minerals and petroleum 2012-2013

8/12/2019 Minerals and Petroleum 2012-2013

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Government of Western Austr aliaDepartment of Mines and Petroleum

WESTERN AUSTRALIAN MINERAL AND PETROLEUM

STATISTICS DIGEST201213


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DisclaimerInformation provided in this Digest is made available without charge, as a public service,in good faith. The information provided is derived from sources believed to be reliable andaccurate at the time of publication. However, use of the information in the Digest is at yourown risk. The Digest is provided solely on the basis that users will be responsible for makingtheir own assessment of the information provided therein and users are advised to verifyall representations, statements and information for decisions that concern the conduct ofbusiness that involves monetary or operational consequences.

Each user waives and releases the Department of Mines and Petroleum and the State ofWestern Australia and its servants to the full extent permitted by law from all and any claimsrelating to the use of the material in the Digest. In no event shall the Department of Minesand Petroleum or the State of Western Australia be liable for any incidental or consequentialdamages arising from any use or reliance on any material in this Digest.

Copyright 2013Copyright in this document is reserved to the State of Western Australia.Reproduction except in accordance with copyright law is prohibited.

Cover photo credits: Rio Tinto Iron Ore


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WESTERN AUSTRALIAN MINERAL AND PETROLEUM STATISTICS DIGEST 2012132

LIST OF FIGURES

Figure 1. Mineral Exploration Expenditure .............................4

Figure 2. Petroleum Exploration Expenditure ............... ..........5

Figure 3. Average Price Comparison 201112 and201213 .............................................................9

Figure 4. Exchange Rate Trade-Weighted Index ............... .....9

Figure 5. Exchange Rate US$/A$ .........................................9

Figure 6. Non-rural Commodity Price Index ........................10

Figure 7. Australian Dollar Exchange Rate againstMajor Currencies ................................................10

Figure 8. Major Commodities by Value ...............................10

Figure 9. Western Australian Mineral and PetroleumExports 201213 ...............................................11

Figure 10. Western Australian Merchandise Exports201213 ...........................................................11

Figure 11. Australian Merchandise Exports 201213 ............11

Figure 12. Western Australian Merchandise Exportsby Country 201213 ..........................................11

Figure 13. Value by Commodity 201213 ............................11

Figure 14. Iron Ore Exports .................................................. 12

Figure 15. Iron Ore Quantity and Value by Quarter ................12

Figure 16. Chinas Crude Steel Production andIron Ore Imports .................................................14

Figure 17. Chinas Iron Ore Imports by Countryfor 2012 ............................................................14

Figure 18. Iron Ore Quantity ................................................15

Figure 19. Average Price Iron Ore Fines (all grades) ..............16

Figure 20. Crude Oil and Condensate Quantity......................17

Figure 21. Historic Oil Prices ...............................................18

Figure 22. Crude Oil and Condensate Quantity and Valueby Quarter ..........................................................18

Figure 23. Crude Oil and Condensate Exports ............... ........18

Figure 24. Tapis Crude Oil Price US$/bbl ................ ..............18

Figure 25. Petroleum Exports.............................................18

Figure 26. OPEC Share of World Crude Oil Reserves 2012 ....19

Figure 27. AsiaPacic Region LNG Imports 2012 byExporting Country ...............................................21

Figure 28. Countries Importing LNG in 2012 ........................21

Figure 29. World LNG Imports by Region 2012 ................ .....22

Figure 30. World LNG Rankings 2012 ..................................22

Figure 31. Crude Oil and Condensate Production 201213 ...22

Figure 32. Natural Gas Production 201213 ........................22

Figure 33. Average Natural Gas Prices .................................25

Figure 34. Western Australian Average DomesticNatural Gas Price ................................................25

Figure 35. LNG Import Prices ..............................................26

Figure 36. Average LNG Import Prices..................................26

Figure 37. Gold Price ..........................................................27

Figure 38. Gold Quantity and Value by Quarter .....................27

Figure 39. Historic Gold Price, per Ounce .............................27

Figure 40. Gold Exports...................................................... 29

Figure 41. Gold Production ..................................................29

Figure 42. Alumina Quantity and Value by Quarter ................30

Figure 43. Alumina Price A$/tonne ...................................30Figure 44. Alumina Exports .................................................30

Figure 45. Alumina Quantity ................................................31

Figure 46. Nickel Exports ....................................................33

Figure 47. Nickel Price A$000/tonne ..................................33

Figure 48. Nickel Quantity and Value by Quarter ...................34

Figure 49. Nickel Quantity ...................................................34

Figure 50. Historic Nickel Price per tonne .............................34

Figure 51. Copper Price ......................................................37

Figure 52. Lead Price ..........................................................37

Figure 53. Zinc Price.......................................................... 37

Figure 54. Heavy Mineral Sands Exports..............................38

Figure 55. Heavy Mineral Sands Value by Quarter ..............38

Figure 56. Heavy Mineral Sands Value of Production .............39

Figure 57. World Coal Consumption 2012 ............... .............42

Figure 58. Selected WA Commodities Relative to WorldProduction Ending 2012 by Quantity ............... .....45

Figure 59. WA Minerals Employment 201213 ....................46

Figure 60. WA Mining Employment199697 to 201213 ........................................46

Figure 61. Mining Investment ..............................................47

Figure 62. New Capital Investment .......................................48

Figure 63. Royalty Receipts 201213 andNorth West Shelf Grants.....................................51

Figure 64. Value of Minerals and Petroleumby Commodity ....................................................53

Figure 65. Value of Minerals and Petroleum by Region

201213 ...........................................................57


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WESTERN AUSTRALIAN MINERAL AND PETROLEUM STATISTICS DIGEST 201213 3

FOREWORD

Welcome to the Mineral and Petroleum Statistics Digestfor 201213. This publication brings together arange of statistical information to provide acomprehensive overview of Western Australiasmineral and petroleum industry.

The statistics in this Digest show that the value ofmineral and petroleum sales from Western Australiawas $102 billion in 201213. This was four per centless than the previous nancial year.

The value of the mineral and petroleum industryremains high despite global economic conditions whichresulted in lower commodity prices for the period.It also demonstrates the resilience of Western Australian mineral and petroleum producers who for

the most part of the year contended with a strong Australian dollar.

The States resources industry has grown considerablyover the past decade with the value of mineral andpetroleum sales increasing on average by 14 per centeach year. This expansion has been driven by rapidindustrialisation in Asia which has underpinned steadydemand for Western Australias commodity exports.In 201213, mineral and energy exports contributed adominant 89 per cent share of the States merchandiseexports earnings.

Western Australia is one of the great mineral provincesof the world. It hosts an impressive 523 commercialmineral projects, embracing 1032 operating minesites which produce over 50 different minerals.The resources industry continues to play a key rolein the economic development and prosperity of theState and the nation.

Whilst not immune to external economic conditions,the States mineral and petroleum industry is globallycompetitive and is in a very strong position asshown by near-record sales in 201213 and huge

investment in resource projects. The Department isfocused on ensuring that Western Australia remainsa destination of choice for responsible resourceexploration and development.

It is not possible to prepare such a comprehensiverange of information without assistance from outsidethis Department. I would like to thank the variousresource companies, Bureau of Resources and EnergyEconomics (BREE), Australian Bureau of Statistics (ABS)and the Western Australian Department of Treasury fortheir cooperation in compiling this Digest.

Richard SellersDirector GeneralDepartment of Mines and Petroleum


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1. EXPLORATION AND MINERAL TITLES

1.1 MINERALS EXPLORATIONIn 201213, mineral exploration expenditure in Western Australia fell sixteen per cent to $1.8 billion from the

previous years record high of $2.1 billion. This result for201213 was 40 per cent higher than ve years ago.

Nationally, mineral exploration metres drilled fell by26 per cent to 8.4 million metres from the previousyear, whilst expenditure fell by 23 per cent to $3.06billion in 201213. Most of this drilling occurred inareas of existing deposits which accounted for 67 percent, with the remaining 33 per cent on new ground.Weaker commodity prices have seen a re-evaluation ofexploration expenditure over the past year.

