The role of contract mining in the resources industry - Leighton ...
The role of contract mining in the resources industry - Leighton ...
The role of contract mining in the resources industry - Leighton ...
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<strong>The</strong> <strong>role</strong> <strong>of</strong> <strong>contract</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong> <strong>in</strong> <strong>the</strong><br />
<strong>resources</strong> <strong>in</strong>dustry<br />
Wal K<strong>in</strong>g CEO / Melbourne M<strong>in</strong><strong>in</strong>g Club / 6 August 2009
<strong>The</strong> M<strong>in</strong>erals Demand Cycle<br />
2 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Australia’s Economic Growth<br />
GDP AT CONSTANT F2008 PRICES 1788‐2009<br />
GDP $bn<br />
1,800<br />
Hunt<strong>in</strong>g Age Agrarian Age Industrial Age Infotronics Age<br />
1,600<br />
F<br />
1,400<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
An Industrial Age is when<br />
Manufactur<strong>in</strong>g, Construction<br />
and Utilities (electricity, gas<br />
& water) dom<strong>in</strong>ate <strong>the</strong> economy,<br />
that is over a third <strong>of</strong> GDP<br />
200<br />
0<br />
1780 1794 1808 1822 1836 1850 1864 1878 1892 1906 1920 1934 1948 1962 1976 1990 2004 2018<br />
Source: IBISWorld<br />
3 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Chang<strong>in</strong>g Importance <strong>of</strong> Australian Industry<br />
Share <strong>of</strong> GDP by Industry Division<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
0%<br />
1800<br />
1820<br />
1840<br />
1860<br />
1880<br />
1900<br />
1920<br />
1940<br />
1960<br />
1980<br />
2000<br />
2020<br />
2040<br />
2050<br />
Agriculture<br />
M<strong>in</strong><strong>in</strong>g<br />
Manufactur<strong>in</strong>g<br />
Utilities<br />
Construction<br />
Wholesale trade<br />
Retail trade<br />
Transport &storage<br />
Communication<br />
F<strong>in</strong>ance &<strong>in</strong>surance<br />
Prop &bus<strong>in</strong>ess<br />
Dwell<strong>in</strong>g O'Ship<br />
Govt adm<strong>in</strong><br />
Education<br />
Accom, cafes &rest<br />
Health &community<br />
Cult &recreation<br />
Personal &o<strong>the</strong>r<br />
Source:<br />
N.G Butl<strong>in</strong>, ABS & IBISWorld<br />
4 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
<strong>The</strong> World’s Economic Regions In 2009<br />
‐ Share <strong>of</strong> World GDP (ppp basis)<br />
North<br />
America<br />
24.0%<br />
W. Europe<br />
24.5%<br />
ME<br />
3.5%<br />
Indian<br />
S‐C<br />
6.2%<br />
C&E<br />
Europe<br />
5.5%<br />
C&S<br />
America<br />
5.0%<br />
Africa<br />
4.0%<br />
Asia<br />
Pacific<br />
27.3%<br />
Source Note:<br />
5 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
World’s 30 Largest Economies 2009 (F)<br />
World’s 228 nations US$ 73.8 trillion<br />
PURCHASING POWER PARITY (PPP) TERMS<br />
7%<br />
15%<br />
15%<br />
3%<br />
3%<br />
3%<br />
3%<br />
3%<br />
4%<br />
20%<br />
5%<br />
6%<br />
13%<br />
USA<br />
Ch<strong>in</strong>a<br />
Japan<br />
India<br />
Germany<br />
Russia<br />
Brita<strong>in</strong><br />
France<br />
Brazil<br />
Italy<br />
11th‐20th Nations<br />
21‐30th Nations<br />
