But while exploration spending is at record levels, it has to find or prove up resources capable of being exploited in projects developed at existing operations or in new locations.
And that is the most impressive thing about the ABARE report.
The sheer health of the industry can be seen from the following two paragraphs.
“There are 43 projects (both advanced and less advanced) that are new to ABARE’s list since October 2006,” ABARE said..
“In the two year period from the end of April 2005 to the end of April 2007, over 166 projects have been added to ABARE’s project list.
“The number of newly listed projects in this timespan is unprecedented and is another indication of the current high level of investment interest in the mineral resources sector.
“Of the 43 projects added to the list, nine are either committed or already under construction.”
ABARE remarked that In line with previous project listings, the current investment intentions in the Australian mineral resources sector, as reflected in the large number and record value of minerals and energy projects committed to or under construction, “continue to bode well for the sector’s growth over the next few years.
“The 91 advanced projects as at April 2007 indicate continued expansion across most of the minerals and energy industry spectrum. Of the record 279 projects in ABARE’s April 2007 projects list, 67 per cent (188 projects) remain uncommitted.
“However, most of the projects that will ultimately proceed to development in the medium term are included in ABARE’s current list of 188 less advanced projects.”
The spending levels are at times mind boggling in their growth.
In 2004-05 around $10 billion was spent on new capital projects according to the Australian Bureau of Statistics and ABARE.
That jumped 80 per cent in 2005-06 to $18.6 billion, which according to the report was “more than double the average annual expenditure in real terms (2006-07 dollars) for the past 25 years.
“Surveys of industry intentions indicate the possibility of further increases to almost $23 billion in 2006-07 and over $30 billion in 2007-08.”
According to ABARE, if the capital expenditure in 2006-07 and 2007-08 is realised, this would represent increases of 22 per cent and 61 per cent respectively from the record expenditure in 2005-06.
“The expected continued high level of capital expenditure in the mining industry in the near future is consistent with the development trends shown in the full list of major mineral and energy projects.”
The metals industry is the only one to show a slowing in spending.
“Capital expenditure in the metals products sector, which includes the minerals processing activities covered in ABARE’s projects list, was $4.8 billion in 2005-06, 41 per cent above expenditure in 2004- 05.
“Paralleling the result in mining, real expenditure in the metal products sector in 2005-06 is the highest on record and more than double the 25 year annual average of $2.5 billion (in 2006-07 dollars).
“However, surveyed industry intentions suggest that metal products expenditure could fall in 2006-07 to about $4.1 billion and $3.2 billion in 2007-08.
“The possible decreases in metal products capital expenditure reflect the imminent completion of some large projects and the lack of commitment to any large metal processing projects in the past twelve months.”
Looking at the six months since the last report in October 2006, ABARE said that 23 major minerals and energy projects, with a total capital expenditure of $3.36 billion, were completed.
“The completion of these projects will result in increased production and export capacity for a range of commodities, including coal, natural gas, bauxite, base metals, gold, iron ore, mineral sands and nickel.
“The total number of projects completed in the six months ended April 2007 was one less than for the six months ended October 2006 and just below the record number (27) completed in the six months to April 2006.
“However, the total capital cost was significantly less than in the six months ended April 2006 and October 2006.
“The average value of projects completed in the six month period to April 2007 was $144 million, down from the historical nominal average over the past nine years of around $234 million.”
Looking ahead, ABARE’s list of projects suggests that the rate of project completions is likely to increase in the short term, with over 45 advanced projects scheduled for completion in the second half of 2007.
“However, there is the possibility that some of these projects will not meet announced scheduled completion dates or cost budgets, reflecting strong industry-wide competition for skilled labour and equipment.
“In addition, progress on a number of projects has been hampered by unfavourable weather conditions, particularly in Western Australia.”
At the end of April 2007, there were 91 projects at advanced stages of development included in ABARE’s projects list – these projects are either committed or under construction.
This was three fewer than the number of advanced projects included in the October 2006 list.
Despite the slight reduction in the number of advanced projects in the April 2007 list, there were still around 18 projects either newly committed or entered the list at an advanced stage in that six month period.
The announced capital expenditure of the 91 advanced projects at the end of April 2007 sums to $43.4 billion.
However, ABARE said it should be noted that even projects that have reached the committed stage may be deferred, modified or even cancelled if economic or competitive circumstances change sufficiently.
Among the more notable large scale projects in ABARE’s April 2007 list that are still undergoing feasibility studies are seven proposed LNG developments that, collectively, co