The bulk of Australias mineral exploration activityoccurs in Western Australia. The State accounted for58 per cent ($1763 million) of national mineral explorationexpenditure in 201213. The following list shows theorder of State and Territory share of national expenditureon mineral exploration:

Western Australia __________________ 58% Queensland ______________________ 22% South Australia _____________________8% New South Wales ___________________ 6% Northern Territory ___________________ 4% Victoria __________________________1% Tasmania _________________________ 1%

In 201213, the majority of Western Australias mineralexploration expenditure was spent on existing depositswhich accounted for around 67 per cent or $1190 million.The remaining 33 per cent, or $573 million, was spent ongreeneld areas.

In terms of expenditure by mineral, in 201213,iron ore dominated once again and accounted for

52 per cent, or $922 million, of Western Australianmineral exploration expenditure. This was a ten per centfall on 201112. Gold exploration was also down by16 per cent to $467 million, with nickel also fallingby 39 per cent to $157 million on the previous year.Other base metals exploration expenditure fell16 per cent to $93 million, whilst uranium fell byover half to 22 per cent to $35 million.

Together, iron ore, gold and nickel accounted for 88per cent or $1.5 billion of total mineral explorationexpenditure in Western Australia in 201213.

The cornerstone of growth in the mining industry isexploration and investment. In 2009, the Western

Australian government announced its four-year,$80 million Exploration Incentive Scheme (EIS),an initiative that aims to encourage exploration inunder-explored greeneld regions of the State.

The agship program of the EIS is the Co-funded Drillingprogram which offers refunds of up to 50% of directdrilling costs for innovative drilling programs through acompetitive application system. Since the start of theprogram, co-funding has been offered to 377 explorationdrilling projects.

The success of EIS has prompted the State Government toextend funding beyond the initial four years to the end ofthe 201617 nancial year, by which time $130.6 millionwill have been allocated to the EIS.

Further details on the initiatives six programscan be found on the Departments website atwww.dmp.wa.gov.au/EIS.

Figure 1 Mineral Exploration Expenditure Source: ABS

$ M i l l i o n

0

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Rest of AustraliaWestern Australia
http://www.dmp.wa.gov.au/EIShttp://www.dmp.wa.gov.au/EIS


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1.2 PETROLEUM EXPLORATIONIn 201213, petroleum exploration expenditure inWestern Australia was a record $3.3 billion (an increase

of 56 per cent on last year) and represented 69 per centof the total national petroleum exploration expenditure.

At the national level, in contrast to minerals, expenditureon petroleum exploration rose by 50 per cent to a record$4.8 billion in 201213. Western Australia attracted thelargest share with 69 per cent of national petroleumexploration expenditure, up three per cent from 201112.

The following list shows the State and Territory share ofnational expenditure on petroleum exploration in 201213:

Western Australia __________________ 69% Queensland ______________________ 14% South Australia _____________________8% Northern Territory __________________ 6% New South Wales ___________________ 1% Victoria __________________________ n/a Tasmania _________________________ n/a Not available for publication ___________2%

Offshore basins continue to attract the majority ofpetroleum exploration expenditure in Australia andaccounted for 72 per cent of total spending in 201213.The proportion of petroleum exploration expenditure spentonshore in Australia rose to 28 per cent in 201213.

Further information on petroleum exploration activityin Western Australia can be found in the publicationPetroleum in Western Australia which is produced bythe Department of Mines and Petroleum. This publicationcontains a comprehensive overview of petroleumexploration activities in this State, together with details onthe award of petroleum exploration permits.

Figure 2 Petroleum Exploration Expenditure Source: ABS

$ M i l l i o n

0

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2,000

3,000

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6,000Rest of AustraliaWestern Australia

2 0 1 2 - 1

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1.3 MINERAL TITLESIn 201213, the total amount of land covered bymineral tenements in force in Western Australia fell by10 per cent to 61.7 million hectares.

Exploration Licences covered the majority of mineraltenements (86 per cent) and this is where the largestfall occurred. The actual number of ExplorationLicences fell by seven per cent from 6969 to 6503,whilst the area fell by 12 per cent from 60 millionhectares to 53 million hectares.

Mining Leases accounted for only four per cent(2.5 million hectares) of the total area. This is anincrease of seven per cent over the previous period,rising from 2.285 million hectares in 201112 to2.415 in 201213. The number of Mining Leases inforce rose by ve per cent from 5897 to 6195.

TABLE 1. MINERAL TENEMENTS IN FORCE 1978 ACT

200809 200910 201011 201112 201213

Number 000 ha Number 000 ha Number 000 ha Number 000 ha Number 000 ha

Prospecting Licences 7,110 913 7,032 890 7,106 897 7,265 910 6,834 851

Exploration Licences 4,959 42,367 5,297 44,123 6,050 52,205 6,969 60,396 6,503 52,895

Mining Leases 5,618 2,065 5,764 2,125 5,845 2,233 5,897 2,285 6,195 2,451

Other 2,512 3,477 2,884 4,541 2,995 4,926 3,157 5,323 3,377 5, 486

Mineral Claims &Other 1904 Act 186 21 186 21 186 21 186 21 186 21

Total 20,385 48,843 21,163 51,700 22,182 60,282 23,474 68,935 23,095 61,704

Source: DMP


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1.4 PETROLEUM TITLESIn June 2013, the total area covered by petroleum titlesin force under Western Australia State legislation was

308 thousand square kilometres.

The Petroleum (Submerged Lands) Act 1982 titlestotalled 45 covering 5.4 thousand square kilometres.Pipeline licences accounted for 25 of these titles,production licences ten, retention leases ve andexploration permits ve.

The Petroleum and Geothermal Energy Resources Act1967 titles totalled 138, covering 303 thousand squarekilometres. This comprised 78 exploration permits covering224 thousand square kilometres and 33 geothermalexploration permits covering 56 thousand squarekilometres. 16 production licences covered three thousandsquare kilometres, ve retention leases (412 squarekilometres) and the remaining six are made up of othermiscellaneous licences/authorities.

There were a total of 90 pipeline licences held under thePetroleum Pipelines Act 1969 in June 2013, covering sixthousand square kilometres.

TABLE 2. PETROLEUM TITLE AREAS BY TITLE TYPE

Legislation Title Type Area Blocks Number of Titles

Petroleum (Submerged Lands) Act, 1982 5,413.2000 km 2 102 45

Exploration Permit 2,290.1500 km2 53 5

Pipeline Licence 614.9500 km 25

Production Licence 2,041.4300 km2 29 10

Retention Lease 1,081.6200 km2 20 5

Petroleum and Geothermal Energy Resources Act 1967 302,642.2423 km 2 3,973 138

Access Authority to Deviated Well 0.0000 km2 0 3

Drilling Reservation 223.1000 km2 3 1

Exploration Permit 223,508.1964 km2 2,866 78

Geothermal Exploration Permit 55,651.8879 km2 782 33

Petroleum Lease 260.1000 km2 9 1

Production Licence 3,003.4580 km2 48 16

Retention Lease 411.8900 km2 8 5Special Prospecting Authority with Acreage Option 19,583.6100 km2 257 1

Petroleum Pipelines Act 1969 6,001.5263 km 90

Pipeline Licence 6,001.5263 km 90

308,055.4423 km2 4,075 273


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2. MINERAL AND PETROLEUM INDUSTRY 201213 REVIEW

2.1 OVERVIEWThe value of Western Australias mineral and petroleumindustry in 201213 was $102 billion. Although the

value of the industry fell by 3.8 per cent from 201112,this value was the second highest on record and thethird consecutive year above $100 billion.

The strong Australian dollar maintained an averageexchange rate in excess of US$1 over this period.This played a part in lowering the received prices forWestern Australian producers. Traditionally perceivedas a commodity currency, the Australian dollar did notdecrease in line with falling commodity prices andtherefore did not shield producers from lower prices.It was not until May 2013 that the exchange rate fellbelow parity thus providing some relief to falling prices.

