gold
Iron ore, uranium, nickel, gold
LNG, iron ore, gold infrastructure
LNG, mining
Base metals
Coal, CSG, LNG
11
Coal, CSG, polymetallics
•KALGOORLIE
•DARWIN
PILBARA REGION
KIMBERLEY REGION
12 12
Australian Industry Participation in Western Australia resource projects
• Proportional spending on the construction phase of oil & gas projects (but not
mining) has shifted towards overseas suppliers over the last 30 years
• But there continues to be a very high level of Australian industry participation
• CME/APPEA Local Content Study (2011)1:
• WA State Government Local Content Report – November 20112
• Publically announced local contracts July 2011 to March 2012 = A$15.5 billion3
Sector Construction Operations
Mining 86% 95%
Oil & Gas 58% 83%
Sector Construction Operations
Mining, Oil & Gas 74% 100%
Sources:
1: CME/APPEA Local Content Study 2011
2: Government of Western Australia, Department of Commerce, Local Content Report 2011 – figures for period 1/1/2011 though 30/9/2011
3: Media Statement, 8 March 2012, Minister for Commence, Hon Simon O’Brien
Kalgoorlie-Boulder, Western Australia
13
• KALGOORLIE
Map source: DMP
Kalgoorlie
14
• Mining town since 1900s – – Hosts gold, nickel sulphide and
nickel laterite – long life operations and evolving industry
• Mining is the dominant employer
• Region population 45000 (including 4500 Indigenous)
• Initially developed mining services because of remoteness
• Now a net ‘exporter’ of mining services to other locations – approximately 200 manufacturing & services sites
Kalgoorlie factors of success
15
• Local, long-life customer mining operations
• Good infrastructure: industrial land, roads, energy, water, community infrastructure
• Skilled resident workforce
• Education and training institutions: WA School of Mines, Vocational Training and Education Centre
• Inter-firm networking; minimal government intervention
• Firms cooperate to win large or multidisciplinary contracts
Darwin, Northern Territory
16
• Australia’s most northern and isolated city – Major service centre for mining,
oil and gas, defence and marine sectors
• Population 110,000 (~20% Indigenous)
• Mining services initially developed because of remoteness
• Now has a competitive advantage in mining and petroleum services
• Exporter of mining services to other locations, including Indonesia
Darwin factors of success
17
• Diverse market sectors with similar technologies: mining, offshore petroleum, LNG, defence, marine
• Good infrastructure: serviced industrial land, utilities, transport, community facilities
• Skilled resident workforce – but has needed supplementation
• Education and training institutions: university and VTEC
• Firms benefit from co-location, cooperation and networking
– RANms started as JV between small firms; now integrated service company owned by Wood Group.
• Industry Capability Network links customers and suppliers
• Government policies oriented to facilitating services business and investment
Darwin mining services: active role by government in promoting METS capability
18
Manufacturing
Basic Chemical and Chemical Product Manufacturing Polymer Product and Rubber Product Manufacturing Fabricated Metal Product Manufacturing Transport Equipment Manufacturing Machinery and Equipment Manufacturing
Transport, Postal and Warehousing
Road Transport Rail Transport Water Transport Air Transport Transport Support Services Warehousing and Storage Services
Electricity, Gas, Water and Waste Services
Waste Collection, Treatment and Disposal Services
Construction Heavy and Civil Engineering Construction Construction Services
Wholesale Trade
Machinery and Equipment Wholesaling Grocery, Liquor and Tobacco Product Wholesaling Other Goods Wholesaling
Accommodation and Food Services Accommodation Food and Beverage Services
Rental, Hiring and Real Estate Services Rental and Hiring Services
Education and Training Tertiary Education VTEC
Health Care and Social Assistance Hospitals Medical and Other Health Care Services
Case studies of development of indigenous business
HOBART
Western Australia
Northern Territory
South Australia
Queensland
New South Wales
Victoria
SYDNEY
CANBERRA
MELBOURNE
BRISBANE
ADELAIDE
PERTH
LNG, iron ore, gold, infrastructure
19
•KALGOORLIE
•DARWIN
PILBARA REGION
KIMBERLEY REGION
Indigenous business – Pilbara case study: Rio Tinto Iron Ore Business Development and Contracting Regional Standard
20
Includes: • Giving preference to Pilbara Aboriginal businesses • Improving the tender process • Regular information sessions on contracting opportunities,
contracting and procurement guidelines • Provide practical feedback to unsuccessful applicants Other measures by Rio Tinto • Identify and create opportunities for Pilbara Aboriginal businesses • Increase capacity of Aboriginal contractors through appropriate
contract opportunities, providing support while they gain experience • Introduce suppliers to Aboriginal contractors to enable discussions
around joint venture and sub contracting opportunities • Identify non-mining supply opportunities
Pilbara Aboriginal Businesses servicing Rio Tinto Iron Ore
21
Number of Aboriginal Businesses
– 104 Aboriginal businesses on the RTIO database
Categories – Civil and mining, plant hire and labour hire – Accommodation and catering
– Building trades, carpenters, electricians
– Building fabrication, fitout and refurbishment
– Fencing, landscaping, plant nursery and site rehabilitation
– Rubbish removal and recycling
– Bio diesel – Cross cultural awareness training
Contract Profile – Ranging from $50,000 to $100,000,000
Spending with Aboriginal businesses – A$120 million + a year on contracting, enterprise development and capacity building
Photo: Rio Tinto
Indigenous business – Kimberley case study: Argyle Diamond Mine
22
• Business Development Facilitator assists development of Traditional Owner businesses – and to ensure that they are able to compete for site-based contracts.
• Argyle has developed an 'inside-out' approach to business development and contracting within its site operations, helping indigenous staff to develop commercial opportunities from existing roles – for example, assisting grader operators to become earthmoving
contractors and waste management staff to set up waste management businesses
• Joint Business Development Taskforce looks for business development opportunities within the mine. – All site-based contracts worth more than A$250,000 are notified to the
Business Development Taskforce prior to the tender being let
Requirements for successful cluster building
23
• Diverse, deep and long life customer base
• Existence of market leading/large firms – both customers and leaders
• Existence of an entrepreneurial ethos amongst leading firms
• Networking and partnership relationships
• Access to innovation and R&D capacity – through regional institutions or other companies
• Existence of a skilled workforce (strong human capital base), plus training infrastructure
• Business infrastructure, and community infrastructure for workforces
• Access to adequate sources of finance
• Commercial orientation, but support from governments, industry groups and customers