The role of contract mining in the resources industry · The role of contract mining in the resources industry ... Iron Ore Coal Gold Nickel St Ives Beta Hunt ... The role of contract

The role of contract mining in the resources industry

Wal

King CEO / Melbourne Mining Club / 6 August 2009

Leighton Holdings Limited2 Melbourne Mining Club 6 August 2009

The Minerals Demand Cycle


F

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1780 1794 1808 1822 1836 1850 1864 1878 1892 1906 1920 1934 1948 1962 1976 1990 2004 2018

GDP $bn

Australia’s Economic Growth

GDP AT CONSTANT F2008 PRICES 1788‐2009

Source: IBISWorld

Hunting Age Agrarian Age Industrial Age Infotronics

Age

An Industrial Age is when

Manufacturing, Construction

and Utilities (electricity, gas

& water) dominate the economy,

that is over a third of GDP


Changing Importance of Australian Industry

0%10%20%30%40%50%60%70%80%90%

100%

1800

1820

1840

1860

1880

1900

1920

1940

1960

1980

2000

2020

2040

2050

AgricultureMiningManufacturing UtilitiesConstructionWholesale tradeRetail tradeTransport &storageCommunicationFinance &insuranceProp &businessDwelling O'ShipGovt adminEducationAccom, cafes &restHealth &communityCult &recreationPersonal &other

Share of GDP by Industry Division

Source: N.G Butlin, ABS & IBISWorld


The World’s Economic Regions In 2009 ‐

Share of World GDP (ppp

basis)

Source Note:

North America24.0%

C&S America5.0%

W. Europe24.5%

C&EEurope5.5%

Asia Pacific27.3%

Africa4.0%

ME3.5%

IndianS‐C6.2%


20%

13%

6%

5%4%3%3%3%

3%3%

15%

7%

15%USAChinaJapanIndiaGermanyRussiaBritainFranceBrazilItaly11th‐20th Nations21‐30th NationsRest of World

World’s 30 Largest Economies 2009 (F) World’s 228 nations US$ 73.8 trillion

PURCHASING POWER PARITY (PPP) TERMS

Source: CIA/IBISWorld

10/11/08

11TH –

20TH NATIONS:Spain

2.0%Mexico

2.0%Canada

1.9%Korea S 1.9%Indonesia

1.3%Turkey

1.3%Australia

1.2% 17thIran

1.1%Taiwan

1.1%Netherlands

1.0%

21ST –

30TH NATIONS:Poland

1.0%S. Arabia

0.9%Argentina

0.8%Thailand

0.8%S. Africa

0.7%Egypt

0.7%Pakistan

0.6% Belgium

0.6%Malaysia

0.6%Sweden

0.5%

Rest of World (198 nations)

15.3%


F

‐30

‐25

‐20

‐15

‐10

‐5

0

5

10

15

20

25

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

%

Chinese Economic Growth

ECONOMIC GROWTH: CHINA, REAL GROWTH 1950‐2010 (F)

Source: SSBC/IBISWORLD

8.2% average

Presenter

Presentation Notes

�


Over 60% of China’s steel use is

for construction and

infrastructure – the key targets

of their stimulus package

7%5%

6%

20%

62%

Infrastructure/ Construction

Machinery

Metal Goods

Autos and Ship‐Building

Other

Chinese Steel consumption

CHINA’S STEEL USE BY SECTOR CY2008

Source Note: CEIC, UBS, BHPB


F

‐8

‐6

‐4

‐2

0

2

4

6

8

10

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

%

Indian Economic Growth

ECONOMIC GROWTH: INDIA, REAL GDP GROWTH 1950‐2010 (F)

Source: SSBC/IBISWORLD


F

Trend line.Actual

Impact of GFC on world GDP

‐2

0

2

4

6

8

10

80 82 84 86 88 90 92 94 96 98 0 2 4 6 08e 10f

%

Worldeconomy*

Emerging anddevelopingeconomies

Advancedeconomies

WORLD REAL GDP GROWTH

*PPP weightsSource: IMF World Economic Outlook Update, Jan. 2009. Year end December

Presenter

Presentation Notes


Forecast

0

50

100

150

200

250

300

350

2 3 4 5 6 7 8 09e 10f 11f 12f

$US/Various

Gold($US/oz /10)

