Australia’s longest ever minerals boom has clearly passed. The world economy is fragile, commodity prices will become more volatile and capital more difficult to obtain.
There is no argument over the value of the minerals industry to Australia. The sector has generated exports of more than $100 billion dollars a year and more than 30 per cent of new capital expenditure. Employment numbers in the sector grew by 66 per cent in the past five years.
Australian governments have been big winners from the sector. Overall direct and indirect tax contributions to the Federal and various state governments totalled $9 billion dollars in 2006-07.
However, Australia’s longest ever minerals boom has clearly passed. The world economy is fragile, commodity prices will become more volatile and capital more difficult to obtain.
We should look at the fundamental drivers of world minerals demand, whether previous levels of demand will return, whether Australia will be able to meet the challenges of servicing a global long-term demand, and the role of research and development in meeting those challenges.
The time-lag conundrum
It can take decades between thinking about a resource and generating export income from a developed mine. Lead processes include searching pre-competitive geological data, tenement application, exploration, capital raising and expenditure.
Then, finally, there is some promise of income through mining production, refining and export.
This means that it is very hard to make rational economic decisions when you are trying to second-guess commodity prices 15 or 20 years in the future. It also means that existing miners are understandably reluctant to get involved in ‘greenfields’ exploration, far from their existing infrastructure.
However, it is only through exploration that we have a chance of finding new stocks of raw materials. Australia has not had a major ore discovery since Olympic Dam. Our resource stocks need replenishing.
What has driven and will drive demand?
A combination of massive population growth in China and India, combined with rapid urbanisation and rising standards of living in both countries, is the prime driver of demand.
The pictures of high-quality infrastructure and obviously affluent people we saw during the Beijing Olympics would have surprised a lot of people.
In 1990 China’s population was a little over one billion; in 2025 it will be little under 1.5 billion. In the same period India’s population is expected to rise from about 800 million to well above 1.5 billion.
Demand for basic consumer items such as TV sets, mobile phones, computers and cars has risen exponentially in India and China. There are now well over 10 million privately owned cars in China. In a very short time that number is expected to double. The average car is made up of about a tonne of steel and iron, plus copper, lead, zinc, glass, aluminium, rubber and plastics – a total of about 1.4 tonnes per car. But it takes more than five tonnes of ore and other input materials to create that 1.4 tonnes of refined material.
But feeding China and India’s domestic demand is only the tip of the iceberg. China manufactures the majority of the world’s DVD players, air conditioners, microwave ovens and colour TVs. It also makes a large proportion of the world’s computers, refrigerators, washing machines and mobile phones. While demand for these items has reduced with the current economic downturn, it will rise again as the world’s economies recover.
With billions of people demanding a better lifestyle and willing to pay for it, the world seems positioned for a future extended period of high demand for basic commodities.
The consequences of rising demand
Australia responded to rising demand by increasing production. We mined and exported increasing volumes of iron ore, gold, diamonds, lead, silver, bauxite, uranium, copper, zinc, nickel and coal.
There are downsides to increased production. Ore grade has been trending downward since 1900 and continues to decline as our higher-quality ores are mined and sold. This decline in quality has been accompanied by an increase in waste rock and tailings production, and consequent energy and water use, particularly since 1980.
Australia is not a monopoly supplier and we do not have guaranteed markets. Customers can choose to buy their raw materials from any supplier in any country. In addition, multinational mining companies can base their production in any country they choose. As always, the primary decision-points on where to buy and where to mine are price, risk and availability.
There are a number of disturbing trends
1. Greenhouse gas emissions
Metal production worldwide generates about 2.2 billion tonnes of CO2 equivalent every year. This is unsustainable in a carbon-constrained world. While aluminium production is the most energy-intensive, the sheer volume of iron and steel production means that it produces more than three times the greenhouse gas emissions of aluminium, and constitutes the majority of greenhouse gas emissions from metal production.
2. Workforce
The available workforce in Australia is diminishing. Projections based on 2005 data suggest that the minerals industry would need to expand by 70,000 employees by 2015. However, in the same period, the number of new entrants to the total workforce is expected to drop significantly.
3. Cost increases
The past couple of years have seen massive cost increases in the sector. This rate of increase is not sustainable.
4. Safety
Over the past decade, lost time injuries have been dropping, but the graph is beginning to level out. It is clear that a massive effort or a change in the way we operate will be required to eventually reach zero harm. The other area of concern is that the number of fatal injuries has remained fairly static over the past five years. Something has to change.
5. Exploration spend
From 1996 to 2006 Australia’s share of world exploration expenditure dropped from about 20 per cent to just over 10 per cent. In the same period, the share of exploration expenditure in virtually every other significant exploration region was either static or increasing.
6. Who’s exploring?
Back in 2001 the majors outspent juniors on exploration by two to one. Today those figures are reversed. Juniors are doing more of the ‘greenfields’ exploration and this trend will probably continue.
Future challenges
The good news is that the drivers of high levels of demand appear long-term. But the real concern is whether Australia can position itself during the current downturn to take advantage of rising world demand as the economy improves.
To summarise the challenges:
- new Australian ore bodies need to be discovered;
- juniors will do more of the high-risk ‘greenfields’ exploration, but they are doing it with fewer resources than the majors;
- quality reserves are dwindling;
- there are fewer Australian workers;
- fewer Australian workers means people will have to do more and produce more – which suggests a more highly educated and skilled workforce working with higher levels of technology;
- mining will take place in more difficult conditions as higher-grade ore bodies are used up. These conditions will include lower grade, higher stress, higher temperatures and more gassy environments; and
- health, safety and environmental outcomes must be better than they are today.