The value of sales overall, however, was maintained byan increase in quantities sold.

Iron ore and gold together accounted for $65.3 billion(84 per cent) of all mineral sales in 201213.

Iron ore remained the States highest value commodity,accounting for $56.4 billion (73 per cent) of totalmineral sales in 201213. With strong demand, led

by China, the sector achieved record levels of exportquantities. This resulted in 513 million tonnes beingexported, an increase of 13 per cent on the previousnancial year. However, lower prices resulted in adecrease of 7.3 per cent in the value of iron ore sales.

The gold price continued to climb in the rst half of201213, but started to weaken in December 2012and continued its downward trend to June 2013.This resulted in total sales of just under $9 billionfor 201213, a fall of 4.6 per cent over the previousnancial year.

The petroleum sector, which includes crude oil,condensate, LNG, natural gas and LPG (butane andpropane), was valued at $24.5 billion, an increase of2.9 per cent on the previous year. This increase wasdue to the Pluto LNG project coming onstream, whichcountered falls in crude oil, LPG and domestic gas.

Mineral and petroleum exports comprised 89 per centof the States total merchandise exports, representingthe major contribution to Western Australias 47 per

cent share of the nations total merchandise exports.China remains our major trading partner, taking 47 per

cent of merchandise exports and is followed by Japanat 19 per cent.

ABS gures showed that investment activity in Western Australia strengthened during 201213, with theStates mining industry investing a record $48 billion,a seven per cent increase compared to 201112.Western Australia remained the nations leading mininginvestment destination, attracting 51 per cent of totalnational capital spending valued at a record $95 billion.Fuelled by strong demand for resource commoditiesfrom Asia, new capital expenditure by the Statesmining industry has grown at an annual rate of 23 percent during the ve years to 201213.

The dominance of the resources sector in the nationseconomy is expected to continue given the numberof projects which have been expanded or developed,in particular iron ore and LNG. However, investmentlevels in the States resources industry have begunto decline as major projects under construction nownear completion and transition to the operationalphase. Recent falls in commodity prices have alsocaused some mining companies to re-evaluate theirinvestment positions.

As at September 2013, Western Australia had anestimated $146 billion worth of resource projectsunder construction or in the committed stage ofdevelopment. A further $97 billion has been identiedas being allocated to planned or possible projects incoming years.

HIGHLIGHTS IN 201213Iron ore remains the States most valuable sector ofthe mining industry, accounting for $56.4 billion(73 per cent) of the mineral sectors total sales. Although this result was 7.3 per cent lower than the201112 year, increased output of 13 per cent(58 million tonnes) helped to offset weaker prices anda strong Australian dollar. In total, 513 million tonneswere exported in 201213.

Gold was the second most valuable mineral sector,with total sales of just under $9 billion, representing12 per cent of the mineral sectors total sales.The gold price continued its upwards momentum inthe rst half of 201213; however, it started to weakenin December 2012 and continued a downward trend

to June 2013. The quantity sold fell slightly from5.8 million ounces in 201112 to 5.7 million ounces.


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Figure 3 Average Price Comparison 201112 and 201213Source: LME, Kitco, Metal Prices, WATC and DMP

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Figure 4 Exchange Rate Trade-Weighted Index(units of foreign currency per A$) Source: Reserve Bank of Australia

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Jun-13Dec-12Jun-12Dec-11Jun-11

( M a y 1 9 7 0 =

1 0 0 )

Definition: "Trade-weighted index" is the average value of A$in relation to the currencies of Australia's major trading partners.

Figure 5 Exchange Rate US$/A$ Source: Reserve Bank of Australia

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U S $

RESERVE BANK OF AUSTRALIA (RBA)COMMODITY PRICE INDEX

The Reserve Bank of Australia Commodity Price Index is basedon the price of 20 major commodities exported by Australia. These commodities collectively account for around two-thirdsof total commodity exports. The index is apportioned into threesections rural, non-rural and base metals.

The non-rural section of the index comprises base metals (whichconsist of aluminium, copper, nickel, zinc and lead), as well asgold, coking coal, steaming coal, iron ore, alumina, crude oiland LNG. The index is compiled monthly and is expressed in USdollars, Australian dollars and Special Drawing Rights (SDR).

The RBAs index, expressed in US dollar terms, is usefulbecause most commodities traded in world markets are in USdollars. However, such an index is subject to changes in theUS dollar exchange rate (as it is based on spot prices). In thisrespect, the SDR index is a better indication of underlying supplyand demand for commodities than the US dollar index.

SDR is a unit of account used by the International Monetary Fund(IMF). Its value is based on a basket of currencies comprisingthe euro, Japanese yen, English pound and US dollar. Weightsare assigned to each of these currencies to reect their relativeimportance in world terms. The RBA expresses the SDRcomponent of its index in US dollar terms, with commodity pricesderived from the London Metal Exchange and Bloomberg andconverted to monthly averages of daily data.

Alternatively, the Australian dollar index is useful for gaugingthe domestic currency price received by Australian commodityexporters, as it reects the interrelation between worldcommodity prices and the Australian exchange rate. Forexample, if prices in foreign currency terms remain unchangedbut the Australian dollar depreciates, this will be recorded asa favourable upward shift in the index which would not beevident in either the SDR or US dollar index.

The RBA index is a xed-weight Laspeyres index, using 200809as the base year. The index is re-based periodically in order tomake long-run reliable comparisons, unlike the national accountsthat are re-based annually to track short-run movements. Base-period weights indicate the relative importance given to individualcommodities. These weights change over time to reectchanges in the composition of commodity exports. Movementsin the index from one period to the next reect underlying pricemovements and do not take into account changes in volumes.


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Figure 6 Non-rural Commodity Price Index (201112 = 100) Source: Reserve Bank of Australia

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Jun-2013Dec-2012Jun-2012Dec-2011Jun-2011Dec-2010Jun-2010

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Figure 7 Australian Dollar Exchange Rate against Major Currencies (May 1970 = 100) Source: Reserve Bank of Australia

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Figure 8 Major Commodities by Value Source: DMP

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000

Coal

Heavy Mineral Sands

Base Metals

Natural Gas & LPG

Nickel

Alumina

Gold

Crude Oil & CondensateLNG

Iron Ore

Total all Commodities

201112

201213

$Million


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Figure 9 Western Australian Mineral and PetroleumExports 201213 Total Value $103.6 Billion Source: DMP

Petroleum 21%

Heavy MineralSands* 1%

Iron Ore 54%

Diamonds 0.3%

Nickel 4%

Base Metals 2%

Alumina 3%

Gold* 14%

Other 1%

3%

14%

1%

1%2%

0.3%

21%

54%

4%

* Includes $6.2 billion of gold and $86 million of heavy mineral

sands refined/processed and exported from Western Australia,but produced from mining operations in other States, Territoriesand overseas.

Figure 10 Western Australian Merchandise Exports 201213$116.1 Billion Source: DMP and ABS

Minerals andPetroleum 89%Other WA Exports* 11%

11%

89%

* Other includes wheat, wool, wood chips, live animals, seafood,

meat, pearls and other agricultural and manufactured items

Figure 11 Australian Merchandise Exports 201213$248 Billion Source: ABS

WA 47%

TAS 1%

NT 2%

NSW 15%

VIC 9%

QLD 18%

SA 4%

47%

1%

2%15%

9%

18%

4%

Note: These percentages are based on data which includes$8.6 billion of re-exported goods and of no State originavailable and account for around 4% of the total.

Figure 12 Western Australian Merchandise Exports by Country201213 $116 Billion Source: ABS

China 47%Thailand 2%Japan 19%Taiwan 2%South Korea 8%Singapore 3%United Kingdom 3%India 3%Other 11%Malaysia 2%

19%

2%

8%

2 %

11%

47%

3%

3%

3%

2%

Figure 13 Value by Commodity 201213 $101.8 Billion Source: DMP

LNG 12%Condensate 4%Natural Gas 1%Crude Oil 6%LPG Butaneand Propane 1%

55%

4%

24% 12%

4%

1%

1%

6%

4%

4%9%

Petroleum 24%Others 4%

Alumina 4%Gold 9%Iron Ore 55%Nickel 4%


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2.2 IRON OREOver the past ten years, the States iron ore industry hasexperienced a period of unprecedented growth fuelled

in the main by Chinas demand. On average, the annualgrowth in the value of sales from Western Australiasiron ore industry during this period has been 27 per centper annum whilst output has increased 11 per centper annum.

