After four or five years in the doldrums, 2017 was by most definitions a good year for Australia’s mining sector.
It was able to consolidate on unexpected price gains in 2016 in its key export commodities, iron ore and coal.
The shine that returned to gold in 2016 was burnished even brighter throughout 2017.
And while that old-fashioned supply and demand churned and burned, new jobs are being created to service the future of commodities in their so-called digital mines.
Digital mining calls for different skill set
Driverless trains that can be kilometres long, operated from a nerve centre in Perth, and driverless trucks are now commonplace in the iron ore industry in WA’s Pilbara.
Now the junior and mid-size miners and the companies that service them are operating or working towards the digital mine model.
The aim is to extract greater value from existing resources at a lower cost, while improving the health and safety of mine workers.
Airobotics director of flight operations in Australia, Joseph Urli, says drones aim to remove the ‘three Ds’ from mining jobs — danger, and dull and dirty jobs.
At the annual Diggers and Dealers conference in Kalgoorlie in August, Mining Education Australia director Steve Hall said change was needed in vocational training centres and universities to keep up with changing technology.
“I think the old style of thinking was more around the ‘double degree’ but what we’re talking about is called micro-credentialing,” he said.
He also predicted there would be more jobs in the mining, equipment, technology and services companies, rather than within mining companies themselves.
“Whether it’s flying drones or working in big data analytics,” Professor Hall said.
Gold the stand out performer of 2017
It seems that 21st century Australia is undergoing a gold rush that mirrors the frenetic activity of the mid 1800s.
The low Australian dollar of less than 78 US cents means the Australian gold price is close to $1,700 an ounce.
Once idle drill rigs are again in the bush, the only thing holding them back is lack of experienced drillers.
New mines are being brought online in record time, and investors are breathing new life into old ones.
That is what private group Aratay Capital Partners did only weeks ago when it bought the mothballed Stawell gold mine in Victoria.
CEO Campbell Olsen says the demand is there — the trick is to look at old workings with new eyes.
“Because of several different owners over the years there was less work done in exploration,” he said.
“The view was there may not be enough grades there to continue on, but our view is different — we think that it just needs more work.
Iron ore rolls with the waves and floats to the top
There is a well-known maxim when it comes to predicting the prices of mineral resources: ask five different analysts and you will get five different answers.
That was borne out across 2017 with most of the price predictions for iron ore coming up short.
In June, the market was agog after the price jumped 5 per cent overnight to $US60 a tonne.
Director of market analysis firm Iron Ore Research, Phillip Kirchlechner, said one of the catalysts was a speech by Chinese Premier Li Keqiang in which he said China would meet its 6.5 per cent GDP growth target.
But he did not think it would change much from that level.
“I think $US50–60 is a reasonable band it will trade within for the rest of the year, although there will be some volatility above and below that,” Mr Kirchlechner said at the time.
However, the price went as high as almost $US80, and at the time of writing was fetching $US74 on the spot market — exactly the same as at this time last year.
Given that it is estimated that a $US10 change in the iron ore price is worth $2.5 billion to the Federal Government, the price is important.
That correlation is likely one of the reasons Treasurer Scott Morrison used an iron ore price assumption of $US55 in the MYEFO two years ago after being hammered for heroic assumptions in budgets past.
Coal prices still on the strong side
After iron ore, coal is Australia’s second-most valuable export.
There are two types of coal — coking coal, also known as metallurgical coal, which is used as an ingredient to make steel, and thermal coal used to make heat and power.
Both had unexpected and spectacular price rises in 2016 of $US300/t for coking and $US100 for thermal.
They have fluctuated, but those strong prices are there again as 2017 draws to a close.
Mines that were up for sale were taken off the market, others went ahead with expansion plans and there are greenfields mines under consideration.
In the New South Wales Hunter Valley alone it has meant another 1,300 jobs.
In July, Steven Galilee from the Minerals Council of Australia said that unlike the previous construction boom these are not short-term jobs.
“We would expect these jobs to be at least sustained at these levels, provided that the ongoing strong demand for our Hunter coal continues.
“And provided that the increase in coal prices we’ve seen sustained over last 12–18 months continue that way.”
Six months later and coal analyst Mike Cooper from Platts Global said they had.
“Coal has had a very strong finish to the year. Newcastle thermal coal prices, the current price for the grade that goes to Japan, are trading around the $US100/t mark, on their way to $US105,” he said.
“The Newcastle 55 grade of coal that goes up to China, the Chinese grade, has been trading in the doldrums around $US70. But it’s starting to shift upwards now.”
But coal consumption patterns are changing, and even with Chinese demand the last two years saw it fall back a total of 4.2 per cent — its largest recorded drop.
China will slowly reduce coal imports, and although it will remain our biggest market, the industry is looking to developing and South-East Asian countries to take up the slack.
That is in keeping with the International Energy Agency’s (IEA) recent Coal 2017 Report, which predicts rapid growth in those areas.
“If we combine Bangladesh, Pakistan, India and the ASEAN region, there are more than 2 billion people with very low electricity consumption,” said IEA director of energy markets, Keisuke Sadamori.
“Although the IEA is very optimistic about the development of renewables and the future and the role of gas, in some countries coal will also supply a significant share of the electricity needs.”