If we continue doing things the way we have in the past, we will not be able to meet these challenges, and the Australian minerals industry will slowly decline in value and importance.
Only transformational research and development can help meet future challenges.
How R&D can help
The Minerals Down Under National Research Flagship’s goals are to assist the Australian minerals industry to exploit new resources with an in situ value of $1 trillion by the year 2030 and to help the size of the associated services and technology sector to more than double to $10 billion a year by 2015.
To achieve this, we will:
- facilitate the discovery of new mineral resources in Australia;
- develop and apply the next generation of safe, geologically intelligent mining systems that are automated and/or controlled via the internet;
- unlock the hidden wealth of Australia’s mineral deposits; and
- deliver to the minerals industry an ongoing licence to operate through innovative solutions that cross business and discipline boundaries to reduce environmental impact and increase social dividend.
The Flagship has assembled an impressive list of collaborators, researchers and resources. Our partners include eight CSIRO divisions, Geoscience Australia, all state and territory geological surveys, ANSTO, 30 universities (including 13 international), CRCs and a mix of industry partners from the majors, juniors and SMEs. About 320 CSIRO scientists and engineers are working on Minerals Down Under projects and our investment in R&D, excluding in-kind contributions, is about $52 million a year. About 40 per cent of this investment comes from non-appropriation or external sources.
Probably the best way we can demonstrate the Flagship approach is to describe a few of our research projects and their planned outcomes.
Exploration
We are modelling fundamental geological processes over time, which will lead to a predictive understanding of geochemical anomaly formation and an ability to predict parts-per-billion trace element values in both the regolith and cryptic alteration haloes around undiscovered deep ore systems. It will lead to more accurate area and target selection.
Mining
New automated surface-mining machinery is being designed with novel cutting technologies and sensing and guidance systems that enable selective extraction and remote operation from any location using secure internet networks. The machines will be intelligently aware of geological terrain and able to reduce dilution through multiple-sensor feedback, allowing material discrimination and sorting.
Processing
New, non-cyanide systems for anaerobic leaching of gold are being developed. These systems will use resin adsorption for the recovery of gold from solution and have the potential for in situ leaching. Once fully developed the new technologies will remove several time-consuming and expensive steps from the mining-to-metal flowchart.
Sustainability
Minerals Down Under is researching the dry granulation of slag from steel production. Dry granulation allows the capture and re-use of 600˚C heat energy, while producing glassy granules that can be used to replace lime in the manufacture of cement. The potential impact of this technology is a saving of $2 to $3 per tonne of steel, or about $2 billion to $3 billion per year globally. It could reduce greenhouse gas emissions by 150 million tonnes of CO2 equivalent annually and reduce water loss by more than 200 gigalitres globally a year.
Looking ahead to 2030
The Minerals Down Under National Research Flagship has a vision for how the industry will look in Australia in 2030 based on its goals and research program
Exploration
- Australian geologists are the best trained mineral explorationists on Earth.
- A complete predictive understanding of geochemical anomaly formation is available.
- Improvements in geophysical data collection and processing technologies have enabled imaging of potential new discoveries at depth.
- The average cost of discovering ore in Australia is half what it was in the decade 2000–10.
- More than $250 billion has been added to Australia’s in-ground resources and its share of global mineral exploration expenditure is over 20 per cent.
Drilling
- The economics of drilling are transformed by CSIRO’s lightweight drilling equipment.
- Fibre-composite coiled tubing, with embedded fibre optics for telemetry, is being used.
- Hard-wearing new materials in drill bits are being used.
- Logging and measuring while drilling is a standard procedure.
- Semi-autonomous moles are steerable with pinpoint accuracy.
- The use of high-power lasers and plasma drilling has increased.
- Down-hole probes measure elemental and mineralogical compositions providing accurate and precise assays.
- Boreholes are drilled by remotely controlled, semi-autonomous rigs.
Mining
- Many mines are now controlled from major population centres.
- Geologically intelligent autonomous mining systems are capable of mining ore selected for grade, and are able to sort ore as it is mined.
- Deep-ore mining systems keep people isolated from hazardous activities.
- Large alluvial resources are mined with minimum impact on other land uses.
Processing
- Innovative biological processes have revolutionised heap leaching with plans to take processing underground using in situ technologies.
- CSIRO software is a key part of heap design and effective management.
- CSIRO dry-processing technologies have made many isolated deposits environmentally viable.
- New low-grade and complex resources are seamlessly integrated into the production cycle.
- New integrated exploration, mining and characterisation technologies come on-stream to manage every aspect of the production cycle.
- For some ore bodies s processing has meant lower energy and water use.
- Australia still has abundant resources and is well positioned to play a major role in the future.
License to operate
- The Australian mining industry no longer competes with communities for water resources.
- Renewable biomass replaces coal as a major energy source and reductant.
- New technologies avoid acid mine drainage while extracting mineral products from tailing dams.
- New markets exist for electronic materials generated from the early removal and safe storage of minor elements.
- The tallest building in Australia is built from the new polymer-based cements using fly-ash residue.
- Other materials once considered to be waste are used to generate valuable products.
- Mines now operate close to Australian cities.
- Transformational molten-slag processing enables waste heat recovery and re-use for desalination of water.
- Salinity-affected farmland in WA and SA has been rehabilitated through partial revegetation with Mallee trees.
- Electricity and charcoal byproducts from revegetation are recycled into metal production.
Technology services
- The Australian mining and minerals technology services sector is the world leader.
- Exports exceed $20 billion per year.
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