In 201213, iron ore sales output increased by 58 milliontonnes or 13 per cent from 201112 to reach a record513 million tonnes, whilst the value of sales was down to$56 billion (a seven per cent decrease). As a result, ironore continued to be the most valuable resource sector inWestern Australia, accounting for 55 per cent of the totalvalue of the States mineral and petroleum sales.

China continued to dominate Western Australias iron oreexports, accounting for 74 per cent or $42 billion of thetotal amount shipped in 201213. Other major marketsincluded Japan (15 per cent), South Korea (nine per cent)and Taiwan (two per cent).

Iron Ore ProducersWhilst the larger iron ore operations and seven smallermines are based in the Pilbara region of Western Australia,

there are also ve mines in the Mid West region, three inthe Kimberley region and two in the Wheatbelt. A total of 95 per cent of production comes from thePilbara region.

BHP Billiton Limited (BHPB) and Rio Tinto Limited(together with various joint venture partners) dominate theindustry in Western Australia and accounted for around80 per cent of the sales value of the States iron ore in201213.

Rio Tinto Limited is the largest iron ore producer in thePilbara region and is the second largest iron ore producerin the world. Its wholly owned subsidiary HamersleyIron Pty Ltd owns eight mines, comprising Brockman 2,Brockman 4, Marandoo, Western Turner Syncline, Mt TomPrice, Nammuldi, Paraburdoo and Yandicoogina.

Hamersley also operates several other mines in jointventures, which are:

Channar (60% a joint venture with an Australiansubsidiary of the China Iron & Steel Trade Group).

Eastern Range (54% a joint venture with ShanghaiBoasteel Group Corporation).

Hope Downs (50% a joint venture between Rio TintoIron Ore and Hancock Prospecting Pty Ltd).

Robe River Iron Ore Operation (53% a joint venturewith Robe River Iron Associates) which includesMesa A Waramboo, Mesa J and West Angelas.

BHP Billiton is the States second largest iron ore producerand operates seven mine sites including one of thebiggest single-pit open-cut iron ore mines in the world the massive Mt Whaleback mine which was establishedin 1968. It is more than ve kilometres long and nearly1.5 kilometres wide. Nearby are the smaller orebodies29, 30 and 35. Smaller satellite mines Wheelarra and

orebodies 18, 23, 24, 25 are outside the town of Newman.There is also Jimblebar, Yandi, Mining Area C and Yarrie.

Figure 14 Iron Ore Exports Total Value $56.37 Billion Source: DMP

9%

74%

15%

2%

0.1%

China 74%

Japan 15%

South Korea 9%

Taiwan 2%

Other 0.1%

M i l l i o n t o n n e s

$ M i l l i o n

Figure 15 Iron Ore Quantity and Value by Quarter Source: DMP

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Jun-13Mar-13Dec-12Sep-12Jun-12Mar-12Dec-11Sep-1112,000

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Fortescue Metals Group (FMG), with its Chichester RangesCloud Break and Christmas Creek mines and the newSolomon Firetail mine, is the third-largest mining companyin the Pilbara. FMG exports ore through their Herb Elliottport at Port Hedland.

The smaller producers comprise:

Cliffs Natural Resources operates the Koolyanobbingmine (50 kilometres north of Southern Cross in theWheatbelt region).

Atlas Iron Limited has three iron ore operations inthe Pilbara region: Pardoo (approximately 75 kilometreseast of Port Hedland), Wodgina (approximately100 kilometres south of Port Hedland) and Mt Dove.

These operations use road haulage and ship throughPort Hedland.

Karara Mining Ltd, (a 50:50 joint venture betweenGindalbie Metals Limited and Anshan Iron and SteelGroup Corporation), operates the Karara DSO andmagnetite project (200 kilometres east of Geraldton).

Mineral Resources Limited operates three mines: Carina(100 kilometres north of Southern Cross), Poondano(30 kilometres southeast of Port Hedland) and PhilsCreek (100 kilometres northwest of Newman).

Sinosteel Midwest Corporation Limited operates twoopen pits at Koolanooka (160 kilometres southeast ofGeraldton) and two open pits at Blue Hills Mungada(approximately 70 kilometres east of Koolanooka).

Mount Gibson Mining Ltd operates the Tallering Peakmine 175 kilometres east of Geraldton, the ExtensionHill mine 260 kilometres east-southeast of Geraldtonand the Koolan Island hematite mine, located in YampiSound off the Kimberley coast.

BC Iron Ltds Nullagine project (a 50:50 jointventure with FMG). The operation utilises FMGs rail

infrastructure, which is located 50 kilometres southof the mine, to export its product through FMGsHerb Elliott port.

Cockatoo Island (200 kilometres north of Broome inthe Kimberley region) was acquired from Cliffs NaturalResources in September 2012 by Pluton ResourcesLimited. The Cockatoo Island mine is only accessibleby sea and air, produces high-grade ore (greater than66 per cent iron) and is the only known subsea miningoperation in the world.

The Kimberley Metals Group Pty Ltd (KMG) Ridges ironore project (165 kilometres south of Wyndham in theKimberley region). KMG commenced shipping out ofWyndham in July 2011 and plans to export1.5 Mt/a over a ve-year period.

Moly Mines Ltds Spinifex Ridge molybdenumcopperproject (located 170 kilometres east of Port Hedland)is one of the smaller operations, producing around1.0 Mt/a of iron ore nes.

Expansions/New Projects in thePilbara RegionOver the past ten years, both Rio Tinto and BHPB havesignicantly expanded their Western Australia Pilbara

operations. With the completion of the majority of thisdevelopment, they have now moved into an increasedoutput stage of their operations.

BHPB expansion plans to increase annual capacity to220 million tonnes are ahead of schedule, with rstproduction expected to be achieved in the Decemberquarter 2013. This comprises:

developing Orebody 24 (approximately 10 kilometresnortheast of Newman);

expansion of the Jimblebar mine;

Port Hedland Inner Harbour expansion; and

development of port-blending and railyard facilities tooptimise resources and enhance efciency across thesupply chain.

Rio Tintos expansions comprise:

phase one expansion of the Pilbara mines, ports andrailways from 230 Mt/a to 290 Mt/a commenced inSeptember 2013; and

phase two of the expansion of port, rail and power

infrastructure to 360 Mt/a is currently underway.Options for mine capacity growth are under evaluation.

FMG expansion projects remain on schedule to achieveproduction at 155 million tonnes in the 201314 nancialyear. Expansions include additional infrastructure at HerbElliott port, 120 kilometres of mainline rail duplication anda new 130 kilometre rail spur to a new mine at Solomon.The Kings development at Solomon is expected to becommissioned by the end of 2013.


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Development of the 55 Mt/a Roy Hill iron ore project(277 kilometres south of Port Hedland) is continuing, withplans to commence exporting by 2015. Ownership of theproject is 70 per cent Hancock Prospecting Pty Ltd and30 per cent a consortia comprising POSCO, MarubeniCorporation and China Steel Corporation. Roy Hill will featurea remote-operations centre based in Perth.

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Figure 17 Chinas Iron Ore Imports by Country for 2012 Source: TEX Report


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Atlas Iron commenced operations in the March 2013quarter at its Mt Dove mine (70 kilometres south ofPort Hedland). It has expanded its Wodgina mine and is ontrack to bring into production its Abydos and Mt Webbermines (both south of Port Hedland). Mt Webber is a jointventure with Altura Mining Limited owning 30 per cent and Atlas Iron owning 70 per cent.

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Figure 16 Chinas Crude Steel Production andIron Ore Imports Source: TEX Report and Interfax China Ltd


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MagnetiteFor the past 40 years, all iron ore mined in Western Australia has been hematite ore or direct shippedore. However the State also has massive resources ofmagnetite ore.