Thermal Coal($US/t)

Coking Coal(US$/t)

Iron Ore

Commodity Price Forecast

SELECTED COMMODITY PRICES

SOURCE: ABARE, BIS SHRAPNEL, MACQUARIE RESEARCH APRIL 2009


Hobart

Brisbane

Perth

Darwin

SydneyCanberraAdelaide0.9%

0.9%

53.7%48.8%

17.8% (not producing)19.3% (not producing)

18.7%18.4%

0.1%0.2%

1.8%0.9%

0.2%0.2%

9.5%1.3%

1.9%

(not producing)0.3%

Otway

BasinBass

Basin

Gippsland

Basin

Bowen Surat

Basin

Adavale

Basin

Cooper / Eromanga

BasinAmadeus Basin

Carnarvon Basin

Browse Basin

Bonaparte

Basin

Dampier‐Bunbury

stage 5 gas pipeline

Pyrenees oil

Van Gogh oil

Pluto gas

NWS CWLH oilNWS North Rankin B LNG

Reindeer gas

field,

Devil Creek gas processing plant

Blacktip

gasMontara/Skua

oil

Queensland gas pipelineLacerta

Gas Field coal seam methaneDarling Downs ‐

Tallinga

coal seam methane

Darling Downs including Spring Gully

coal seam methane

Eastern gas pipeline

Turrum

gasKipper gas

Longtom

gas

9.5%4.8%

South Gippsland

gas pipeline

Proposed gas

pipeline

Capital Expenditure$101‐500m$501‐1000m>$1000m

Oil basinGas

basin

Melbourne

Oil & Gas reserves

MAJOR OIL AND GAS RESOURCES AND ADVANCED PROJECTS

Source: ABARE Apr 2009


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

World

Asia

Europe

Africa

NorthAmerica

LatinAmerica

Forecast World Population Growth 1950‐2050

POPULATION GROWTH (MILLION PAX)

Source: United Nations World Population Prospects


The role of contract mining


Contract mining in Australia

Components by Commodity‐ Contract Mining, 2008f, $ million

2539

1367

7

128

964 206

171

716

Coal

Iron Ore

Bauxite

Copper

Gold

Mineral sands

Silver/Lead/Zinc

Other (mainlyNickel)

Source: ABS and BIS Shrapnel


Year ended June Coal Iron ore Total

2002 1247 425 3234

2003 1696 543 4076

2004 1532 714 4070

2005 1767 845 4272

2006 2366 1022 5329

2007f 2506 1137 5665

2008f 2539 1367 6098

Ave growth pa % 12.6% 21.4% 11.2%

Share % 41.6% 22.4% 100%

Source: ABS 8415.0 and BIS Shrapnel

Value of contract mining

Value of contract mining by commodity AUD $million, 2004-2008f, current prices

Leighton Holdings LimitedMelbourne Mining Club 6 August 2009 17

Contractors can provide a full range of services

Typical roles of contractor in the mining sectorOwner Operator Traditional

Contract MinerFull Services Contracting

Contractor

Activity•

Limited to

infrastructure set‐up

•

Pre‐strip

•

Mining

•

Rehabilitation

•

Infrastructure set‐up•

Mine planning•

Pre‐strip•

Mining•

Processing & load out•

Rehabilitation

Delivery

System•

Design & construct

•

Lump sum

•

Schedule of rates

•

Lump sum

•

Alliancing•

Schedule of rates per tonne delivered•

Schedule of rates for some

components

Investment by

Contractor•

Nil •

Plant & equipment

•

Working capital

•

Plant & equipment•

Working capital•

Investment stake in mine

Skills

Required by

Contractor

•

Construction Earthmoving/Mining

skills

•

Construction•

Mine planning•

Earthmoving/Mining skills•

O&M


Wilpinjong

Coal Mine, NSW, Thiess



Key reasons for using contractors

Reason Coal Gold Copper SLZ Other metals

Doesn’t tie up capital 3.5 3.5 3.2 2.8 2.9

Cost management & accountability

3.7 3.3 2.4 2.8 3.1

Management of equipment3.3 3.1 3.6 3.2 3.5

Need for flexibility 4.4 4.2 3.2 4.0 4.0

Uncertainty over size and life of mine

2.7 3.3 2.8 3.8 2.5

Technical capability 3.1 3.3 3.4 3.4 3.2

Labour shortages 3.4 4.1 2.6 3.8 3.6

IR concerns 2.4 1.8 1.8 2.0 2.1

Internal benchmarking

2.5 2.1 1.8 1.8 2.1

Note: Ratings scale: 1=unimportant and 5= very important


Leighton Group contract mining

Leighton Holdings LimitedMelbourne Mining Club 6 August 2009 21

Leighton Group is world’s largest contract miner

World contract miners(A$bn revenue pa, various recent years as available)

