A CENTURY OF MINING IN AUSTRALIA
Prepared by the Coal and Mineral Industries Division of the Department of Industry, Science and Resources, drawing on a paper written by staff of the Australian Geological Survey Organisation which appears in Australian Mining Industry, 1998-99 (ABS cat. no. 8414.0).
At the time of Federation, the mining industry was well established in Australia; many of the deposits being mined had been discovered 40 to 50 years earlier. Gold was the main mineral commodity, accounting for three-quarters of the total value of metalliferous mine production, with copper, lead and silver accounting for most of the remainder.
Although the mining industry had prospered in the early years of Federation, it was severely affected by the collapse of metal prices after the end of World War I. Many mines closed, and the value of mineral exports fell from $15.3m (in today's prices) in 1919-20 to $7.6m in 1921-22. The Mount Isa silver-lead-zinc deposit was discovered in 1923, and mining and smelting commenced in 1931. The existence of copper at Mount Isa was known from this time, but the copper lodes were not defined and mined until World War II.
Petroleum (which includes crude oil and natural gas) had been sought for many decades, but it was a latecomer to the mineral production scene in Australia. In 1900, at Roma in Queensland, natural gas was encountered in an artesian water bore which was being deepened. Gas continued to flow freely from the well, and in 1906 it was reticulated for town lighting (however, the flow failed just ten days later). This discovery marks the real beginning of petroleum exploration in Australia. Many wells were drilled subsequently in the Roma region. Some encountered quantities of oil and gas. In 1924 the first discovery of crude oil was made at Lake Bunga No 1 well near Lakes Entrance, Victoria.
The Depression in the early 1930s saw coal production fall by a third from a mid-1920 high of 14 million tonnes. Exports of coal, which had exceeded one million tonnes a year until the mid 1920s, had fallen to about 50,000 tonnes by the late 1940s due to increasing competition from petroleum products, which began to replace coal in industry and railways. This trend was exacerbated by prolonged industrial unrest.
In the late 1930s the mining industry, although well established, played only a minor role in the Australian economy. The need for new ore reserves of many minerals was the major concern of the industry in the late 1930s and early 1940s. Indeed, the paucity of new discoveries, after the flood of the previous century, had led some to the belief that there were few new resources to be found, and that the industry would gradually run down. In 1938 the Commonwealth Government placed an embargo on the export of iron ore, when reserves of high grade ore were believed to be no more than 260 megatonnes.
World War II brought the need for metals for the war effort; this gave rise to the realisation that Australia needed to have a greatly increased knowledge of the geology of the continent. The Bureau of Mineral Resources was subsequently formed by the Commonwealth Government in 1946. The resulting systematic geological and geophysical surveys across the continent and the increasing focus of State and Northern Territory Geological Surveys on mineral resources were important reasons for the surge of mineral discoveries from the late 1940s.
Mineral explorers were able to search more efficiently by using geological maps and theories on the origin of mineral deposits to target specific areas for exploration. The better understanding showed also that Australia had a high potential for the discovery of many styles of mineral deposits.
This realisation, together with Australia's political stability, led in the early 1960s to an influx of major overseas mining companies bringing with them new expertise and ideas, in addition to increasing exploration expenditure. The discovery of new ore bodies was also greatly aided by the development of geochemical and geophysical exploration methods suited to Australian conditions. Many techniques developed in the northern hemisphere were not successful in the arid, deeply weathered terrain characteristic of most of Australia.
The economics of working some previously uneconomic deposits changed remarkably because of technological advances which lowered the cost of mining and transporting huge quantities of material, but these advances would not have been decisive without the general expansion of the world economy in the 1950s and 1960s, and in particular the emergence of Japan as a major buyer of coal, iron ore and bauxite.
In the 1950s the mainstays of the industry were lead, zinc, copper, gold and coal, of which only the first four were exported in any quantity. Uranium was discovered in 1949 and mining commenced in 1954 at Rum Jungle in the Northern Territory. In the mid-1960s, the Australian mining industry began to expand, with growth in both production and exports combined with a change in relative importance of the various commodities - gold and base metals declined, while coal, iron ore and 'other minerals' increased in relative terms. By the late 1960s Australia was a world force in black coal, bauxite, iron ore, nickel, manganese, titanium and zirconium.
A major expansion of Australia's aluminium industry followed the decision to mine bauxite in the Darling Range, Western Australia, in the early 1960s. The perception that high grade iron ore resources were limited in Australia was turned around with the discovery of vast resources in the Pilbara from the mid-1960s. A five year nickel exploration and discovery boom in Western Australia in the late 1960s set Australia on the path to becoming a major nickel producer for domestic and overseas markets.
