Investment a struggle in the mining sector

The mining sector is showing signs of “green shoots in a cold market” according to a report from Newport Consulting, however the figures show investment is at an all-time low.

Based on interviews with 50 mining executives, the consulting firm suggested there was a “slight revival” in attitudes towards the state of the market.

Of those interviewed, 16 per cent of mining leaders said they were cautiously optimistic about growth prospects in the next 12 months, and leaders who showed no signs of optimism fell from 93 to 84 per cent.

Regardless of these minor improvements on the impoverished sentiment of the last three years, capital expenditure continues to plunge, as the number of leaders reporting a reduction in Capex jumped from 44 per cent up to “an overwhelming”  78 per cent, which Newport said was the most pronounced capex reduction seen in five years of reporting.

According to one president of a $34 billion company: “No Capex is being approved. As a new business we are seeking to reduce our back office costs. We will become lean and mean while supporting essential Capex spend in production.”

80 per cent of mining leaders are planning to reduce workforces, up a massive 50 per cent on last year’s retrenchment intent, while no-one indicated a desire to increase numbers, indicating more bad times ahead for workers on the ground as well as administrative and managerial roles.

However, a vein of positivity showed more than half of those surveyed believing that commodity prices would stabilise over the next 12 months (less than a quarter each believed prices were still falling or on the rise).

Queensland Resources Council CEO Michael Roche said there was no doubt the resources sector in Queensland was primarily focussed on cost reduction.

“The priority for QRC members is maintaining their global competitiveness,” he said.

“Our industries are price takers, not price makers, and with the industrialisation of Asia more subdued but not abandoned, there are many more potential competitors for Queensland active in the marketplace.”

Roche said a drop in the Australian dollar against the greenback would be beneficial for Australian producers, but as a factor beyond our control it was better to seek commitments from government to take advantage of the market downturn, in anticipation of another market rebound in demand for minerals and energy.

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