Australian mining costs 'too high'

The Sydney Morning Herald  September 17, 2012

A new report has warned labour costs in Australia's mining industry are among the highest in the world.

The Minerals Council of Australia report said the latest modelling revealed capital costs had made new thermal coal projects 66 per cent more expensive and iron ore projects 30 per cent more costly to build than the global average.
The paper, produced by Port Jackson Partners, found real GDP would be 5.3 per cent lower in 2040 if Australia does not act to boost competitiveness, The Australian reported.
"Policy decisions made now can create or destroy an economic opportunity equal to more than five per cent of the Australian economy in 30 years, with lower minerals industry growth quickly translating into poorer economic performance," the report said.
The report outlines measures that could be adopted, including halting spiralling wage costs by deploying skilled immigration and sending workers in manufacturing jobs on the east coast to mining jobs in Western Australia.
Earlier this year the federal government sought to discredit preliminary modelling because Angus Taylor, a partner of Port Jackson Partners, was seeking Liberal party preselection.
Mr Taylor has since been pre-selected for the federal seat of Hume.

AAP

Australian Mining 20 September, 2012 Vicky Validakis

The demand for Australia’s resources will continue, but better policies are needed to stay competitive in the global market. That was the message Minerals Council of Australia chief, Mitchell Hooke, delivered at the 2012 Kevin Mccann Lecture on Energy and Resources Law.
Speaking at the University of Sydney last night, Hooke remained adamant that the need for Australia’s resources will not diminish as emerging economies continued to surge in their plans of urbanisation and growth.

Pointing to China as the main example, Hooke explained that as more people moved out of poverty and into the middle class, at a rate of 170 people a minute, the demand for mineral would remain strong. Though Hooke did point to the recent price slumps in coking coal, he surmised that commodity prices had caught up with demand and sees this as the reason for the easing prices saying the resource race has moved from ‘price led growth to volume led growth.’
Hooke is calling for policy changes which will ensure Australia stays competitive in what he called the ‘global village,’ and pointed to the reforms made by emerging economies which put Australia at a disadvantage and at risk of losing out on market share.
“There is no salvation in dining out on our natural resources,” he said.
Hooke pointed to higher total cash costs, which are 30 per cent more than the global average as making Australia an unattractive place to do business for foreign investors.
He went on to say that Australia’s position as a premier global supplier is ‘deteriorating as emerging markets become more competitive.”
Pointing to places like Kazakhstan, India and South America, where costs are lower, Hooke says natural resource companies have no choice but to access future resources elsewhere.

Hooke says that restrictions need to be taken off the economy in order for sustained growth and that we need policy changes which "recharges the batteries of economic reform,” with a sustainable fiscal policy which will help to restore and maintain economic growth.

David Crowe  From: The Australian  September 19, 2012 1:53PM

BHP Billiton, the world's biggest mining company, has fired a warning shot at Canberra and the states over new tax burdens on the resources sector as it forecasts a fall in commodity prices at the same time its domestic costs increase.
BHP senior executive Alberto Calderon attacked the "current inertia" in Australia's handling of the resources boom, pointing to the dire consequences if the nation fumbled the historic opportunity in mining and energy exports.
The comments came at a Canberra conference shortly before Mr Calderon, the chief executive of BHP's aluminium, nickel and corporate development, headed to Parliament House to deliver his message directly to federal political leaders.
While the BHP executive warned of a short-term fall in commodity prices, he joined others at the resources conference in pointing to sustained demand from China as the country invested in infrastructure to cope with rapid urbanisation.
Mr Calderon projected continued demand from China through to 2025, when its urbanisation would grow close to that of the United States, and noted that demand for commodities like copper would continue to grow even as prices for iron ore waned.
Without continued growth in resources, he warned, Australia's economic position would slide as the federal budget came under pressure and the nation struggled to fund its future.
"It is certainly possible if the current inertia continues," he told the inaugural conference hosted by the federal government's Bureau of Resources and Energy Economics.
"What concerns me is there appears to be a tendency to treat the strong commodity price environment [as permanent]," he said in a rare speech.
Fiscal policy presumed that the gains from resource exports were fixed and that they could be easily spent, he added.
The remarks matched a warning from Rio Tinto Australia managing director David Peever yesterday that policies appeared to be more focused on "redistributing the boom" rather than increasing output for the wider national benefit.
Neither executive singled out any Gillard government policies for rebuke. However, political debate has focused on the government's decision to use the proceeds of its mining tax to increase family payments in the May budget, under a policy dubbed "sharing the benefits" of the mining boom.
Mining executives have attacked a Queensland government decision to increase coal royalties but they are also anxious about federal reform options, being put to Wayne Swan by his business tax working group, to scale back tax concessions on capital costs and exploration spending.
Mr Calderon warned that productivity in Australia was not encouraging and that a truck driver cost $120,000 a year in Australia compared to $75,000.
Soon after his speech Mr Calderon headed to Parliament House for private meetings but would not comment on those discussions.
Australian Coal Association chief executive Nikki Williams also pointed to relatively high salaries for mining workers as a source of concern.
Ms Williams told the event that she was not suggesting that Australian wages should fall to match other countries, but that productivity would have to increase in order to justify the relatively higher salaries in Australian mining.

