The Australian mining industry is operating in a less certain external and more expensive environment which is placing increased financial and operational pressures on the sector, one of Australia’s most experienced resources industry chiefs, OZ Minerals Managing Director and Chief Executive Officer, Terry Burgess, believes. The growing popularity of Fly In, Fly Out (FIFO) rosters to many remote mining sites, very high standards of facilities at these and other sites, and increasing costs of plant, equipment and wages are making many mining companies “walk a fine line” in relation to softening commodity prices.The comments were made when delivering the 38th annual Essington Lewis Memorial Lecture – one of the most prestigious lectures on the South Australian resources industry calendar – in Adelaide this week.

“Over the past couple of years, the mining industry has been a bit like the wedding industry,” Burgess said. “If you were to organise a nice dinner for a group of family and friends, you may get it for a reasonable price. Mention it’s a wedding and you should expect to pay much more! As an industry, we now want to pay for the nice dinner – not the wedding or mining premium.

“Having said this, we do not do it without being realistic. Our industry operates to an increasingly high standard, and in some cases this does mean that things cannot always be done at the lowest cost.

“We are hearing a lot about productivity in Australia today and this has been because costs have escalated with the pressure of the resources projects with goods, services and people in relative short supply.

“There is a strong view from many parts that this has gone too far. Federal Resources Minister Martin Ferguson has said that miners have become ‘fat and lazy’ and CEOs of major companies such as BHP Billiton and Rio Tinto are calling to their contractors for costs to be reduced.”

Burgess said the resources industry had reacted to the situation over the past few years by trying to obtain the needed goods and services, and to retain people almost at any cost to meet the demands of their enterprises.

He said the sector now needed to review this environment to determine what the best sustainable option is for this cyclical industry.

“Overall, there needs to be a different way of thinking about the business to prevent the boom/bust cycle from which no one benefits,” Burgess said. “Technological investment – particularly in IT and control systems – is one way of succeeding in this.

“It is unlikely there will be major changes to the mechanics of mining and processing, but the use of cleverer technology and automation of equipment is an attractive option for a country such as Australia.”

In a wide ranging lecture, titled Modern Mining – New Directions, Burgess also spoke about:

• How China’s insatiable appetite for a better quality of living standard – or urban regeneration – is the “new” global driver of copper demand
• Only by Government, industry and local communities working together over the long term will South Australia reap long term sustainable benefits from the mining industry
• BHP-Billiton’s decision to delay the expansion of its Olympic Dam mine had brought some relief for much smaller operators like OZ Minerals in terms of availability and affordability of quality and skilled people, and specialised equipment
• The global copper industry is struggling to keep up with global demand with an estimated 800,000 t shortfall likely this year – eight times the annual production of OZ Minerals’ Prominent Hill copper-gold mine in South Australia.

“We have just seen a period of pretty phenomenal demand for commodities over almost ten years, particularly for iron ore and coking coal – the ingredients of the Chinese steel mills and the raw materials for infrastructure of this rapidly growing economy – but also for copper,” Burgess said.

“While urbanisation is still occurring in China at a rapid rate, urban regeneration – where people are moving from the older style urban dwellings in the ‘old city’ areas to more modern high-rise living spaces in the ‘new towns’ – is now a bigger driver of copper demand.

“This demand will continue for some time to come, and that is good news not only for Australia, but also South Australia, which is very fortunate to have the Gawler Craton – considered to be one of the most highly prospective regions of the world for copper – in its own backyard.”