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Oz Mining Investment At Record Levels By FY13

By Chris Shaw

The global economic downturn quickly flowed through to weaker activity levels in the Australian mining sector, but industry analyst and economic forecasting group BIS Shrapnel suggests in its "Mining in Australia, 2009 to 2024" report mining investment will return to record levels by as soon as FY13.

On BIS Shrapnel's numbers, annual gross mining investment in Australia will experience a downturn through both FY10 and FY11 but should recover to in excess of $50 billion by FY12, as measured in constant FY07 prices, and to more than $60 billion by FY14. Driving these increases will be multi-billion dollar projects, predominately in the oil and gas, iron ore, coal and copper sectors.

Growth in mining production should recover even sooner, as BIS expects a strong pick-up across most commodities in FY10, to be followed by further acceleration in subsequent years on the back of stronger global demand and gains from previous investment in new capacity.  Its numbers suggest the real value of mining production will increase by 30% between now and FY14, well up from the 2% increase recorded in FY09.

BIS Shrapnel Infrastructure and Mining Unit senior manager Adrian Hart is forecasting a relatively mild decline in mining investment over the next 12 to 18 months as the global economy recovers from the recession, but long-term he continues to see a strong outlook for key commodities.

Looking ahead the group suggests as production and investment growth increase the previous problems of skill shortages, capacity constraints in rail and port transport chains, equipment shortages and not enough exploration and maintenance work are likely to re-emerge as issues, leading Hart to suggest action needs to be taken now to allow for maximum benefits to flow through in later years, otherwise there is a risk projects will be delayed and costs will rise.

Over the next five years, BIS suggests the energy and steel driven commodities such as oil, gas, coal and iron ore have the best prospects, whereas recovery in investment for the base metals is not expected until after FY13 in the group's view.