Hematite ore does not have to undergo costlyconcentration to make it saleable. However, Chinese

steel producers have long used magnetite with well-established technology and have led a push to develop anumber of magnetite projects in Western Australia.

The rst shipment of magnetite ore from GindalbieMetals Ltd (operator) and Anshan Iron and Steel GroupCorporation (a 50:50 joint venture) departed Geraldton inJanuary 2013 bound for China. In July 2013, Gindalbieannounced the production of its rst-ever batches ofpremium quality 68% Fe magnetite concentrate.This is the rst project to produce magnetite concentratein Western Australia.

CITIC Pacic Mining Management (a subsidiary of CITICPacic Ltd which is the largest specialist steelmakerin China) acquired mining rights from Mineralogyfor two billion tonnes of magnetite ore, with rightsand options for a further four billion tonnes. AlthoughCITICs $8-billion Cape Preston Sino magnetite minecommenced commissioning earlier this year, it hasencountered several technical setbacks which havedelayed ramping up to full production.

When operational, CITIC plans to export 27.6 Mt/a of amixture of high-grade iron ore concentrate and pelletsover a period of 25 years.

Supply and DemandWestern Australian iron ore sales increased signicantlyin 201213 to 513 million tonnes (up by 58 milliontonnes or 13 per cent) as new projects and expansionsbecame operational.

In 2012, the international iron ore trade totalled1131.7 million tonnes, a fall of one per cent on

the previous year.

In 2012, China dominated world trade, accountingfor 64 per cent (745.4 million tonnes) of total worldimports, an increase of ve per cent compared to 2011.Western Australia contributed 53 per cent of Chinas ironore imports in 2012. Other major global importers wereJapan with 132 million tonnes (up three per cent) andSouth Korea with 66 million tonnes (up two per cent).

China will continue to play an important role in the futureof the Western Australian iron ore industry. In 201213,it accounted for 74 per cent, or $42 billion, of the totaliron ore shipped from Western Australia.

The recent downturn from record prices and theuncertain economic outlook have seen producersand potential producers reassessing expansionand development plans. In the main, the two largerproducers are maintaining their expansion programs,albeit in a modied format, to ensure costs are kept toa minimum. Cost pressures and long-term commodityprices could affect new capacity coming into production.

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Figure 18 Iron Ore Quantity Source: DMP and BREE

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Iron Ore PricesIron ore prices softened in 201213 amid a worseningeconomic outlook for Europe, a slowdown in Chinese

growth and increases in worldwide iron ore productionputting downward pressure on record high prices. A strong Australian dollar also impacted returns toWestern Australian producers. It was not until theJune quarter of 2013 that the Australian dollar fellbelow parity.

In September 2012, the price for iron ore nes with62 per cent iron content slid to below US$87 per tonne.Prices recovered relatively quickly; however, they havenot returned to their peak of US$194 per tonne for lumpand US$184 per tonne for nes in 201112.

Since the move away from the annual benchmark pricingsystem in 2010, there is little ofcial information aroundcontract prices actually agreed to by identied parties(although the prices applied appear relatively widelyknown). The practices for price setting vary signicantly,

with a large number of published prices and indices,each with a different product specication. There arethree competing price indices (Metal Bulletin, Plattsand the Steel Index), with other prices published on aninformal basis.

Across all grades and markets, Western Australianproducers achieved an average free-on-board(FOB) price of A$122 per tonne for lump and A$110 per tonne for nes in 201213.

Cost and freight (CFR) spot prices to China for theperiod for 62 per cent Fe nes peaked at aroundUS$159 per tonne.

From a historical perspective, iron ore prices arestill high. Just prior to the global nancial crisis,Western Australian producers were receiving aroundUS$64 per tonne for lump and US$50 per tonnefor nes.

Figure 19 Average Price Iron Ore Fines (all grades) Received by Western Australian Producers Source: DMP

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2.3 PETROLEUMThe value of Western Australian petroleum salesamounted to a record $24.4 billion in 201213.

This represented 25 per cent of the States total valueof resource sales, placing petroleum as the secondmost-valuable resource sector after iron ore.

Reduced output of crude oil, LPG and domestic gas,as well as falling oil prices, were offset by increases inLNG and condensate output. This resulted in a modestthree per cent increase in the overall value of Western Australian petroleum sales in 201213.

As the nations premier petroleum producer, Western Australia accounted for 65 per cent of conventionalnatural gas (including LNG feedstock but excludingcoal seam methane) and 73 per cent of crude oil andcondensate production in 201213.

LNG was again the major contributor to petroleum sales,accounting for 51 per cent of its value. This wasfollowed by crude oil and condensate with 25 per centand 16 per cent respectively. Together thesecommodities accounted for 92 per cent of the Statespetroleum sales. The remainder comprised natural gas(6%) and LPG (2%).

Over the past ten years, the value of Western Australiaspetroleum sales has increased on average by nine per

cent each year. This impressive record of growth is set tocontinue as large gas projects are developed off the Statesnorthwest coast to meet Asias growing energy needs.These projects include Woodside Energys Pluto whichcommenced mid-2012 and the recently commissionedMacedon project of BHP Billiton. Chevrons $52-billionGorgon and $29-billion Wheatstone LNG and domestic gasprojects (which are under construction) are expected tocome onstream in 2015 and 2016 respectively.

Oil and CondensateThe value of crude oil sales from Western Australia fellfrom $7.8 billion in 201112 to $6 billion in 201213, adecrease of 23 per cent. In volume terms, crude oil outputfell by 24 per cent in 201213 to 54.2 million barrels or8.6 million kilolitres. This decrease was mainly attributableto a general decline in maturing elds.

Over the course of 201213, the price of oil based on acombination of Brent, West Texas Intermediate (WTI) andTapis averaged US$105.16 per barrel. This representeda four per cent decrease compared to the equivalentaverage price in 201112.

The Tapis oil price averaged US$114.20 a barrel,peaking at US$125.17 a barrel in February 2013.Overall, oil prices remained relatively high and helpedto offset the strong Australian dollar which weighedon petroleum export earnings.

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Figure 20 Crude Oil and Condensate Quantity Source: DMP and BREE

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Figure 23 Crude Oil and Condensate Exports Total Value $9.3 Billion Source: DMP and ABS

Japan 10%Papua New Guinea 6%Thailand 8%South Korea 16%United States 2%

Singapore 19%Indonesia 3%India 1%China 21%Taiwan 3%Malaysia 8%Other 3%

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Figure 25 Petroleum Exports Total Value $22.4 Billion Source: DMP and ABS

Japan 55%

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Figure 22 Crude Oil and Condensate Quantity and Value by Quarter Source: DMP

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Figure 24 Tapis Crude Oil Price US$/bbl Source: WA Treasury Corporation

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Figure 21 Historic Oil Prices

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The Organisation of the Petroleum ExportingCountries (OPEC) is a permanent intergovernmentalorganisation of twelve oil-exporting developingnations that coordinates and unies the petroleumpolicies of its member countries.

There are currently 12 member countries of OPECcomprising Algeria, Angola, Ecuador, Iran, Iraq,Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

Most OPEC oil is produced for export, whereasmany non-OPEC countries, such as the UnitedStates, produce oil primarily to meet their domesticdemand for petroleum.

Non-OPEC countries account for less than a quarterof the worlds proven oil reserves, but produce

57 per cent of the worlds oil. They also possess themajority of the worlds capacity for rening crudeoil into petroleum products such as gasoline andheating oil.

ProducersThe major crude oil producers in Western Australia in201213 were located in the Carnarvon Basin off thenorthwest coast, with other operations located in thePerth and Canning Basins.

Carnarvon Basin producers include Australias largestoil project in the last decade, the BHP Billiton (BHPB)-operated Pyrenees development. Pyrenees extractscrude from the Ravensworth, Crosby and Stickle eldsand is located around 45 kilometres off the coast ofExmouth. BHPB also operates the Stybarrow project.

