Iron ore. The red dirt stalwart long seen as a staple of the Western Australian mining scene.

Gold. The glittering drawcard that has inspired generations of prospectors the world over.

Lithium. The linchpin of developing technologies at the centre of an economic groundswell tipped to steer the mining industry through a new chapter of success.

When these commodities are doing well individually, so too is Australia’s mining landscape. But collectively, this triumvirate has the power to shape something amazing – such as that which is currently rumbling under the surface in Western Australia.

There has been much hype about the potential of lithium and other battery minerals, many of which are found in WA, and this hype has been complemented by an equally significant resurgence in the gold exploration space.

These two combined were already set to deliver a powerful economic punch, and when Fortescue Metals Group (FMG), BHP and Rio Tinto’s plans to green light new multi-billion dollar iron ore facilities came to light, said punch turned into a dizzying knockout blow.

Despite the positivity, there are still some fairly fresh wounds in the WA mining industry following the last mining boom and its subsequent bust. AMEC Chief Executive Officer Warren Pearce said these scars meant he was wary of using the same terminology to describe what was potentially on the horizon.

“There is still a bit of anxiety about using the word ‘boom’,” Mr Pearce told National Mining Chronicle.

“I think the reality is the recovery of the mining sector is taking place much faster and much stronger than we or anyone expected it to.”

One of the reasons for this unexpected speed, according to Mr Pearce, is the number of people and organisations funding exploration and drilling programs.

“There has been a substantial drill and exploration program going on in the last 12 months, all over WA, but particularly the Goldfields and in the Pilbara,” Mr Pearce said.

“You’re now seeing the big players at the other end of the spectrum making big commitments to new mine developments and new mine expansions, which is pulling the next step of the growth cycle closer.

“We’re looking at the next 12 to 18 months of exploration programs and the announcements from them to determine how strong this growth cycle is going to be in terms of new projects, what’s likely to see money, what’s likely to be going forward as project development.”

The Federal Government’s decision to redesign the Exploration Development Incentive (EDI) has proved crucial in the increase in exploration activity.

Proof of this came earlier in the year when the Junior Minerals Exploration Incentive’s (JMEI) second round was oversubscribed, with 46 companies successful in applying for available credits for the 2018/19 financial year.

The JMEI allows mineral exploration companies (with no mining income) to raise capital and renounce and pass future tax deductions to their Australian resident investors. The money raised must be spent on greenfields mineral exploration in Australia.

“Hitting the JMEI cap vindicates the Federal Government’s decision to rework the EDI and shows the returning strength of the mineral exploration sector,” Mr Pearce said.

“Completely distributing the 2018/19 allocation of JMEI funding within two weeks reflects the substantial building confidence in the sector.

“This means more greenfields exploration, which increases the chances of finding the next mine, and therefore more jobs and more revenues for local businesses.”

Similar to Mr Pearce, WA Mines and Petroleum Minister Bill Johnston was cautious about using the word ‘boom’, but said there were some very positive signs in the WA mining sector.

“Like all capital investment in projects, it’s important to maximise benefits to Western Australia,” Mr Johnston said.

“Part of that process is identifying the lessons we have learnt from previous cycles to ensure we maximise the opportunities presented in the future.

“It is also important for State Government to use the levers it has, particularly policy settings, to ensure the benefits of any investment into the state’s resources industry are maximised and  ow through the community.”

Mr Johnston said an example of this was the McGowan Government’s commitment to establish jobs and skills centres.

Five metropolitan centres were opened in May this year and a further eight, plus a number of outreach services, will be established in regional WA in the next year.

“Western Australia is already a global hub for the resources industry and it is important to look at how we can continue to build on this reputation,” Mr Johnston said.

“Having a highly skilled workforce in Western Australia will play an important role in ensuring industries have access to local workers with relevant skills.”

 

Spread the load

A driving force behind the positivity in the WA resources sector is the prospect of the potential gain and responsibility not being centralised around one single commodity.

With 794 million tonnes produced in WA last year – a 14 per cent increase on the previous year, reaching an export value of $62.9 billion – iron ore is still very much leading the charge, but Mr Pearce said the evolving fortunes of gold and lithium would paint a clearer picture of where the resurgence was heading.

“Gold exploration has really driven the recovery in terms of investor confidence,” he said.

“The lithium battery minerals story is one that has also added a lot of confidence to the market, particularly because of the demand environment internationally.

“People are looking at the demand curvature and it just seems exponential, with WA’s prospectivity for lithium and the range of battery minerals here a big opportunity.”

Mr Johnston said the range of mineral commodities made the resources sector in WA one of the richest and most diverse jurisdictions in the world, and was keen to highlight the potential for lithium.

“The opportunity presented by development of Western Australia’s lithium resources has the potential to have a significant and lasting impact, not just in mining, but also processing,” he said.

“Western Australia is the world’s leading producer of lithium and is uniquely placed to capitalise on the rising growth of battery use and technologies.

“There is enormous potential to increase downstream processing of lithium and other energy materials, creating long-term job opportunities for Western Australians.

“Other sectors including gold, nickel, alumina and mineral sands will also make important contributions to the overall strength of Western Australia’s resources industry.”

Within the space of a month, nearly $9 billion worth of new iron ore infrastructure has been mooted, and its timing could be extremely beneficial to both Western Australia and Australia as a whole.

FMG was the first to present its statement of intent by announcing the $1.7 billion Eliwana mine, which would include the development of 143km of rail. The site is designed to replace the Firetail mine and has been given a projected mine life of at least 24 years.

Three weeks later BHP followed this up by announcing it had finally decided to give its $4.8 billion South Flank mine the go-ahead before Rio Tinto unveiled plans to develop its Koodaideri mine next year, which has forecast capital costs of around $2.2 billion.

Although there is a mass of new infrastructure planned, unlike the previous mining boom, all of these projects are designed to replace existing mines.

“They’re all making similar judgements about the mining environment and I think they’re also at the point where those companies have reached the conclusion that in order to continue their growth plans they have got to be able to have some ongoing mine developments,” Mr Pearce said.

“They’re looking at the environment and thinking the next period is going to be quite opportune, and they want to be well-placed to take advantage of it.

“We have been suggesting this growth period is going to be made up of a larger range of smaller projects with new mines coming out for base metals, battery minerals and precious metals, but with the reality that the big players are putting multi-billion dollar projects on the table, it suggests the opportunity for a boom might actually be in play.”

Image: BHP