Now, the dreaded mining tax. Hehehe.
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Australian Mining 21 September, 2012 Vicky Validakis

Queensland MP George Christensen has blamed the closure of coal mines, axed projects and job cuts on mining taxes.
With the announcement yesterday that BHP Billiton plan to shelve another two coal mining projects, Christensen has pointed the finger directly at mining taxes.
Listing seven Queensland projects worth billions of dollars which have been abandoned and the loss or non-creation of 9000 jobs, the MP says that it has all been bad news since the tax was introduced 81 days ago, 4-Traders reported.
"Economic opportunities are being squandered because incentives are being taken away from industry and companies are being penalised for operating in Australia or daring to make a profit," he said.
"Our competitor countries around the world do not face the same obstacles that the Gillard government is harnessing companies with here, especially the mining tax and the carbon tax.
"These taxes have been choking our golden goose for 81 days and we will be paying the price in years to come when those industries are just not there."
Christensen’s comments come after major companies have also spoken out about the taxes imposed by Queensland’s new Liberal Government. BHP Billiton’s chairman Jac Nasser attacked the rise calling it “unbelievable," "disappointing," and "counter-productive".
Rio Tinto has also blamed the hike on job losses. A spokesperson for the company last week highlighted the issue facing the mining giant.
"We are working to improve our competitiveness by actively seeking ways to reduce costs across our business, which unfortunately means some roles will no longer be required.”
Projects which have been axed or are on hold include:
•   BMA to close Gregory mine, near Emerald - 300 jobs
•   BMA closes Norwich Park mine
•   Xstrata coal to shed jobs across Queensland - 600 jobs
•   Rio Tinto to close Blair Athol mine- 170 jobs
•   Rio Tinto cuts work force at Clermont mine
•   Rio Tinto cuts workers at Kestrel mine
•   Rio Tinto to shed jobs at Boyne aluminium smelter - 90 jobs
•   Peabody Energy shelves plans at Codrilla, near Nebo - jobs foregone
•   BHP shelves Peak Downs expansion plans, near Moranbah - 350 jobs
•   BHP to shelve Red Hill mine, near Moranbah - 2000 construction jobs, 1500 permanent jobs
•   BHP shelves Saraji East mine plans, near Dysart - 2500 construction jobs, 1400 permanent jobs

Everyone wants a larger piece of the pie. The mine workers want higher wages; the mining companies want higher profits; the govt wants higher taxes.

That’s what makes Australia a great country to live in.

 Advice to my kababayans back home is to lodge your resumes. And keep fine-tuning them. Sooner or later, the people here will reach a compromise. They have to. No compromise means no money.

John Dagge  From: Herald Sun  October 29, 2012 12:00AM

THE high cost of doing business in Australia is putting $200 billion in mining and energy projects at risk, the founder of engineering firm WorleyParsons has warned.
John Grill, who stood down as the company's chief executive last week to take up the role of chairman, said hefty wages for trade skills and the high Australian dollar were making resources projects in the developing world increasingly attractive.
Speaking on ABC's Inside Business program yesterday, Mr Grill said wages for Australian engineers were 50 per cent higher than anywhere else in the world as demand for skills outstripped supply.
Mr Grill said the country suffered a shortage of skilled tradespeople such as boilermakers, welders, fitters, electrical and instrumentation specialists.
Australia also needed to upskill project managers who can look after mega-developments, he said.
"We had a period of 25 years of very little that was built, so there were very few people trained in the trades," Mr Grill said.
"When the number of projects that we've got going on in Australia gets to the number we have now, we've had a problem."
He agreed with recent comments by BP Australasia president Paul Waterman that up to $200 billion in major projects was now at risk.
A slew of mining and energy companies had shelved or put on review major developments in recent months, citing falling commodity prices, business costs and the high dollar.
"There's two factors here - one's the cost of the Australian workers in Australian dollars and the second is the exchange rate," he said.
"The exchange rate has had a big effect as well.
"When the dollar was 72c (in US currency), Australia was definitely more competitive."
While mining and energy companies have traditionally preferred Australia as an investment destination because of its low political risk, major operators will shift their investment dollars into developing markets if the country does not rein in costs, Mr Grill warned.
"The cost of labour on site, essentially the blue-collar labour, has been - through shortages - forced up to levels that are very high."

