ANALYSIS: Mining is back and investors aren’t just watching from the sidelines
Words by Todd Harrington, Resources Investment Commissioner, Queensland Government
The mining and energy sector in Queensland could not be in a more different place to where it was just 18 months ago.
Within this time, many vital pieces have fallen into place for our state’s energy and mining sector. This is incredibly good news for investors, stakeholders, companies and the public.
The importance of the sector for Queensland’s broader economy are difficult to overstate. And I don’t say that simply because I am the state’s Resource Investment Commissioner - the numbers don’t lie.
Contrary to the narrative put in some sections of the media, the sector has seen a seismic turnaround in key areas that are fueling positive sentiment, investment and an eagerness for mining and resource companies to take opportunities with both hands.
The mining and resources sector is an indispensable part of the renewables story. Two-thirds of Queensland’s coal mines produce metallurgical coal – the stuff that makes steel. Without it we can’t make the wind turbines, solar panels or countless other pieces of technology and infrastructure that are critical for renewable to work. It’s vital we appreciate this relationship – something often lost in the public discourse on resources and energy.
But what has propelled the mining and resources comeback in Queensland?
Prices and positivity paint a near-perfect picture for investment
The price recovery and demand for Queensland’s resources has generated significant interest for investors looking at Queensland, especially those who have re-geared their business for a post-boom environment.
The price recovery has spread far and wide. Metallurgical coal, thermal coal, coal seam gas, LNG, oil, copper, zinc and more have all seen gains in price. The gains for some have been prodigious, and they are all an incredibly valuable part of Queensland’s domestic and export economy.
Here’s just an idea of the real impact: thermal coal revenue has just about doubled, metallurgical coal revenue has recovered more than 200%, oil is up 200%, and copper and zinc have seen marginal increases of between 10%-20%.
But prices alone are not the whole picture.
Another critical part of the picture is the Aussie dollar, which is in an undeniably more favourable position than it was just a few years ago. When the Aussie was at parity with the US dollar, margins were further corroded in a market also dealing with 10-year price lows.
These conditions did, however, spur many resources companies to restructure their businesses with far lower cost bases in terms of capital and operations.
Two years ago companies were carrying too much debt in a low- or no-margin environment. Now it has made them beasts for productivity and efficiency, especially with the benefit of our state’s existing high-capacity infrastructure. The proof is in the balance sheets.
There are also green shoots in the sector, with QCoal, Whitehaven Coal and Pembroke Resources building new metallurgical coal mines in Queensland. At the pointy end, one recent sale saw Rio Tinto sell two coal mines for a total $5.3 billion transaction – twice the pre-sale expectations.
In all honesty, I can’t think of a project that hasn’t made its way back to higher revenues and margins. That’s piqued investor interest - and the pendulum has swung back in the sector’s favour.
The investors are coming to Brisbane
In late June, Brisbane will play host to Energy Mines & Money Australia, a conference that will put about three quarters of a trillion dollars’ worth of investors in our city for two days.
Helping to attract this conference to Brisbane has been a priority for me and the city’s economic development stakeholders for a long time. It will help set the agenda and sentiment for resources investment in this state.
One takeaway from the Energy Mines & Money Australia will surely be that mining is back, and and that the sector’s sentiment is extremely positive looking forward. The conference will o give investors a deeper understanding of the latent potential in Queensland’s resources infrastructure. I know investors want to understand what capacity we have, and I believe they will be impressed with the answers they get.
From private equity investors to institutions, the gathering will bring some of the most active players in the sector to our own backyard. They will be here at a time when revenue and conditions are firmly in both our and their favour.
I can’t wait to put Brisbane and Queensland in front of them.
Todd Harrington is the Resources Investment Commissioner within the Queensland Government. He is a seasoned resource executive, possessing significant investment, mining, asset development, approval and corporate financing experience. A geologist originally by profession, Todd has an in depth knowledge on over 250 global resource assets with an eye for value and optimisation.
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