What’s next for the mining industry in the Hunter region of New South Wales?
For a region that mixes industries like mining and resources, agriculture, manufacturing, tourism and more, it seems that one of these sectors causes more friction than the others do combined.
That industry is of course mining, which despite the battering it has taken over the past few years continues to contribute substantially to the region.
The outlook for the mining industry in the Hunter region was bleak in 2016, especially for the coal industry, when Anglo American committed to a global restructure, resulting in a 60 per cent downsizing of its operations.
However, the following figures from a recent NSW Minerals Council survey, which covered the 2016 financial year before the recent recovery in coal prices, indicates that the industry in the region has maintained its strong contribution.
According to the NSW Minerals Council, the 23 participating mining companies in the survey directly injected $4.8 billion into the region’s economy during the 2016 fiscal year.
This expenditure was the same level as the previous financial year, and higher than four years ago.
The spending included $1.5 billion in wages for 11,218 full-time employees, and $3.3 billion in purchases from 3647 local businesses. The number of local supplier businesses in the Hunter mining supply chain increased by 230 to 3647, while the number local direct mining jobs was also up slightly.
Over the past five years, local mining companies have spent $26.4 billion in the Hunter region, with $6.4 billion of this was spent in the Newcastle local government area (LGA).
NSW Minerals Council chief executive officer Stephen Galilee said these numbers were quite likely higher now, considering the improvement in market conditions throughout the mining industry.
“There is growing confidence that even more local businesses and more local jobs will be supported going forward,” Galilee told Australian Mining.
“Over the last six months we’ve seen encouraging signs of recovery in the coal price and an increase in demand for our coal from key markets like China.
“There is also increased demand for our coal from Southeast Asia reflecting the deployment of more coal-fired power generation across the region, including new low-emission coal-fired power plants.”
Recent activity in the Hunter’s coal sector has been both positive and negative for the industry and region.
Rio Tinto looks to have found a buyer for subsidiary Coal & Allied Industries, its Hunter Valley thermal coal division, in China’s Yancoal.
The proposed deal would see Yancoal acquire the assets, including majority shares in the Hunter Valley Operations mine, the Mount Thorley mine and the Warkworth mine, for $US2.45 billion ($3.23 billion).
Between them, the operations produced 25.9 million tonnes of thermal and semi-soft coking coal in 2016.
“We are confident that Coal & Allied will continue to contribute to the NSW economy and the communities of the Hunter Valley under a new owner,” Rio Tinto chief executive officer Jean-Sebastien Jacques commented on the deal.
If the deal is executed, Yancoal would expand an Australian portfolio that already includes seven sites across NSW and Queensland.
The proposed Coal & Allied deal might even be the start of more M&A activity in the region, according to Ernst & Young’s Paul Murphy, who expects demand for Australian coal to remain high.
“Already in 2017 we’ve seen one large coal mining deal talked about, in the Hunter Valley, NSW,” Murphy said.
“And if the price stays within a fairly stable band this year, then we expect to see a few more coal deals occur in Australia.”
Meanwhile, Anglo American’s exhaustive expansion plans for the Drayton South coal mine in the Hunter have again been stalled.
For a fourth time in six years, the Planning Assessment Commission rejected the proposed expansion because of the risks the project would pose to the environment.
Anglo American is seeking to develop a Drayton South into a 6.4Mt per annum coal mine, with a 15-year mine life.
Keeping the faith
Shrinking business volumes in the past five years have caused many mining services companies and suppliers to close their operations in the Hunter region.
The suppliers that remain today have overcome various challenges to beat falling volumes through increased market share.
Despite the pessimism the downturn caused, Metso bucked the trend in 2016 with a significant investment into a new east coast service facility at Tomago in the Hunter.
Metso has been supplying equipment and services to the broader mining and quarrying industries from its east coast service centre in the Newcastle suburb of Carrington since 1959.
After more than 50 years at Carrington, the company relocated its service centre to the new 2000-square-metre Tomago facility last year.
The Tomago facility houses around 35 personnel, comprising some of Metso’s east coast services staff, part of its health, safety and environmental (HSE) team, as well as associated support staff.
Metso’s new facility provides extensive services to the coal and metalliferous mining industries along Australia’s entire east coast. It also services the company’s clients in the quarry industry.
So, with a strong market position, and after 57 years at Carrington, why did Metso invest in the new premises?
Metso vice president of service operations Roger Taylor explained: “Whilst we are bullish about the medium to long term future of mining, ultimately the decision to invest was based on a core theme of increased efficiency.
“We also chose a location that brought us physically closer to our customers. The 20 kilometre move from Carrington to Tomago might not sound significant, but it cuts travel time to the Hunter Valley by 30 minutes and so allows our team to respond more rapidly to urgent customer issues.”
Combining efficiency with safety
Common industry strategies to improve efficiency, safety and flexibility were high priorities at the new facility, Metso’s service manager for eastern Australia Jason Richards continued.
He said the business had survived over the years by constantly improving its practices in these areas.
“The new centre has provided a leap for us in both efficiency and productivity. The quicker processing times, and overall reduction in costs are a benefit for us as well as our customers,” Richards, who is responsible for the Tomago facility, said.
Richards sights the facility’s greatly improved lifting capabilities and innovative new paint booth as two examples of significant efficiency improvements.
The paint booth can be retracted upwards when not in use and then lowered over the equipment as required. This allows the floor space to be used for other purposes when the booth isn’t required. It also saves the time that would be needed to move equipment in and out of a fixed paint booth.
Taylor added, “Whilst we do have a positive outlook for business in the region, ultimately we wanted to improve the service that we provide to our customers with a new facility that matches a more cost effective supply model.
“The benefits of the new centre were immediately recognised by both our customers and personnel. We are confident that we are very well positioned to service a rebound in the mining and quarrying industries,” he said.
Where are the jobs?
Further adding to the renewed optimism in the Hunter is the prospect of more mining jobs returning to the region.
And after years of bad news for mine workers in the Hunter there have signs that employment is slowly coming back.
Glencore demonstrated an early case of this late last year by announcing that its Integra underground coal mine in the Hunter would restart, creating up to 275 jobs.
If the Drayton South development is ever approved, that mine is expected to employ up to 500 workers.
“After a long period of downturn, the recovery in coal prices has boosted activity and confidence across the Hunter mining sector and this will hopefully translate into more jobs for the region,” Galilee said.
“Mining is the beating heart of the Hunter, providing jobs and economic stability, as well as providing reliable electricity to our region and to NSW.”
Galilee believes that mining will remain the bedrock of the Hunter economy for many years to come.
This article appears in the May edition of Australian Mining magazine.