Rest <strong>of</strong> World<br />
11TH – 20TH NATIONS:<br />
Spa<strong>in</strong> 2.0%<br />
Mexico 2.0%<br />
Canada 1.9%<br />
Korea S 1.9%<br />
Indonesia 1.3%<br />
Turkey 1.3%<br />
Australia 1.2% 17th<br />
Iran 1.1%<br />
Taiwan 1.1%<br />
Ne<strong>the</strong>rlands 1.0%<br />
21ST – 30TH NATIONS:<br />
Poland 1.0%<br />
S. Arabia 0.9%<br />
Argent<strong>in</strong>a 0.8%<br />
Thailand 0.8%<br />
S. Africa 0.7%<br />
Egypt 0.7%<br />
Pakistan 0.6%<br />
Belgium 0.6%<br />
Malaysia 0.6%<br />
Sweden 0.5%<br />
Source: CIA/IBISWorld 10/11/08<br />
6 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
Rest <strong>of</strong> World (198 nations)<br />
15.3%<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Ch<strong>in</strong>ese Economic Growth<br />
ECONOMIC GROWTH: CHINA, REAL GROWTH 1950‐2010 (F)<br />
%<br />
25<br />
20<br />
8.2% average F<br />
15<br />
10<br />
5<br />
0<br />
‐51950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018<br />
‐10<br />
‐15<br />
‐20<br />
‐25<br />
‐30<br />
Source: SSBC/IBISWORLD<br />
7 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Ch<strong>in</strong>ese Steel consumption<br />
CHINA’S STEEL USE BY SECTOR CY2008<br />
5%<br />
7%<br />
Infrastructure/ Construction<br />
6%<br />
Mach<strong>in</strong>ery<br />
20%<br />
62%<br />
Metal Goods<br />
Autos and Ship‐Build<strong>in</strong>g<br />
O<strong>the</strong>r<br />
Over 60% <strong>of</strong> Ch<strong>in</strong>a’s steel use is<br />
for construction and<br />
<strong>in</strong>frastructure –<strong>the</strong> key targets<br />
<strong>of</strong> <strong>the</strong>ir stimulus package<br />
Source Note: CEIC, UBS, BHPB<br />
8 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Indian Economic Growth<br />
ECONOMIC GROWTH: INDIA, REAL GDP GROWTH 1950‐2010 (F)<br />
%<br />
10<br />
8<br />
F<br />
6<br />
4<br />
2<br />
0<br />
‐2<br />
1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018<br />
‐4<br />
‐6<br />
‐8<br />
Source: SSBC/IBISWORLD<br />
9 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Impact <strong>of</strong> GFC on world GDP<br />
WORLD REAL GDP GROWTH<br />
%<br />
10<br />
8<br />
6<br />
4<br />
2<br />
F<br />
World<br />
economy*<br />
Emerg<strong>in</strong>g and<br />
develop<strong>in</strong>g<br />
economies<br />
Advanced<br />
economies<br />
0<br />
‐2<br />
80 82 84 86 88 90 92 94 96 98 0 2 4 6 08e 10f<br />
Trend l<strong>in</strong>e.<br />
Actual<br />
*PPP weights<br />
Source: IMF World Economic Outlook Update, Jan. 2009. Year end December<br />
10 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Commodity Price Forecast<br />
SELECTED COMMODITY PRICES<br />
$US/Various<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
Forecast<br />
Gold<br />
($US/oz /10)<br />
<strong>The</strong>rmal Coal<br />
($US/t)<br />
Cok<strong>in</strong>g Coal<br />
(US$/t)<br />
Iron Ore<br />
0<br />
2 3 4 5 6 7 8 09e 10f 11f 12f<br />
SOURCE: ABARE, BIS SHRAPNEL, MACQUARIE RESEARCH APRIL 2009<br />
11 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Oil & Gas reserves<br />
MAJOR OIL AND GAS RESOURCES AND ADVANCED PROJECTS<br />
Re<strong>in</strong>deer gas field,<br />
Devil Creek gas process<strong>in</strong>g plant<br />
NWS North Rank<strong>in</strong> B LNG<br />
