Picture: ISTOCK
Picture: ISTOCK

Sydney/Melbourne — Mining companies in Australia, the world’s biggest exporter of iron ore and coal, are poised to approve new investments in projects, driven by rallying commodity prices and the need to replace depleting deposits, according to global equipment company Komatsu.

"They’re looking at new fleets of equipment," said Sean Taylor, Komatsu’s Australian CEO. 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$200bn ($156.74bn) over the next two financial years and there is a pipeline of about A$25bn 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 an interview on June 29.

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

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

BHP Billiton approved $184m in June in initial spending for its A$4bn South Flank mine in Western Australia, while Rio Tinto Group in 2016 sanctioned development of the $338m Silvergrass operation.

Komatsu, the world second-biggest supplier of equipment to the construction and mining sectors, in 2016 agreed to a $2.89bn deal to acquire Joy Global 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.

BHP could boost annual earnings by about $500m from mining cost savings by adding more autonomous trucks to cover most of its fleet in the Pilbara iron-ore region and about a third of its 350 vehicles at coal operations in the Bowen Basin, Deutsche Bank said in July.

Still, even with a rebound in projects, imports of mining equipment into Australia are likely to be at about 50% to 60% of levels in 2012, at the height of an investment boom, Taylor said. Capital expenditure by miners is forecast for a fifth annual decline in the year to July 2018, the country’s industry department said in June.

With lead times for new equipment expected to lengthen and supply of used machinery in decline, miners need to take decisions on adding new equipment, EY said in a May report.

Bloomberg

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