Top mining nation readying fresh investment wave

SYDNEY: Mining companies in Australia, the world’s biggest exporter of iron ore and coal, are poised to approve fresh investments in projects, driven by rallying commodity prices and the need to replace depleting deposits, according to global equipment supply giant Komatsu Ltd.

“They’re looking at new fleets of equipment,” Sean Taylor, chief executive officer of Komatsu’s Australian unit, said in an interview in Sydney. The miners have to reinvest in output “because otherwise they can’t maintain production at the levels that they’re at,” he said.

Australia’s commodity exports are set to hold above A$200bil (US$155bil) over the next two fiscal years and there’s a pipeline of about A$25bil of projects approved for construction, according to government estimates.

The Bloomberg Commodity Index has advanced more than 12% since slumping to a quarter-century low in January 2016.

“The level of the commodity prices is pretty good now for the miners to consider reinvestment,” Taylor said in the June 29 interview. “It feels like to me we’ve got more discussion around decision making.”

Conversation about greenfield sites, which can take up to 10 years to be approved, have “certainly increased a little bit in the last six months – whereas before that, it was zero,” he said.

The nation’s top iron ore exporters have already given the go-ahead for new mines amid a potential US$8bil of investment to replace at least 170 million tonnes of capacity that’ll be lost as exhausted pits are closed.

BHP Billiton Ltd last month approved US$184mil in initial spending for its A$4bil South Flank mine in Western Australia, while Rio Tinto Group last year sanctioned development of the US$338mil Silvergrass operation.

Komatsu, the world’s second-biggest supplier of equipment to the construction and mining sectors, last year agreed a US$2.89bil deal to acquire Joy Global Inc to add expertise in rope shovels and underground mining equipment.

Komatsu and competitors are positioned to benefit from a slow recovery in mining equipment demand, particularly across Asia, according to Bloomberg Intelligence. — Bloomberg