In the early 1970s indications from exploration for oil were that onshore oilfields probably would be small and unlikely to be economic. However, the oil shocks of 1973 and 1979, when oil prices increased severalfold, completely changed the economics of the industry. Expenditure on exploration increased rapidly, from $49m in 1976 to $948m in 1982. Some known fields were developed, such as Palm Valley and some Bass Strait fields, and many new fields were discovered, especially in south-west Queensland and the adjoining part of South Australia.
The exploration success in the Gippsland shelf also turned attention to Australia's extensive continental shelf, and the first of the huge gas fields of the North West Shelf were discovered in 1971. The emergence of large markets for coking coal, particularly in Japan, together with the realisation of the economic importance of near-surface coal seams in the Bowen Basin in Queensland, meant that coal exports increased rapidly from the mid 1950s and received added impetus with the oil shocks of the 1970s.
In the late 1970s the rate of growth of the mining industry in Australia, which had been maintained for more than 15 years, began to slow. New mines had been developed around the world to meet a forecast demand for minerals, which turned out to be overly optimistic. The Australian industry's costs had increased but mineral prices generally had not. The industry was largely dependent on exports and had to compete for sales with an increasing number of mines in other countries; some of these mines were less affected by cost increases, or were assisted in various ways by the governments of those countries.
Many new coal mines were established in Australia after the second oil shock in 1979, but world demand stagnated, leaving the industry in Australia (and the world) with substantial surplus capacity. Metal prices failed to increase in line with the world economic upturn in the early 1980s, and few new metal mines were opened. Australian production increased largely because of capacity increases at existing mines to achieve economies of scale.
By the mid-1980s one of the few bright spots in the Australian mining industry was gold. Because its price had been fixed, gold was largely ignored in the expansion of the industry after World War II. Interest revived to some extent when the price was freed in 1968, and strengthened with increasing confidence that the price increases of the late 1970s were likely to be sustained.
Other factors heightened the interest in gold. There was the development in the early 1980s of the efficient carbon-in-pulp method for recovering very fine-grained and low grade gold. This, and other developments with mining equipment, meant that it was now economically feasible to mine, by open cut or by underground methods, entire zones of gold bearing veins (whereas in the past only the main veins themselves would have been mined). So another gold boom emerged in the early 1980s. Australian gold production multiplied from 18 tonnes in 1981 to 57 tonnes in 1985.
The 1980s also saw increased vertical integration in the mining industry, most notably the processing of Australian bauxite to alumina and aluminium. This was a springboard for growth of some regional centres, such as Gladstone in Queensland.
The collapse of world crude oil prices in the first quarter of 1986 changed the fortunes of the petroleum exploration industry, and exploration expenditure bottomed out in 1987. The collapse, however, did not significantly affect the level of production or the expenditure on production and development during this period. Petroleum exploration in the 1980s resulted in the discovery of large resources of natural gas.
The Timor Sea became a focal point of petroleum exploration from 1983 when the Jabiru oil field was discovered. In 1986 this field became Australia's first production project based on floating production, storage and off-loading technology. The North West Shelf, in addition to supplying Western Australia, began a liquefied natural gas export project in 1989. In 1985, 96% of Australia's crude oil requirement was met by domestic production. Since then, however, oil self sufficiency has been declining slowly as demand has increased.
The 1990s were another period of change for the mining industry - a period of consolidation with considerable focus on further improving efficiency and safety of operations and movement towards 'globalisation'.
The economic crisis in Asia in the late 1990s reduced demand for many mineral commodities and fuelled further declines in metal prices. Again, Australian companies increased production of metalliferous commodities. With abundant production from other countries, this exacerbated over-supply and maintained downward pressure on metal prices. Despite far-reaching changes in world mineral production and consumption patterns and the financial crisis in Asia, the mineral industry was able to retain its role as a major source of export income for the Australian economy.
For gold producers, significant central bank selling in the late 1990s (notably in Australia, England, Russia, Malaysia, Lebanon, the Netherlands, Jordan and Canada) was another burden that led to price falls and diminished the role of gold as a national reserve asset. This contributed to the closure of some high cost operations.
At the end of the century Australia had become a major world producer and exporter of coal, iron ore, bauxite, alumina, diamonds, gold, nickel, copper, lead, zinc, silver, mineral sands, manganese ore, uranium and tantalum. Minerals and energy were the largest commodity export by value in 1998-99 at $39.2b, exceeding agriculture ($22.4b). Mining-related intellectual property was worth $1.2b in 1998-99 and was Australia's fifth biggest mineral export, behind coal, gold, aluminium and iron ore. This intellectual property includes geophysical and mining instrumentation, software and processing chemistry, mine site rehabilitation, engineering, and other world-class Australian technologies. The minerals industry contributed 36% of Australian exports of goods and services in 1998-99.