NWS CWLH oil<br />
Pluto gas<br />
Van Gogh oil<br />
Pyrenees oil<br />
Dampier‐Bunbury<br />
stage 5 gas pipel<strong>in</strong>e<br />
Gas<br />
bas<strong>in</strong><br />
Source: ABARE Apr 2009<br />
Perth<br />
0.9%<br />
0.9%<br />
Bonaparte<br />
Montara/Skua oil<br />
Bas<strong>in</strong><br />
Blacktip gas<br />
Browse Bas<strong>in</strong><br />
Carnarvon Bas<strong>in</strong><br />
48.8%<br />
53.7%<br />
Proposed gas<br />
pipel<strong>in</strong>e<br />
Darw<strong>in</strong><br />
17.8% (not produc<strong>in</strong>g)<br />
19.3% (not produc<strong>in</strong>g)<br />
Amadeus Bas<strong>in</strong><br />
0.1%<br />
0.2%<br />
Oil bas<strong>in</strong><br />
18.7%<br />
18.4%<br />
Cooper / Eromanga<br />
Bas<strong>in</strong><br />
1.8%<br />
0.9%<br />
Adavale<br />
Bas<strong>in</strong><br />
0.2%<br />
0.2%<br />
Darl<strong>in</strong>g Downs <strong>in</strong>clud<strong>in</strong>g Spr<strong>in</strong>g Gully<br />
coal seam methane<br />
Sydney<br />
Adelaide 9.5% Canberra<br />
4.8% Eastern gas pipel<strong>in</strong>e<br />
Gippsland Bas<strong>in</strong> Kipper gas<br />
9.5%<br />
Melbourne<br />
Turrum gas<br />
1.3% Otway Bass<br />
Longtom gas<br />
Bas<strong>in</strong> Bas<strong>in</strong><br />
South Gippsland gas pipel<strong>in</strong>e<br />
1.9% Hobart<br />
(not produc<strong>in</strong>g)<br />
0.3%<br />
Capital Expenditure<br />
$101‐500m<br />
$501‐1000m<br />
>$1000m<br />
Queensland gas pipel<strong>in</strong>e<br />
Lacerta Gas Field coal seam methane<br />
Darl<strong>in</strong>g Downs ‐ Tall<strong>in</strong>ga coal seam methane<br />
Brisbane<br />
Bowen Surat Bas<strong>in</strong><br />
12 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Forecast World Population Growth 1950‐2050<br />
POPULATION GROWTH (MILLION PAX)<br />
10,000<br />
9,000<br />
8,000<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050<br />
World<br />
Asia<br />
Europe<br />
Africa<br />
North<br />
America<br />
Lat<strong>in</strong><br />
America<br />
Source: United Nations World Population Prospects<br />
13 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
<strong>The</strong> <strong>role</strong> <strong>of</strong> <strong>contract</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong><br />
14 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Contract <strong>m<strong>in</strong><strong>in</strong>g</strong> <strong>in</strong> Australia<br />
Coal<br />
Iron Ore<br />
Components by Commodity‐ Contract M<strong>in</strong><strong>in</strong>g,<br />
2008f, $ million<br />
Bauxite<br />
128<br />
Copper<br />
Gold<br />
M<strong>in</strong>eral sands<br />
1367<br />
7<br />
964<br />
206<br />
171<br />
Silver/Lead/Z<strong>in</strong>c<br />
716<br />
O<strong>the</strong>r (ma<strong>in</strong>ly<br />
Nickel)<br />
2539<br />
Source: ABS and BIS Shrapnel<br />
15 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Value <strong>of</strong> <strong>contract</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong><br />
Value <strong>of</strong> <strong>contract</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong> by commodity AUD $million, 2004-2008f, current prices<br />
Year ended June Coal Iron ore Total<br />
2002 1247 425 3234<br />
2003 1696 543 4076<br />
2004 1532 714 4070<br />