The next-largest crude oil producer is the Woodside-operated North West Shelf (NWS) Joint Venture whichincludes the Cossack, Hermes and Wanaea elds.Woodside also operates in joint venture with Mitsui(40%) the Eneld and Vincent projects.

Other Carnarvon Basin operators include:

Apache Energy Ltds Harriet, Stag and Van Gogh projects

Chevron Australias Barrow Island (which has beenproducing oil since 1967) and Thevanard Island

Vermillion Energys Wandoo

Santos Ltds Mutineer Exeter.

Perth Basin operators include:

Roc Oils Cliff Head

Origin Energy Resources Ltds Jingemia AWE Energy Ltds Dongara.

Figure 26 OPEC Share of World Crude Oil Reserves 2012 Source: BP World Energy Statistics 2013

Ecuador 0.5% Angola 1%

Iran 9%

Venezuela 18%

OPEC

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73%

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Libya 3%

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The remaining producer, Buru Energy Ltds BlinaLloydand Ungani, is in the Canning Basin.

Overall, volumes were generally down in 201213,mainly due to oileld natural decline as well as somescheduled maintenance. The exception to this downturnoccurred with the completion of the $1.8-billion NWS OilRedevelopment project (Cossack, Hermes and Wanaea).These elds achieved an increased output of 112 per centover the previous period.

Against a background of declining production frommaturing elds, exploration will play a key role insupporting future output of crude oil in Western Australia.

As a by-product from natural gas elds, nearly all of theStates condensate production comes from elds locatedon the North West Shelf. In 201213, a total of 38.5 millionbarrels or 6.1 million kilolitres of condensate was soldby Western Australian producers, an increase of four percent. In sales-value terms, this was worth $3.9 billion, anincrease of two per cent from the previous year.

The NWS Joint Venture (Athena, Goodwyn, Hermes, Angel,North Rankin and Wanaea) accounted for almost 90per cent of the total in 201213. Woodsides Pluto and Apaches John Brookes, Reindeer and Halyard projectscontributed the remaining ten per cent.

The volume of LPG (butane and propane) sold in 201213fell by 10 per cent to 752,910 kilolitres, with the total valueof LPG sales falling by 13 per cent to $639 million.

Liqueed Natural Gas (LNG)LNG is second only to iron ore in terms of sales value tothe State. Currently, LNG from Western Australia originatesfrom the NWS Joint Venture project and the WoodsidePluto project which was commissioned in mid-2012.

In 201213, reported LNG output rose by almost30 per cent to a record 19.8 million tonnes. Much ofthis increase was due to a full year of Pluto production,which commenced in the June quarter of 2012. Severalfactors were responsible for the lower 201112 result.

This included refurbishment and maintenance programs,planned shutdowns and the North Rankin Redevelopmentproject activities together with cyclone activity in the rstquarter of 2012. Other than adverse seasonal weatherconditions, the 201213-year was able to operate at amuch higher level.

The increased output over the period was offset by afall in oil prices (which are benchmarked in LNGcontracts), resulting in the value of LNG sales rising byonly 25 per cent to $12.5 billion when compared to theprevious year.

On a smaller scale, Wesfarmers Ltd utilises Western Australias gas resources at its small-scale LNG plant in

Kwinana. Opened in 2009, the LNG plant has the capacityto produce 175 tonnes per day and supports Australiaslargest eet of LNG road tankers.

The NWS Joint Venture LNG quantity published in theDigest is sourced from Woodsides quarterly AustralianStock Exchange reports. A value is obtained by multiplyingthis quarterly gure by an LNG price using Woodsidespublished share of LNG sales revenue.

Domestic Natural Gas Supply The quantity of natural gas supplied into the domesticmarket in 201213 fell by four per cent to 8.7 billioncubic metres (Bcm) compared to the previous year.The value of sales decreased marginally by just overone per cent to $1.4 billion. This value of gas is basedon the summation of total domestic gas sales values atthe point of entry into the Dampier-to-Bunbury naturalgas pipeline (DBNGP), or where applicable, the Parmeliapipeline and Goldelds pipeline.

The graph included (gure 34) showing the price ofdomestic gas in Western Australia is calculated on this

value and the aforementioned total volume of sales.

The average price of gas sold into the DBNGP in Western Australia rose by three per cent in 201213 and averaged$4.33 per gigajoule.


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Figure 28 Countries Importing LNG in 2012 Source: BP World Energy Statistics 2013

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ProducersThe NWS Joint Venture (Angel, Cossack, Goodwyn,Hermes, Lambert, North Rankin and Wanaea) accountedfor 55 per cent (4.8 Bcm) of domestic gas in 201213.

Apache Energy Ltd (East Spar, Harriet, John Brookes andReindeer) was the second-largest producer of domesticgas in 201213.

AWE Exploration Ltd (Corybas and Dongara) and Origin EnergyResources Ltd (Beharra Springs) made up the balance.

Devil Creek Domestic Gas Project (Reindeer eld)The Devil Creek project is a joint venture between Apache (55%) and Santos (45%). The Devil Creek gasplant is located on the Mardie Station pastoral leaseapproximately 45 kilometres southwest of Dampier andhas the capacity to supply up to 215 terrajoules of gasper day (TJ/d) into the domestic market. The Reindeereld supplies gas to the Devil Creek facility at a rate ofaround 110 TJ/d and will produce around 500 barrelsper day of condensate.


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Figure 32 Natural Gas Production 201213 Source: EnergyQuest

Figure 31 Crude Oil and Condensate Production 201213 Source: EnergyQuest

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Figure 29 World LNG Imports by Region 2012 Source: BP World Energy Statistics 2013


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Figure 30 World LNG Rankings 2012 Source: BP World Energy Statistics 2013


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Petroleum Development Projects MacedonBHP Billiton ofcially opened its US$1.57-billion

Macedon domestic gas project in September 2013.Macedon is located 50 kilometres north of Exmouthand involves four offshore production wells and a gastreatment plant at Ashburton North, 17 kilometressouthwest of Onslow. It is expected that Macedonwill supply gas into the domestic market until 2033.The gas treatment plant has a capacity of up to200 TJ/d of gas.

Red GullyCommissioning of Empire Oil and Gas NL (76.4%) andERM Powers (23.6%) Red Gully facility commenced inJune 2013. The facility will process gas and condensatefrom the Red Gully-1 and Gingin West-1 wells. Thefacility is designed to produce eight TJ/d of gas and500 barrels of condensate a day.

ConistonNovara Apache, in joint venture with INPEX (47%), is developingits ConistonNovara oilelds which are located in theExmouth Sub-basin and lie just north of the Van Gogheld. Coniston reserves are estimated at 15.7 millionbarrels and it is expected to be producing in 2014.

Balnaves Another development by Apache, in joint venturewith Kuwait Foreign Petroleum Exploration Company(KUFPEC) 35%, is the isolated Balnaves eld. Reservesare estimated at 17 million barrels of oil and 30 Bcm ofgas. The site is located in the northern Carnarvon Basinaround 180 kilometres northwest of Dampier and isalso expected to be producing in 2014.

Greater Western Flank The NWS Joint Venture is developing the rst phase of

the Greater Western Flank (GWF) project which is thenext major development in the North West Shelf project.

The broader GWF area consists of 16 elds locatedto the southwest of the Goodwyn A platform and isestimated to hold up to 3 Tcf of recoverable gas and upto 100 million barrels of recoverable condensate.

The GWF rst phase will develop the Goodwyn GH andTidepole elds, via a subsea tie-back to the existingGoodwyn A platform, at an estimated cost of $2.5 billionwith project start-up expected early in 2016.

GorgonThe $52-billion Gorgon project is developing the Gorgonand JanszIo gaselds, located within the GreaterGorgon area, around 130 kilometres off the northwestcoast of Western Australia. The Greater Gorgon areagas elds are Australias largest-known conventionalgas resource and contain approximately 40 trillioncubic feet (Tcf) of gas. Chevron, ExxonMobil and Shellcomprise the Gorgon project partners, with interestsof 47, 25 and 25 per cent respectively. Osaka Gas(1.25%), Tokyo Gas (1.1%) and Chubu Electric (0.417%)make up the balance.

