Friday, 23 November 2012 09:17
Many mining companies now walk a fine line in relation to softening commodity prices and rising costs, says OZ Minerals managing director Terry Burgess.
Mr Burgess cited the increasing costs of plant, equipment and wages, and a less certain external environment as placing increased financial and operational pressures on the mining industry.
He also said here needed to be a different way to prevent the boom/bust cycle of mining from which no one benefited.
"Technological investment - particularly in IT and control systems - is one way of succeeding in this," Mr Burgess said, delivering the 38th annual Essington Lewis Memorial Lecture in Adelaide.
The lecture is one of the most important events on the resources industry calendar and is named after the Australian industrialist who put BHP on a solid commercial footing early in the 20th century.
"Over the past couple of years, the mining industry has been a bit like the wedding industry," Mr 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," he said.
"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."
He said a lot was being heard about productivity in Australia and this had been because costs had escalated with the pressure of the resources projects with goods, services and people in relative short supply.
Mr Burgess said the sector now needed to review that environment to determine what was the best sustainable option for a cyclical industry.
He said BHP Billiton's decision to delay the expansion of its Olympic Dam mine in South Australia 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.
He also said that the global copper industry was struggling to keep up with global demand, with an estimated 800,000 tonne shortfall likely this year.
This was eight times the annual production of OZ Minerals' Prominent Hill copper-gold mine in SA.
"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," Mr Burgess said.
"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."
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