2005 1767 845 4272<br />
2006 2366 1022 5329<br />
2007f 2506 1137 5665<br />
2008f 2539 1367 6098<br />
Ave growth pa % 12.6% 21.4% 11.2%<br />
Share % 41.6% 22.4% 100%<br />
Source: ABS 8415.0 and BIS Shrapnel<br />
16 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Contractors can provide a full range <strong>of</strong> services<br />
Typical <strong>role</strong>s <strong>of</strong> <strong>contract</strong>or <strong>in</strong> <strong>the</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong> sector<br />
Contractor<br />
Activity<br />
Delivery<br />
System<br />
Investment by<br />
Contractor<br />
Skills<br />
Required by<br />
Contractor<br />
Owner Operator<br />
• Limited to<br />
<strong>in</strong>frastructure set‐up<br />
• Design & construct<br />
• Lump sum<br />
• Nil<br />
• Construction<br />
Traditional<br />
Contract M<strong>in</strong>er<br />
• Pre‐strip<br />
• M<strong>in</strong><strong>in</strong>g<br />
• Rehabilitation<br />
• Schedule <strong>of</strong> rates<br />
• Lump sum<br />
• Plant & equipment<br />
• Work<strong>in</strong>g capital<br />
Earthmov<strong>in</strong>g/M<strong>in</strong><strong>in</strong>g<br />
skills<br />
Full Services Contract<strong>in</strong>g<br />
• Infrastructure set‐up<br />
• M<strong>in</strong>e plann<strong>in</strong>g<br />
• Pre‐strip<br />
• M<strong>in</strong><strong>in</strong>g<br />
• Process<strong>in</strong>g & load out<br />
• Rehabilitation<br />
• Allianc<strong>in</strong>g<br />
• Schedule <strong>of</strong> rates per tonne delivered<br />
• Schedule <strong>of</strong> rates for some<br />
components<br />
• Plant & equipment<br />
• Work<strong>in</strong>g capital<br />
• Investment stake <strong>in</strong> m<strong>in</strong>e<br />
• Construction<br />
• M<strong>in</strong>e plann<strong>in</strong>g<br />
• Earthmov<strong>in</strong>g/M<strong>in</strong><strong>in</strong>g skills<br />
• O&M<br />
17<br />
Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Key reasons for us<strong>in</strong>g <strong>contract</strong>ors<br />
Reason Coal Gold Copper SLZ O<strong>the</strong>r<br />
metals<br />
Doesn’t tie up capital 3.5 3.5 3.2 2.8 2.9<br />
Cost management &<br />
accountability<br />
Management <strong>of</strong><br />
equipment<br />
3.7 3.3 2.4 2.8 3.1<br />
3.3 3.1 3.6 3.2 3.5<br />
Need for flexibility 4.4 4.2 3.2 4.0 4.0<br />
Uncerta<strong>in</strong>ty over size<br />
and life <strong>of</strong> m<strong>in</strong>e<br />
2.7 3.3 2.8 3.8 2.5<br />
Technical capability 3.1 3.3 3.4 3.4 3.2<br />
Labour shortages 3.4 4.1 2.6 3.8 3.6<br />
IR concerns 2.4 1.8 1.8 2.0 2.1<br />
Internal<br />
benchmark<strong>in</strong>g<br />
2.5 2.1 1.8 1.8 2.1<br />
Note: Rat<strong>in</strong>gs scale: 1=unimportant and 5= very important<br />
19 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
<strong>Leighton</strong> Group <strong>contract</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong><br />
20 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
<strong>Leighton</strong> Group is world’s largest <strong>contract</strong> m<strong>in</strong>er<br />
World <strong>contract</strong> m<strong>in</strong>ers<br />
(A$bn revenue pa, various recent years as available)<br />
Caterpillar Purchases 2004 - 2006<br />
