How has the minerals industry market changed in the last six months?
There is no doubt that the mining industry has changed very significantly in that short period of time.
There has been a fall in commodity prices, and a significant fall in demand. The current global financial crisis has had a significant effect on the Australian mining industry.
What are the major trends and variations in the market that you would expect to see over the next 18 months?
I think you would have to be a very brave person to make any sort of predictions about the future in these uncertain times.
My view is that there will continue to be high levels of volatility associated with the world’s economy and you would hope (though this is not a prediction) that some time in the next 12 months there would be some sort of bottom reached in the situation.
If that were to occur, it would be hoped that the industry would begin to see a steady up-swing in rebuilding from the position that we now find ourselves in.
I think the fundamental demand for minerals around the world is still there, although it has obviously been affected by the global financial crisis. However, I think we will see those fundamentals reassert themselves when things settle down.
You were selected to be part of a Western Australia Industry Working Group — what will this group bring to the State of WA?
One of the things we offer is advice on how to improve the project approvals process.
We have had one meeting so far and I think the key issue raised was that the Western Australia approvals process for projects has been somewhat of an ongoing issue.
In fact, the process has often been viewed by members of the mining industry as unwieldy and lengthy. The Western Australia Industry Working Group will advise the Government on ways the approval process could be improved, so that the process can become a competitive advantage for the State rather than a competitive disadvantage.
There seems to be a high level of interest in this process of late, given the current financial situation.
The industry is currently faced with certain things that they can’t control and the global financial crisis is one of those, but as a jurisdiction, the mining industry needs to focus on the things they can control or at least the things they can influence. That is where this working group steps in. It makes suggestions to the Western Australia Government on what can be done to make the State more attractive to potential developers and explorers.
Having a high level of alignment and certainty associated with project approvals would have a part to play in making Western Australia a more attractive place to generate projects.
It is not just about generating a good nature in the State but also about sending out the message that the state is open for business. Particularly now, where the circumstances have changed so markedly, the State is looking at attracting projects.
Do you think the economic climate has forced companies to ease back on projects?
The global financial circumstances have meant that a whole range of companies are reviewing their current commitments.
While the price of commodities has fallen, there are also some hidden benefits including a reduction in project costs due to the dollar and the heat going out of the market.
There are potentially some counter cyclical opportunities and I think that is something that you need to look at. There has been so much bad news that we also have to look for the opportunities that are inherent in the circumstances we find ourselves in.
What actions would you expect from companies in this market as they move to mitigate potential risks to their businesses?
I think business, particularly commodity businesses, generally have quite a long life so they look and plan against variations in both the commodity price and the Australian dollar (if that is a relevant thing for them).
Obviously, they are looking for robust projects that can navigate the waters that get pretty choppy from time to time.
I think the issue of employment is fundamental to businesses in this time. There has certainly been some shedding of jobs in the resources sector. To some extent, the labour market has been relieved of the pressure of accessing skilled labour, which has long been a sore point for the industry.
On the medium to long term, based on the sort of demand we have seen for commodities in the past, I think there will still be a big demand for skilled employees.
The demand for commodities will rise again, maybe not tomorrow but in the future, and when it does we need to be ready for it because we haven’t been ready in the past.
There may well be a dip in demand for labour in the short term, but in the medium to long term, the fundamentals are still strong so skills will still be required and people will still be required.
What advice would you have for mining and minerals processing professionals, as well as suppliers and distributors in this sector, as we move in to 2009?
I think the circumstances that we find ourselves in globally suggest that the cyclical nature of the mining industry is still in evidence.
You need to look at the fundamentals of the project that you have got. I would be quite surprised if we didn’t see an increase in demand in the future.
I would like to make the observation that we are in a difficult position at the moment, but, the medium to long term future still looks positive.
I think in the short term there is still going to be volatility. I think the fundamentals for commodity demand are still there, in terms of urbanisation and large slabs of developing countries. The demand for the commodities that Western Australia exports is still going to be strong over the medium term, however, there is definitely pain and uncertainty that we need to get through before we can get to the other side.