The project will comprise three LNG trains, a domesticgas plant, condensate handling facilities, carbon dioxide

injection facilities and associated utilities. Constructedon Barrow Island, the LNG trains will have the capacityto produce a combined 15 million tonnes of LNG peryear, with rst LNG expected in 2014.

Under theBarrow Island Act 2003 (the Act), the jointventurers are required to reserve 2000 petajoules ofgas for the domestic gas market. A domestic gas plantwill progressively supply up to 300 terajoules per day,starting from 2015.

The Gorgon development will also be required underthe Act to implement geosequestration as a meansof reducing carbon emissions from the project. Asa result, the Gorgon project will include the worldslargest commercial-scale greenhouse-gas storage site.Successful implementation of this would make theGorgon project one of the rst projects worldwide toimplement geosequestration commercially.

WheatstoneConstruction on the $29-billion Wheatstone projectat Ashburton North, 12 kilometres west of Onslow on

the Pilbara coast, began in late 2011. The Chevron-ledproject includes a two-train, 8.9 million tonnes perannum (Mt/a) LNG facility and a domestic gas plant.The project is planned to eventually comprise ve LNGprocessing trains producing up to 25 million tonnes ofLNG a year.

The Wheatstone project is a joint venture between Australian subsidiaries of Chevron (64.14%), Apache(13%), KUFPEC (7%), Shell (6.4%) and Kyushu ElectricPower Company (1.46%), and PE Wheatstone Pty Ltd(part-owned by TEPCO, 8%).


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Eighty per cent of the Wheatstone projects foundationtwo-train capacity will be supplied by natural gas fromthe Wheatstone and Iago elds, which are operatedby Chevron (80.17%) in joint venture with Australiansubsidiaries of Shell (8%) and Kyushu Electric PowerCompany (1.83%), together with PE Wheatstone Pty Ltd(part-owned by TEPCO, 10%). The remaining 20 per centof gas will be supplied from the Apache and KUFPECJulimar and Brunello elds.

The Wheatstone project is expected to produce rst LNGin early 2015.

Julimar and Brunello Apache, in joint venture with KUFPEC (35%), is developing

its Julimar and Brunello elds which will supply gas tothe Chevron-operated Wheatstone LNG project.This will be a phased development over 20 years, withrst gas expected in late 2016. Julimar and Brunello willproduce approximately 1.65 Mt/a of LNG, 36 TJ/d of salesgas for the domestic market and 1.8 million barrels ofcondensate a year.

Browse BasinThe Browse Basin lies offshore approximately425 kilometres north of Broome and covers around140 thousand square kilometres. All Browse Basin eldsare currently undeveloped, primarily due to their isolatedlocation 300 kilometres from the mainland in waterdepths of 300 to 500 metres.

Prelude and ConcertoShell Development Australia Pty Ltd is proceeding with itsPrelude oating liqueed natural gas (FLNG) project in theBrowse Basin and anticipates operations will commencein early 2017.

The FLNG facility will be the largest oating structure

ever built at 488 metres long and 74 metres wide.Once constructed, the facility will be towed to thePrelude eld (WA-371-P) where it will be permanentlymoored for its 25-year project lifespan. The proposedFLNG would have a capacity to produce around 3.6 milliontonnes of LNG per annum as well as LPG and condensatefor export. The Concerto eld will also be developed aspart of this project.

Prelude and Concerto have approximately 3 Tcf ofliquids-rich gas.

Other parties with an interest in the project includeINPEX Corporation (17.5 per cent), Korea Gas Corporation(10 per cent) and CPC Corporation (5 per cent).

Browse Joint VentureWoodside as operator, in partnership with:

Shell Development (Australia) Pty Ltd,

BP Developments Australia Pty Ltd,

Japan Australia LNG (MIMI Browse) Pty Ltd, and

PetroChina International Investment (Australia) Pty Ltd

is aiming to develop the three Browse gas andcondensate elds, of Brecknock, Calliance and Torosa.Combined, these elds contain an estimated 15.9 Tcfof dry gas and 436 million barrels of condensate.

The joint venture participants have elected to use ShellsFLNG technology and Woodsides offshore developmentexpertise as the concept to commercialise the threeBrowse gaselds. The joint venture plans to be in aposition to consider the commencement of front-endengineering and design (FEED) in 2014.

IchthysThe Ichthys eld in the Browse Basin has an estimatedresource of 12.8 Tcf of gas and 527 million barrels ofcondensate. In September 2008, INPEX and its jointventure partner Total selected Middle Arm Peninsulaat Blaydin Point in Darwin Harbour as the preferred site

for development for Ichthys onshore infrastructure.The projects total cost has been estimated at morethan $20 billion.

The joint venture partners for the Ichthys LNG projectare INPEX (66.070%), Total (30%), Tokyo Gas (1.575%),Osaka Gas (1.2%), Chubu Electric (0.735%) and Toho Gas(0.42%).

ScarboroughExxonMobil and BHP Billiton (a 50:50 joint venture) arestudying the development of the huge Scarborough

and Thebe elds located in the Carnarvon Basin, 220kilometres northwest of Exmouth in 900 metres of water.Scarborough is estimated to hold approximately 10 Tcfof gas. Thebe (100 per cent owned by BHP Billiton) isestimated to contain between 2 and 3 Tcf of gas.

It is one of the most remote of the Carnarvon Basingas resources. The focus for the development of theScarborough eld is an FLNG plant. ExxonMobil hascommenced the environmental referral process for aFLNG and further engineering and design work is beingundertaken before a nal concept decision is made.


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Figure 33 Average Natural Gas Prices Source: Argus Monthly LNG, EnergyQuest, DMP

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Figure 34 Western Australian Average Domestic Natural Gas Price Source: DMP The value of Western Australian domestic gas sales is based on the summation of total domestic gas sale values as at the point

of entry into the Dampier to Bunbury natural gas pipeline (DBNGP) or where applicable, the Parmelia pipeline and Goldfields pipeline.

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Figure 36 Average LNG Import Prices Source: Argus Monthly LNG (Prices include freight and regassing)

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2.4 GOLDIn 201213, the States gold sector recorded sales valuedat just under $9 billion. This represented a 4.6 per cent

fall from the previous record year and accounted for nineper cent of all mineral and petroleum sales in Western Australia in 201213.

Gold has a dual character as both a commodity and amonetary asset. Over the past ten years the gold price hasrisen on average 17 per cent a year, reaching an all-timerecord of US$1895 per ounce in early September 2011.

The gold price averaged US$1603 per ounce in 201213,representing a four per cent decrease from 201112. In Australian dollar terms, the gold price averaged $1570per ounce in 201213, which was again four per centlower than the previous year.

For the rst half of 2013 prices weakened and averaged just US$1520 per ounce. However, this is well above theprice ve years ago which averaged US$823 an ounce.

The prospect of the US government tapering quantitativeeasing by the end of 2013 had a disproportionatedownward impact on the gold price. Investors inexchange-traded funds (ETFs) saw their safe haven ingold fade and ETFs contracted 350 tonnes during theperiod, whilst gold bars and coin demand increased bynine per cent.

In general, forecasts indicate that gold prices will remainrelatively high for some time in comparison to historiclevels. The average US dollar gold price just prior to

the global nancial crisis in 200708 averaged just$823 an ounce.

Figure 39 Historic Gold Price, per Ounce Source: Perth Mint and London PM Fix

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In 201213, the States gold output fell marginally by justunder one per cent compared with 201112 to 179 tonnesor 5.7 million ounces. Over the same period, Australiasgold production was just marginally less than the previousyear, reaching 259 tonnes (8.3 million ounces). In 201213,Western Australia accounted for 69 per cent of Australiasgold production.