0 1 2 3 4

WashingtonUSA

Kiewit USA

MoolmanAfrica

BumaIndonesia

MacmahonAustralia

PamaIndonesia

Downer EDIAustralia

LeightonGroup

Caterpillar Purchases 2004 - 2006

BHP

Billi

ton

Leig

hton

Gro

up*

US$920m

* Including HWE

This graph includes RT, Anglo, Newmont, Peabody, CVRD, Downer EDI, Xstrata, Phelps Dodge, Freeport, Drummond and Arch Coal


Leighton Group Mining projects in Australia, NZ & Asia

Collinsville

South Walker CreekYandiOrebody 23/25

Area C

Yarrie Nimingarra

Cockatoo Island

Koolyanobbing

South Middleback

Iron OreCoalGoldNickel

St IvesBeta Hunt (U)

Agnew

Challenger (U)

Callie (U)

Favona (U)

Mt Keith

Toka Tindung

Leighton Contractors/HWE MiningThiess

Leighton InternationalLeighton Asia

Rapu Rapu Polymetallic

Kaltim Prima

SatuiSenakin

MSJLoa Raya

ABK Loa JananGHP

Sebuku

Rotowaro

Duralie

Broadmeadow (U)

Poitrel/Peak Downs/ Saraji/Middlemount

Dawson North

Yallourn/Loy Yang/ Hazelwood

Liddell/ Mt Owen ComplexWestside

Wilpinjong

Riverside

Oaky Creek/Lake Lindsay

Prominent Hill

Wahana

(U) Underground

Phu Bia Mine, Laos(not shown)

Curragh North

Hail CreekBurton

Goonyella Moorvale

Sonoma

Project Magnet

Tarong

Lake Vermont

Masbate

Collinsville

South Walker CreekYandiOrebody 23/25

Area C

Yarrie Nimingarra

Cockatoo Island

Koolyanobbing

South Middleback

Iron OreCoalGoldNickel

St IvesBeta Hunt (U)

Agnew

Challenger (U)

Callie (U)

Favona (U)

Mt Keith

Toka Tindung

Leighton Contractors/HWE MiningThiess

Leighton InternationalLeighton Asia

Rapu Rapu Polymetallic

Kaltim Prima

SatuiSenakin

MSJLoa Raya

ABK Loa JananGHP

Sebuku

Rotowaro

Duralie

Broadmeadow (U)

Poitrel/Peak Downs/ Saraji/Middlemount

Dawson North

Yallourn/Loy Yang/ Hazelwood

Liddell/ Mt Owen ComplexWestside

Wilpinjong

Riverside

Oaky Creek/Lake Lindsay

Prominent Hill

Wahana

(U) Underground

Phu Bia Mine, Laos(not shown)

Curragh North

Hail CreekBurton

Goonyella Moorvale

Sonoma

Project Magnet

Tarong

Lake Vermont

Masbate

•UHG Mine, Mongolia (not shown)


UHG Coal Mine, Mongolia, Leighton Asia



Mt Owen Coal Mine, NSW, Thiess



0

1

2

3

4

5

6

7

8

9

10

98‐99 99‐00 00‐01 01‐02 02‐03 03‐04 04‐05 05‐06 06‐07 Averagerate

Fatality rates in Australian mining

FREQUENCY OF FATALITIES PER 100 MILLION HOURS

The role of contract mining in the resources industry

Wal

King CEO / Melbourne Mining Club / 6 August 2009

Documents

The role of contract mining in the resources industry · The role of contract mining in the resources industry ... Iron Ore Coal Gold Nickel St Ives Beta Hunt ... The role of contract