Australia had the world's largest economic demonstrated resources of lead, mineral sands (alluvial ilmenite, rutile and zircon), tantalum, uranium, silver and zinc. It also ranked in the top six countries for economic resources of black and brown coal, bauxite, copper, cobalt, diamonds, gold, iron ore, manganese ore and nickel. There were more than 400 medium- to large-sized mines in Australia, including mines in world-class deposits of most major, and several minor, mineral commodities.
The main milestones in the development of the mining industry over the last century are summarised in table 17.1 below.
17.1 DEVELOPMENT OF THE AUSTRALIAN MINING INDUSTRY, Key events from 1900 to 2000
|1900||Natural gas encountered in an artesian water bore at Roma (Qld) marked the beginning of petroleum-focused exploration. |
|1923||Discovery of the Mount Isa lead-zinc-silver deposit (Qld) followed by mining and smelting in 1931.|
|1924||Discovery of crude oil at Lake Bunga No. 1 well near Lakes Entrance (Vic).|
|1953||First substantial flow of oil at Rough Range No. 1 well in north-west of Western Australia, but commercial field did not eventuate.|
|1955||Production of aluminium from the smelter in Bell Bay (Tas) marked the start of Australia's aluminium industry.|
|1957||Commonwealth's Petroleum Search Subsidy Act, active from 1957 to 1974, successfully encouraged on- and offshore exploration, which led to discovery of about half of today's crude oil reserves.|
|1961||First commercial oil field discovered at Moonie (Qld).|
|1964-67||Series of important oil and gas discoveries: oil at Barrow Island (WA); gas in north-east South Australia and adjoining part of south-west Queensland; and the Barracouta gas field and Kingfish and Halibut oil fields off the Gippsland coast (Vic).|
|1960s||Discovery and initial development of vast iron ore resources in the Pilbara region (WA).|
|1966||Discovery of high-grade nickel sulphide at Kambalda (WA) triggered five years of intensive exploration and set Australia on the path to becoming the world's third largest nickel producer.|
|1971||Discovery of the first huge gas fields of the North West Shelf.|
|1975||Discovery of the Olympic Dam copper-gold-uranium deposit (SA), one of the world's largest deposits of uranium.|
|1983||Discovery of the Jabiru oil field in the Timor Sea, followed by implementation of the first floating production, storage and off-loading technology from this field in 1986. |
|1980s||Adoption of fly-in/fly-out arrangements to service many remote mining operations, particularly in the metalliferous sector.|
|1989||First LNG exports from the North West Shelf.|
|1989||Australian and Indonesian Governments signed the Timor Gap Treaty that allowed petroleum exploration in the newly-created zone of cooperation in the Timor Sea.|
|1990s||World-class deposits discovered, including Century (zinc), Cadia-Ridgeway (copper-gold), Murrin Murrin (lateritic nickel) and Kunwarara (magnesite).|
|1992||The High Court held that the common law of Australia recognises a form of native land title.|
|1994||Substantive provisions of the Native Title Act 1993 commenced operation, followed by a comprehensive package of amendments in 1998.|
|1996||Western Australia surpassed Victoria as the nation's leader in petroleum production.|
|1996||Launch of the Australian minerals industry's voluntary Code for Environmental Management.|
|1998||Release of the Federal Government's Minerals & Petroleum Resources Policy Statement.|
|1999||Development of the Laminaria-Corallina oilfield in the Timor Sea completed; at full production this is expected to contribute around a quarter of Australia's total crude oil and condensate.|
|1999||Domestic energy supplied by natural gas surpassed that by crude oil and condensate.|
|2000||Completion of the ten-year National Geoscience Mapping Accord provided a new generation of geoscientific maps and datasets of strategically important areas. |
Source: Australian Geological Survey Organisation.
MINING IN THE KNOWLEDGE-BASED ECONOMY
The minerals industry in Australia has always been a leader in applying innovation and knowledge. Australia's minerals industry at the beginning of the 21st century is world class, not least because it is very much a part of the knowledge-based economy, and is very adept at using, gathering, interpreting, transforming and transmitting data and information using state-of-the-art technologies.
For example, Australia is a world leader in earth science software used to process, visualise and interpret remotely sensed earth science data from satellites and aircraft, and link it with ground-based information. The ability of the Australian minerals industries to capture the benefits of innovation and accumulated knowledge has made and continues to make them internationally competitive.
Over 60% of the world's mines use software created by Australian companies, and AUSTMINE figures show exports of $1.2b of mining-related intellectual property in 1998-99. This is well ahead of much publicised industries such as the wine industry, which has just pushed through the $900m level.