Western Australias ten largest projects accounted for61 per cent of the States gold output in 201213.These projects comprised:

Boddington (Newmont Boddington Gold Pty Ltd) 20 tonnes

Golden Mile (Kalgoorlie Consolidated Gold Mines Pty Ltd(KCGM)) 19.7 tonnes

Telfer Gold (Newcrest Mining Limited) 16.1 tonnes

St Ives (Gold Fields Ltd) 13.2 tonnes

JundeeNimary (Newmont Mining Corp) 9.6 tonnes

Sunrise Dam (AngloGold Ltd) 7 tonnes

Agnew (Gold Fields Ltd) 6.2 tonnes

Granny Smith (Barrick Gold Corporation) 5.8 tonnes

GwaliaLeonora (St Barbara Limited) 5.6 tonnes

Kanowna Belle (Placer Dome Inc) 5.2 tonnes

Gold exports from the State totalled $14.9 billion in201213; however, only 60 per cent of this amount($8.97 billion) is attributable to Western Australian mines(see Gold Export Update 201213 in this section).China was the States largest gold export destination,accounting for 40 per cent of total gold exports. India wassecond with 20 per cent, followed by the United Kingdomat 18 per cent. Other destinations include Thailand(eight per cent) and Singapore (six per cent). A host of

other countries made up the remaining balance.

The large number of gold exports going to the UnitedKingdom reects Londons central role in the internationalgold market, where it is often used as a shipping destinationto be on-sold from London accounts.

Australian gold producers are continuing to experience highproduction costs which have increased around ten per centin the past year averaging around $830 an ounce for theyear (source Surbiton Associates Pty Ltd).

GOLD EXPORT UPDATE 201213

The Australia Bureau of Statistics (ABS) releaseWestern Australian export trade data whichshow exports of gold that are signicantly higherthan gold produced in this State. This apparentincrease in gold exports from Western Australia isdue to a restructuring of Australias gold-reningindustry in the late 1990s through to October2002. Gold export data published by the ABSmust therefore be interpreted with some caution.

Gold Corporation, or as it is more commonlyknown, The Perth Mint, operates Australias

only London Bullion Market Association (LBMA)accredited gold renery. It renes gold producedin other States and Territories, gold fromsurrounding countries and also secondary gold,mainly from Asia, which is rened and exportedfrom Western Australia.

This export gure for Western Australia istherefore larger than Western Australias ownlevel of gold production.

The Victorian renery still renes silver and jewellery products.

The ABS estimates that gold exports from Western Australia in 201213 amounted to approximately$14.9 billion. Approximately 60 per cent or$8.97 billion was gold produced in Western

Australia. The remaining 40 per cent(approximately $5.9 billion) can be attributed togold rened and exported from Western Australia,but produced from mining operations in otherStates, Territories and overseas.

Overseas imported gold also includes scrap whichis rened in Western Australia and exported.


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T o n n e s

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Figure 41 Gold Production Source: DMP and BREE

In the second half of 2011, the high gold price encouragedproducers to expand existing mines and exploit previouslynon-commercially viable deposits. It also resulted in anincrease in exploration expenditure in Western Australia,however, with softer gold prices exploration expenditurein 201213 fell by 16 per cent to $467 million. With theeasing of the gold price and rising costs, several producershave re-evaluated their operations or in some casesclosed. This has affected over 20 gold operations, includingexploration projects and head-ofce personnel.

The AngloGold Ashanti Limited/Independence Group NL joint venture of the Tropicana Gold Mine commenced thecommissioning of its mine in the June quarter of 2013.This low-cost mine commenced production in the September

quarter of 2013 and is well ahead of its original target ofrst production in the December 2013 quarter. Tropicana islocated 330 kilometres east-northeast of Kalgoorlie and isprojected to produce approximately 470,000 ounces a year.

Supply and DemandIn 201213, overall world gold demand reached 4147tonnes, a fall of seven per cent over the previous twelvemonths. This translated into a ten per cent decline in valueto US$216 billion in 201213. Lower prices generated asurge in jewellery demand which increased 15 per cent

whilst technology (electronics, dentistry and other industrialuses) fell ve per cent.

In 2009, the central banks became a net buyer of gold forthe rst time in 21 years, signalling the end of an era inwhich the central banks had been a source of signicantsupply to the gold market. Central bank purchases in201213 fell 16 per cent.

Softer prices also impacted on the supply side of recycledgold, primarily due to consumers in developing marketsholding onto their stocks of old gold as the prot motivewaned along with the gold price.

Total bar and coin demand increased by nine per cent,with India and China dominating consumer demand in201213, together accounting for 63 per cent of theglobal jewellery, bar and coin demand.

The World Gold Council reported that world mineproduction, including recycled gold, reached 4332 tonnesin 201213, a three per cent fall from 201112. China isranked at the top of the list of world mine production at14 per cent, with Australia holding second place at nine

per cent. The United States is third with 8.5 per cent andRussia fourth at 7.6 per cent. Peru and South Africa are aclose equal sixth at six per cent.

Figure 40 Gold Exports Total Value $14.9 Billion Source: ABS and DMP

Thailand 8%

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Current production of alumina is focused in the SouthWest of the State, with the Darling Scarp containingconsiderable deposits of bauxite. The 13.5 million tonnesof alumina sold in 201213 was accounted for by twoproducers: Alcoa World Alumina and Worsley Alumina PtyLtd. Both producers reneries are located within closeproximity to their bauxite mines and shipping facilities,which allows economical processing of relativelylow-grade bauxite.

Alcoas rst bauxite mine at Jarrahdale opened in 1963to supply the Kwinana alumina renery and produced168 million tonnes before closing in 1998. The companycurrently has two operating bauxite mines, Huntly andWillowdale. Huntly was established in the early 1970s to

supply bauxite to Alcoas alumina reneries in Kwinanaand Pinjarra and is currently the largest bauxite minein the world. The other operating mine, Willowdale, wasestablished in 1984 to supply bauxite to the Wageruprenery. Combined, the three reneries have a productioncapacity of around 14 million tonnes of alumina per year.

In May 2012, Alcoa was granted a ve-year extensionby the State Government to expand its Wagerup aluminarenery to a maximum production capacity of 4.7 Mt/a.The planned expansion was suspended in November2008 due to the global nancial crisis.

Worsley Alumina established its bauxite mine and aluminarenery in the early 1980s. The mine is located nearBoddington and the bauxite is transported 51 kilometresby conveyor belt to the renery at Worsley. Alumina isthen transported 50 kilometres by rail and exportedthrough the port of Bunbury.

A US$3.4-billion expansion and efciency upgrade ofthe Worsley alumina renery, which is now complete,will increase the production capacity of the renery from3.5 Mt/a to 4.6 Mt/a. Production at Worsley during the201213 nancial year saw production ramp-up towardsfull capacity.

Around 80 per cent, or $3 billion, of the alumina produced

in Western Australia was exported in 201213, with arelatively small amount shipped by Alcoa to its aluminiumsmelters in Victoria. The States main export marketsin 201213 were the United Arab Emirates and China,which both took 17 per cent of the States alumina.China is the worlds largest consumer and a majorproducer of aluminium. Other major customers includedSouth Africa (12 per cent), Mozambique (ten per cent),India (nine per cent), Bahrain (eight per cent), the UnitedStates and Qatar (ve per cent each) and a host ofother destinations.

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Figure 45 Alumina Quantity Source: DMP and BREE


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2.6 NICKEL Australia holds 35 per cent of worldwide economicnickel resources amounting to 24 million tonnes.

Western Australia has the largest proportion of Australias economic nickel resources and is thesole producer, with annual sales of 228,299 tonnesin 201213, an increase of 19,754 on the 201112nancial year.

The economic nickel resources in Western Australiaconsist of both sulphide and lateritic deposits; however,most production comes from nickel sulphide mines,which accounted for 66 per cent of total production.The balance was sourced from the two lateritemines of Murrin Murrin and First Quantum MineralsRavensthorpe mine, which restarted in late 2011.The increase in production in 201213 can be attributedto the two laterite operations.

The value of Western Australian nickel sales decreasedslightly from $3.7 billion in 201112 to $3.6 billionin 201213. This was attributable to a fall in ni

minerals and petroleum 2012-2013

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