Everyone wants a larger piece of the pie. The mine workers want higher wages; the mining companies want higher profits; the govt wants higher taxes.

That’s what makes Australia a great country to live in.

 Advice to my kababayans back home is to lodge your resumes. And keep fine-tuning them. Sooner or later, the people here will reach a compromise. They have to. No compromise means no money.

The Sydney Morning Herald September 7, 2012 by Marilyn Lake

Gina Rinehart is ignorant that our nation invented the idea of a decent living wage.

IN 1924, when feminist activist Alice Henry came back to Australia after working for the Women's Trade Union League in the United States, she was pleased to tell an old friend that she was travelling on an Australian ship, whose workers' conditions - their hours, accommodation and wages - were up to the Australian standard. ''I do feel a deep sense of self-respect,'' she wrote, ''in knowing that those who are contributing to my welfare and my comfort are just as well off as I am.'' Australian self-respect once depended not on how many gold medals we won at the Olympics but on the knowledge that our fellow citizens were as well paid and well treated as ourselves.

This should not be surprising. The concept of a decent living wage was an Australian invention. Other nations hailed us for this humanitarian idea. It was a distinctive achievement that we should be proud of and rally to defend.

The idea of the living wage attracted world attention in the early 20th century. It was humanitarian, it was just, it recognised the dignity of workers and the equality of citizens. In now suggesting that the wages of Australian workers might be reduced to the lowest levels paid in other mining countries, such as South Africa, Gina Rinehart should be condemned, not just as heartless and reactionary, but un-Australian in her core values.

Other nations celebrate their national traditions and core values. Why are Australian traditions so little appreciated? Australia pioneered the practice of defining wages in terms of the sum required to afford people a decent standard of living, rather than as the least amount that employers might pay. The living wage was defined in opposition to starvation wages and slave labour. Human needs were given explicit priority over the maximising of profits. We decided in the late 19th century that decent wage levels should be enforced by governments through arbitration courts and wage boards. People came from around the world - from France and Germany, from Britain and the US - to see these Australian innovations for themselves. They were impressed at the results and publicised and emulated the outcomes back home.

In 1911, an American professor of sociology and economics, M. B. Hammond, took a year's leave from his university to investigate the effectiveness of Australian experiments in prescribing decent wages and limiting working hours. He had to travel south to Australia to see these things, because nowhere else, not in Europe or Asia, had such advanced legislation been introduced across such a vast territory. He was mightily impressed with Australian experiments, noting the general prosperity and wellbeing of the people, writing about what Australia was doing in numerous articles and lecturing about it at Harvard.

In particular, Hammond hailed the pioneering work of the president of the Commonwealth Arbitration Court, H. B. Higgins, who led the way in explaining the principles underpinning the Australian living wage. ''He has certainly expressed, at greater length and with greater clearness than has anyone else,'' wrote Hammond, ''the ideals which have animated the Australian people and the Australian lawmakers in placing on the statute books the body of social legislation which has drawn the eyes of all the world to Australia, and which marks the most notable experiment yet made in social democracy.'' Higgins explained that his basic idea was to treat workers as human beings.

The living wage was one of Australia's distinctive contributions to world history, along with women's political rights. Gina Rinehart and her political supporters must surely be ignorant of these distinctively Australian traditions, of our achievement in fashioning a social democracy that drew the eyes of the world to Australia. These national traditions symbolised our early commitment to the ideal of equality of opportunity, the refusal of hereditary privilege and gross inequalities in wealth and position.

Initially restricted to white Australians, equality of opportunity and the prospect of a living wage were extended, after many years of struggle, to Australians of all ethnic backgrounds. Talk of introducing restrictive economic zones to enable mining companies to employ coloured labour on lesser wages in inferior conditions is contrary to all that Australians have worked for over 100 years. Once in Australia, all workers should have access to good working conditions and decent wages, sufficient to sustain them as Australian citizens.

Marilyn Lake is Charles La Trobe professor in history at La Trobe University.

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There you are, fellow Filipinos back home! Should you land a mining job here, you could be paid like us, highly-paid, Aussies – lima diez, dili pito singko. Hehehe.

Itnews By Ry Crozier on Dec 4, 2012 7:00 AM
Filed under Strategy
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Analysts look to automation to reverse productivity declines.