Innovative value adding in the Australian minerals industry extends from exploration and mining, through metal production and fabrication, to elaborately transformed manufactures. Although value adding is often equated with downstream processing (smelting and refining) of minerals, exploration and mining are in themselves value adding activities.
The mining industry has a very high level of business PCs and Internet use. This is placing the minerals industry in a good position to take up E-commerce, as evidenced by the initiative by the Australian company WMC to market nickel and cobalt on the Internet.
In August 1999 WMC moved its cobalt and nickel marketing on-line in what is a world first for trading in these commodities. The $100,000 Internet initiative paid for itself in the first month. The web site is changing the way cobalt and nickel are being traded internationally. The move has benefited WMC, which notes that it has doubled its international customer base and improved its premiums, and brought transparency particularly to the cobalt market. WMC also notes that Internet-sourced sales have cut transaction times down to about one minute because availability, pricing and shipping details that were formerly negotiated over the phone are now posted on-line.
Of WMC's customers, North American companies were particularly receptive to the on-line metal trading model, and it is believed that some North American companies will not trade any other way in the future.
Apart from the mineral industries' importance to Australia's balance of trade, they are also particularly important in providing jobs and infrastructure development in regional Australia. Since 1967 these industries have built at least 25 new towns, 12 new ports, 20 airfields and 1,900 kilometres of rail line within Australia. Mining and directly associated manufacturing in metal and non-metallic mineral products, and coal and chemical products, employ over 400,000 Australians.
Mining operations are not typically labour intensive once in production, but during construction they provide employment for a great many skilled workers. Downstream processing projects can provide hundreds of jobs to local communities, not only in areas associated directly with construction and operation, but also indirectly through local service industries such as catering, cleaning, maintenance and entertainment. These projects often result in improved local infrastructure including roads, schools and community leisure and health facilities.
In the 1980s the mining industry became increasingly influenced by public concern for the quality of the environment. With the rising awareness that preservation of natural features such as scenery, and plant and animal habitats, had a value to society, governments increased the controls on discharge of potentially polluting emissions such as water containing sediments or chemicals, and noxious gases.
The industry was increasingly being required to justify its activities in competition with other potential uses of the land. Government environmental impact assessment processes took account of the likely effect of proposed projects on the surroundings before deciding whether they should go ahead. Many mined-out areas were now required to be rehabilitated by reshaping and revegetating the surface so that the site could be used for other purposes.
The effect of land ownership by Indigenous people extended across Australia in the 1990s through a legislative process that commenced in the High Court in 1992. In a historic decision (Mabo (No. 2)), the Court decided that the common law of Australia recognises a form of native land title which exists in accordance with the laws and customs of Indigenous people where:
- those people have maintained their traditional connection with the land; and
- their title has not been extinguished by a law or other action of government (such as a grant of freehold title).
The Native Title Act (NTA) commenced on 1 January 1994, and in 1998 the Federal Parliament passed a comprehensive package of amendments which commenced on 30 September 1998. Under the NTA (or approved State/Territory legislation), applicants for onshore mining or petroleum titles are required to undertake formal negotiations or consultations with native title holders or registered native title claimants who have registered a claim over the area prior to the grant of the titles.
From Federation to the mid 1960s Australia's mineral exports concentrated on Europe. However, from 1965 the destination of mineral exports changed, reflecting our location within the Asian region. In 1965, 41% of Australia's mineral exports went to Europe (and 24% of total exports were to the United Kingdom); 41% went to Asia (32% of the total going to Japan); and 16% went to America.
By 1998-99 these figures had changed dramatically: 14% to Europe (6% to the United Kingdom); 64% to Asia (26% to Japan, 12% to South Korea, and 6% to Chinese Taipei); and 4% to America.
Since Federation, the minerals industry has been important to Australia, both for development of regional Australia and for the income from its export earnings. The mining industry has created wealth for the nation and its people through the discovery and mining of mineral deposits and through processing the ore.
Australia mines, or has unworked deposits of, almost all mineral commodities. Australia is one of the world's leading miners of coal, bauxite, diamonds, gold, iron ore, lead, manganese, nickel, titanium (rutile and ilmenite), uranium, zinc and zircon.
Some commodities, such as petroleum, nickel, bauxite, diamonds and uranium, have had a relatively short production history in Australia. Others, such as gold, coal, base metals and iron ore, go back to the early days of the industry.
At the start of the 21st century, Australia's mining industry is global in its outlook, innovative and highly successful. It has also become recognised for its commitment and skills to sustain and improve the practice of mining in an environmentally responsible manner.