Boom time blues as investment hits peak

A government report has shown the investment stage of the mining boom has possibly peaked.

Capital expenditure in the resources sector is predicted to dive by two-thirds of the next five years, the report said.

A dramatic fall is expected in the value of projects that are already in the pipeline or have commenced.

Minerals Council of Australia chief Mitch Hooke said rising costs, decreasing productivity and more regulation and taxes were punishing the industry, news.com.au reported.

It is predicted to fall to $70 billion by the end of 2017 while a fall to $256 billion by the end of the year is expected, the Bureau of Resources and Energy Economics report said.

If these forecasts are correct, the peak in investment passed last October, when $268.4 billion was committed to projects.

The report’s findings contrast statements from the Reserve Bank, which said on Tuesday mining investment peak was yet to come.

Resources and Energy Minister Gary Gray said investment remains at record levels even as resource projects were declining over the past year.

Referring to a graph in the BREE report, he said it shows how investment increased 12-fold since 2003 to $268 million.

“The current record high levels of committed investment in the Australian mining and energy sectors are typical of resource industry business cycles,” Gray said.

“Looking at the level of committed investment in the mining sector since 1995, we can see that it increased from $65 billion in 1995 to $92 billion in 1998, before declining to a low point of around $20 billion in 2003.”

He attributed the investment increase to soaring demand from Asian economies, particularly China.

The report also noted 14 fewer resources projects are under development at the end of April in contrast with six months earlier.

The number of projects fell to 73 but their value was steady at a near record of $268 billion owing to cost blowouts.

A $150 billion worth of mining and energy projects have been abandoned or deferred over the past year.

The report highlighted these projects need to continue if the boom is to remain.

A $150 billion worth of mining and energy projects have been abandoned or deferred over the past year.

Eighteen projects, including BHP Billiton’s $30 billion Olympic Dam development and Woodside’s $36 billion Browse liquefied natural gas project, have been abandoned.

Exploration spending by mining companies declined by about a quarter between June and December, with higher-risk greenfield sites taking the biggest hit.

A total of $403 billion worth of projects that have caused controversy or remain in the elementary assessment stage remain in the offing.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.