AUSTRALIA - GOLD Industry

 

OVERVIEW

 

Australia produces a large percentage of the world’s gold, with 245 tons per year, and is second only to China, with 320 tons per year. Firms in this industry mine gold-bearing ore and typically process it into gold bullion, either by smelting or by solvent extraction methods.

 

The mining industry is a significant contributor to Australian GDP.

 

TRENDS

 

Demand, primarily from India and China has not diminished, despite the rising price of gold, and is expected to remain strong. Continued concerns over conditions in global financial markets and ongoing tension in the Middle East have only added to gold's luster. These trends have renewed investor interest in the metal, which has resulted in a rising gold price.

 

KEY FORECASTS

 

The outlook for Australia’s mining industry is optimistic through 2014, due in part to continued strong demand from China and other Asian countries. The predicted average growth rate through this time period is 6.8%. In the shorter term, the gold mining industry is expected to generate revenue of about $11.65 billion in 2010-11.

 

Industry revenue is expected to expand by 17.5% in 2010-11, reflecting higher prices and higher output. A substantial part of the gain is expected to flow through to industry profit. The industry's share of GDP in 2010-11 is expected to be about 0.4%.

 

INDUSTRY DEVELOPMENTS

 

Australia's high labor costs and first-world safety regulations, distinctive geology, and the importance placed on mining research by successive governments and businesses has meant that the Australian mining sector is quite technologically advanced. A large proportion of mines worldwide make use of Australian-developed computer software, such as Enterprise resource planning software by Mincom Limited and geology/mine planning software by Runge Ltd and Maptek Pty Ltd. Australia's mining services, equipment, and technology exports are over $2 billion annually.

 

MARKET SIZE

 

The global gold market generated total revenues of $73.5 billion in 2009, representing a compound annual growth rate (CAGR) of 20.1% for the period spanning 2005-2009.

     

Australia’s key industry figures for the gold ore market (2009) are as follows:

 

 

 

Industry Revenue	8,639.1 $ million
Revenue Growth	16.8   percent
Industry Gross Product	3,542 units
Number of Establishments	120    units
Number of Enterprises	80      units
Employment	8,385 $ million
Exports	8,403.5 $ million
Imports	4,342.6  $ million
Total Wages	970.4     $ million

 

 

KEY PLAYERS

 

Barrick (PD) Australia Limited

Bendigo Mining

Citigold Mining

GBS Gold      

Newcrest Mining Limited      

Newmont Australia Holdings Pty Ltd          

Gold Fields Australia Pty Limited

 

 

GROWTH FIGURES AND FDI FIGURES

 

The gold ore mining industry in Australia experienced a compound annual growth rate (CAGR) of 20.1% for the period spanning 2005-2009. Foreign investment rules are liberal and encourage inward investment. The country has well-defined regulatory bodies and a well-established legal system that can be described as investor friendly.

 

Stock of Foreign Direct Investment in Australia by Industry

 

Industry	$ million	% share of total
Agriculture, forestry and fishing	700	0.2
Mining	99,659	25.4
Manufacturing	73,848	18.8
Electricity, gas and water	16,105	4.1
Construction	13,037	3.3
Wholesale and retail trade	57,093	14.5
Accommodation, cafes and restaurants	914	0.2
Transport and communication	25,929	6.6
Finance and insurance	53,143	13.5
Property and business services	33,830	8.6
Other services	6,105	1.6
Unallocated	12,500	3.2
Total	392,862	100

 

RECENT DEALS

On September 8^th 2010, Canada’s emerging gold producer, Anatolia Minerals Development Ltd. announced its plans to buy Australia's Avoca Resources for $964.7 million, the latest merger in the global gold industry. Perth, Western Australia-based Avoca is an S&P / ASX 200 gold mining and exploration company, which has grown rapidly since its listing in 2002. Avoca's 100 per cent owned Higginsville Gold Operation has grown into a large gold production centre with a forecast production level for FY2011 of 190,000 ounces. Following the acquisition of Dioro, Avoca now has the dominant position on Australia's richest gold belt: the Kalgoorlie to Norseman gold belt. Avoca owns two 1.2 million ton per annum treatment plants, has reserves of over 1.3 million ounces of gold and a resource base of 6.7 million ounces; as well as over 3,800kms of very highly prospective exploration ground.

 

A new deal could create the world’s largest gold producer. Bettina Wassener for The New York Times reports that the board of Lihir Gold of Papua New Guinea recommended Tuesday that its shareholders agree to a sweetened $8.8 billion takeover offer from Newcrest Mining of Australia. This move would exemplify another merger within the mining sector and would create the world’s largest gold producer.

 

NEWS

 

A hefty tax could be in the offing for Australia’s miners and other natural resource companies. Although it’s not official yet, it has many pondering what the impact would be for related exchange traded funds (ETFs) as well as one of the world’s largest mining sectors. Canberra’s plan for a tax of up to 40% on on profits generated by resource companies would cut deeply into earnings and dividends. Not only would this put future projects at risk, but the mining sector at large would suffer. The tax, which could come down as early as 2012, would threaten the competitive side of Australia’s mining sector.