Australia's mining companies need to take their investments in technology further to eke out operational efficiencies and reverse labour productivity losses that have built over the past decade, according to analysts BIS Shrapnel.
The firm's infrastructure and mining unit senior manager Adrian Hart told iTnews that lower commodity prices provided some impetus for miners large and small to make "fundamental changes" to their operations. This will provide some clear opportunities to take advantage of information technology.
Hart said that the era of increasing commodity prices had enabled miners to "just to let things slide the way they've been going, and just make do with the existing systems, [rather] than really have a big attack on the costs they're leaking by using those existing systems.
"The mining industry in the past decade has started on a lot of technologies, but they haven't really had that big pressure put on them to use it to bring down costs in a substantial way," he said.
"I think a lot of companies now will be looking quite heavily into how [they] change these systems fundamentally to get long-lasting productivity improvements.
"They need to make some fundamental changes in the way that they mine the ore ... and technology is going to be a big part of that."
Hart's comments come on the back of the release of BIS Shrapnel's Mining in Australia 2012 to 2027 report, which forecasts a "new war on costs within the mining sector", on the back of pressure from "low commodity prices, high and rising costs and the lowest labour productivity in a generation". (pdf) http://www.bis.com.au/verve/_resources/BIS_Mining_in_Australia_2012_RELEASE_FINAL.pdf
Hart branded labour productivity in particular, as an "absolute disaster", pegging it at "60 percent off its peak in 2000/01", its weakest level since 1987.
"Labour productivity in mining operations has simply collapsed over the past decade," he said.
Miners were partially tackling the labour issue with a clampdown on contractors, causing several contract labour firms to "feel the pain".
"The next five years will be a battle of the balance sheets between miners, suppliers and contractors as the industry seeks to lower costs and restore productivity," he noted.
However, there would be opportunities for contract labour growth in areas such as maintenance as mining firms look to "integrate and optimise existing operations" and boost the productivity of existing sites.
Such a push also presents opportunities for technology system providers, such as those offering automated systems, which could drive productivity gains and efficiency.
Rio Tinto revealed last week that it had found an additional seven million tonnes a year in iron ore capacity within existing operations through the use of technology, such as automation and big data analytics.
While noting miners like Rio Tinto had already made some investments, Hart believed there was further room for technology spending.
"I think they [mining firms] need to go a lot further now. I think technology is reaching the point where they can implement a lot more labour-saving technologies, or certainly technologies that can make things a lot more productive," Hart said.
A key focus for the BIS Shrapnel report is to dispel talk about the mining boom "in a past tense".
"I think it's a bit too early to talk about mining as being yesterday's economy again," Hart said.
"I don't think its going to provide the economic growth that it has in the past because we're going to miss that big construction growth driver from having lots of new investment all at once, but it's still going to stay really high in terms of investment.
"When you take a long term perspective of this ... it's still going to be a huge and very important sector.
"It probably puts the onus on those in it and also the rest of us to make sure that it works as efficiently as possible because it will be a big part of the economy."

The Sydney Morning Herald December 17, 2012 - 4:33PM

The sector that has contributed most in recent years to the rise in Australia’s economic prosperity is also the main cause of the nation’s productivity slowdown.
A report by human resources provider, Chandler Macleod, indicated productivity growth delivered at least half of Australia’s wealth before the resources boom.
But since 2005, 90 per cent of the rise in wealth is due to increased resource prices and capital investment in the sector, not productivity gains.
Productivity is measured mainly in terms of capital and labour productivity. Capital productivity is the measure of output delivered by the available capital stock. Labour productivity measures output produced per hour of labour
Chandler Macleod’s report confirmed productivity growth in Australia has not only stagnated, but decreased in the past decade.
Capital productivity has proved to be the biggest drag in Australia’s productivity, with the resources sector contributing 99 per cent to this decline.
Businesses interviewed by Chandler Macleod said there were diminishing returns from capital investments in the sector because the easiest gains, or '‘low hanging fruits'’ had already been reaped, making it harder to achieve further productivity gains.
There is also a time lag between investment and return - previous investments from the mining boom have not yet delivered.
This finding reinforced the results in a recent global report commissioned by the US Society of Human Resources Management and the Australian Human Resources Institute which ranked Australia 50 of out 51 possible places in total productivity, just ahead of Botswana. [Nakakahiya!]
Not only is the resources sector’s capital productivity in decline, its labour productivity is a “disaster” according to the recent “Mining in Australia 2012-2027” report from economic forecasters BIS Shrapnel.
The mining sector’s labour productivity is now 60 per cent lower than its peak in 2000-01, as a result of contractors driving harder bargains and shelved projects.
The report also showed that while companies are focusing on people management and training to improve labour productivity, providing them with innovative work tools such as better technology to help them work faster is a better solution.
Getting the right people and awarding them incentives to increase output is another recommendation.
The Productivity Commission says productivity growth is a crucial source of growth in living standards and small increases in productivity growth compound over time like interest in a bank account.

Everyone wants a larger piece of the pie. The mine workers want higher wages; the mining companies want higher profits; the govt wants higher taxes.

That’s what makes Australia a great country to live in. Hehehe.

 Advice to my kababayans back home is to lodge your resumes. And keep fine-tuning them. Sooner or later, the people here will reach a compromise. They have to. No compromise means no money.