<strong>Leighton</strong><br />
Group<br />
Downer EDI<br />
Australia<br />
Pama<br />
Indonesia<br />
Macmahon<br />
Australia<br />
Buma<br />
Indonesia<br />
Moolman<br />
Africa<br />
Kiewit USA<br />
Wash<strong>in</strong>gton<br />
USA<br />
0 1 2 3 4<br />
BHP Billiton<br />
US$920m<br />
<strong>Leighton</strong> Group*<br />
This graph <strong>in</strong>cludes RT, Anglo, Newmont,<br />
Peabody, CVRD, Downer EDI, Xstrata, Phelps<br />
Dodge, Freeport, Drummond and Arch Coal<br />
* Includ<strong>in</strong>g HWE<br />
21<br />
Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
<strong>Leighton</strong> Group M<strong>in</strong><strong>in</strong>g projects <strong>in</strong> Australia, NZ & Asia<br />
•UHG M<strong>in</strong>e, Mongolia (not shown)<br />
Phu Bia M<strong>in</strong>e, Laos<br />
(not shown)<br />
Rapu Rapu Polymetallic<br />
Masbate<br />
Wahana<br />
Toka T<strong>in</strong>dung<br />
MSJ<br />
Kaltim Prima<br />
Loa Raya<br />
GHP<br />
ABK Loa Janan<br />
Senak<strong>in</strong><br />
Sebuku<br />
Satui<br />
Iron Ore<br />
Coal<br />
Gold<br />
Nickel<br />
Thiess<br />
<strong>Leighton</strong> Contractors/HWE M<strong>in</strong><strong>in</strong>g<br />
<strong>Leighton</strong> International<br />
<strong>Leighton</strong> Asia<br />
(U) Underground<br />
Cockatoo Island<br />
Sonoma<br />
Coll<strong>in</strong>sville<br />
Yarrie Nim<strong>in</strong>garra<br />
Callie (U)<br />
Riverside<br />
Hail Creek<br />
Broadmeadow (U)<br />
Burton<br />
Lake Vermont<br />
Yandi<br />
Goonyella<br />
South Walker Creek<br />
Area C<br />
Oaky Creek/Lake L<strong>in</strong>dsay<br />
Moorvale<br />
Orebody 23/25<br />
Curragh North<br />
Dawson North<br />
Mt Keith<br />
Tarong<br />
Agnew<br />
Koolyanobb<strong>in</strong>g Beta Hunt (U)<br />
Poitrel/Peak Downs/ Saraji/Middlemount<br />
St Ives<br />
Challenger (U)<br />
Duralie<br />
Prom<strong>in</strong>ent Hill<br />
Wilp<strong>in</strong>jong<br />
Liddell/ Mt Owen Complex<br />
South Middleback<br />
Project<br />
Westside<br />
Magnet<br />
Favona (U)<br />
Rotowaro<br />
Yallourn/Loy Yang/<br />
Hazelwood<br />
22 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
UHG Coal M<strong>in</strong>e,<br />
Mongolia, <strong>Leighton</strong> Asia<br />
23 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Mt Owen Coal M<strong>in</strong>e,<br />
NSW, Thiess<br />
24 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
Fatality rates <strong>in</strong> Australian <strong>m<strong>in</strong><strong>in</strong>g</strong><br />
FREQUENCY OF FATALITIES PER 100 MILLION HOURS<br />
10<br />
9<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
98‐99 99‐00 00‐01 01‐02 02‐03 03‐04 04‐05 05‐06 06‐07 Average<br />
rate<br />
25 Melbourne M<strong>in</strong><strong>in</strong>g Club 6 August 2009<br />
<strong>Leighton</strong> Hold<strong>in</strong>gs Limited
<strong>The</strong> <strong>role</strong> <strong>of</strong> <strong>contract</strong> <strong>m<strong>in</strong><strong>in</strong>g</strong> <strong>in</strong> <strong>the</strong><br />
<strong>resources</strong> <strong>in</strong>dustry<br />
Wal K<strong>in</strong>g CEO / Melbourne M<strong>in</strong><strong>in</strong>g Club / 6 August 2009
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