 

The mining industry’s anger over the proposed 40% resource 'super profits' tax (RSPT) on all commodities mined in Australia was a major contributing factor to the shock ousting of Australian Prime Minister Kevin Rudd by his deputy Julia Gillard in June 2010.

 

 

INVESTMENT OPPORTUNITIES

 

Australian copper and gold miner Indophil Resources is now seeking a new buyer, following the decision by approved bidder Zijin Mining to pull out of an AUD545mn takeover deal in June 2010. Zijin had reportedly encountered obstacles in ensuring Chinese regulatory approval at the local level for the purchase. Indophil's key asset is its 37.5% stake in the Tampakan copper/gold deposit in the Philippines, one of the largest undeveloped copper/gold deposits in the world. As such, it is expected to attract new bidders over the coming months.

 

RESOURCES: INDUSTRY GROUPS AND ORGANIZATIONS

 

The Association of Mining & Exploration Companies (AMEC) - Serves as the voice of the mineral exploration industry in Australia. AMEC Members are represented at both the national and state level on matters pertaining to encouraging mineral exploration in Australia, http://www.amec.org.au/

 

Austmine - Promotes Australian mining technology and services to the world, http://www.austmine.com

 

Australian Centre for Minerals Extension and Research (ACMER) -

Focuses on the delivery of a research and technology transfer programs to address the needs of the mining industry, http://www.acmer.uq.edu.au/aboutus/aboutus.html

 

Construction Mining Equpment Industry Group (CMEIG) -     The Construction & Mining Equipment Industry Group (CMEIG) is a non-profit organisation to represent the construction and mining equipment industry and allied equipment and services on issues impacting on the delivery of business, http://www.cmeig.com.au/

 

Current Investment Opportunities in Australia:

 

For current investment opportunities in Australia, please click here  :   http://investinaustralia.com/current-opportunities

 

 

 

REFERENCES:

 

1. Babs McHugh. "Gold production sparkles as mines reopen," ABC Rural, August 2010, http://www.abc.net.au/rural/news/content/201008/s2997112.htm.
2. Editors, Ibis World, “Gold Ore Mining in Australia: Australian Industry Report,” September 2010, http://www.ibisworld.com.au/industry/default.aspx?indid=68.
3. Editors, Business World International, “New Market Research Report: Australia Mining Report Q4 2010,” September 2010, http://www.prlog.org/10941127-new-market-research-report-australia-mining-report-q4-2010.html.
4. Unknown, Austrade, “Mining Capability Overview”, June 2006, http://web.archive.org/web/20060214104214/http://www.austrade.gov.au/overseas/layout/0,,0_S3-1_3zo-2_-3_PWB110704527-4_-5_-6_-7_,00.html.
5. Editors, Report Linker, “Metals and Mining: Global Industry Overview”, http://www.reportlinker.com/p0186290/Metals-and-Mining-Global-Industry-Overview.html.
6. Editors, Ibis World, “Gold Ore Mining in Australia: Australian Industry Report,” September 2010, http://www.ibisworld.com.au/industry/default.aspx?indid=68.
7. Editors, Report Linker, “Metals and Mining: Global Industry Overview”, http://www.reportlinker.com/p0186290/Metals-and-Mining-Global-Industry-Overview.html.
8. Editors, Business World International, “New Market Research Report: Australia Mining Report Q4 2010,” September 2010, http://www.prlog.org/10941127-new-market-research-report-australia-mining-report-q4-2010.html.
9. Editors, Domain-B.com, “Canada's Anatolia to buy Australia's gold miner Avoca Resources for $964.7”, September 2010, http://www.domain-b.com/industry/Mining/20100908_miner.html.
10. Editors, ETF Trends.com, “Possible Mining Tax Smacks Gold Miner, Australia’s ETFs”, May 2010, http://www.etftrends.com//2010/05/possible-mining-tax-smacks-gold-miner-australia-etfs.
11. Editors, ETF Trends.com, “Possible Mining Tax Smacks Gold Miner, Australia’s ETFs”, May 2010, http://www.etftrends.com//2010/05/possible-mining-tax-smacks-gold-miner-australia-etfs.
12. Editors, Business World International, “New Market Research Report: Australia Mining Report Q4 2010,” September 2010, http://www.prlog.org/10941127-new-market-research-report-australia-mining-report-q4-2010.html.
13. Editors, Business World International, “New Market Research Report: Australia Mining Report Q4 2010,” September 2010, http://www.prlog.org/10941127-new-market-research-report-australia-mining-report-q4-2010.html.
14. Editors, Ibis World, “Gold Ore Mining in Australia: Australian Industry Report,” September 2010, http://www.ibisworld.com.au/industry/default.aspx?indid=68.