Is the mining industry as important as it thinks it is? A new report doesn’t seem to think so.

A new survey, conducted by independent think tank The Australia Institute has found public perceptions regarding the size and significance of the mining industry to the Australian economy to be inaccurate.

The survey was conducted as part of a new research paper – Mining the truth: The rhetoric and reality of the commodities boom, which was launched by the Institute’s executive director Dr Richard Denniss at its annual conference in Sydney.

According to the survey, when they were asked to say what percentage of Australian workers were employed in the mining industry, the average response from members of the public was around 16 per cent, when according to the Australian Bureau of Statistics (ABS) the actual figure is 1.9 per cent.

The survey also found Australians believe mining accounts for more than one third (35%) of economic activity.

One again these figures were off the ABS mark, which show mining accounts for around 9.2 per cent of GDP – about the same contribution as manufacturing, and marginally less than the finance industry.

Denniss said expensive advertising campaigns produced by the mining industry had most probably contributed to the public observations.

 

“The mining industry likes to portray itself as a big employer, a big tax payer and a big money maker for Australian shareholders. Yet the reality just doesn’t match the rhetoric,” he said.

“The mining industry’s advertisements ignore the way that the mining boom is driving up the exchange rate, driving up mortgage interest rates and driving down employment in other sectors of the economy.

“It is a bit rich for former BHP Billiton chairman Don Argus to talk about declining productivity growth when an analysis of the figures actually reveals that productivity in the non-mining sectors is growing quite rapidly.

“The irony is that it is the rapid decline in productivity in the mining industry that is driving down the national figures.”

In the area of employment Denniss suggests the industry goes out of its way to, “ensure that employment in mining appears larger than official statistics suggest”.

To do this the industry refers to both direct jobs in the sector and to indirect jobs created upstream or downstream from the sector.

“The process of converting the amount of direct employment into a much larger number of direct and indirect jobs relies on the use of industry multipliers,” Denniss’ report states.

“ABS figures allow analysts to estimate the nature and extent of the interconnections between industries and, in turn, estimate the different multipliers for each industry.

“It is important to remember that the same ‘multiplier effect’ applies in virtually every sector; whether it is teachers, plumbers or miners spending their incomes, additional jobs will inevitably be created.”

Writing on The ABC Drum opinion web site Greens spokesperson for mining Senator Larissa Waters labelled the public’s perception of the industry to be, “a great public relations success”.

“Of course, mining likes to roll in all the indirect jobs it creates,” the senator wrote.

“If every sector calculated their share of the workforce in this way, the total number of Australian jobs would be inflated by three times the true number.”

On the Australian Mining – this is our story website, which is operated by the Minerals Council of Australia; the industry describes itself to be, “a key pillar of the Australian economy”.

It says the minerals resources industry is responsible for over six per cent of Australia’s economy and has invested more than $125 billion in Australia in the last 10 years.

“The mining industry’s contribution to the Australian economy is now $121 billion a year,” the industry site states.

“In terms of export income, it generates $138 billion per annum, which represents over half (54 per cent) of total goods and services.

“Across the nation mining employs 187,400 people directly, and a further 599,680 in support industries.

“In wages and salaries that amounts to $18 billion; an additional $21 billion is contributed through company tax and royalty payments.

“Not least, the industry spends $35.2 billion on new capital investment, $5.7 billion on exploration, and $4.2 billion on research and development.”

Dennis’ paper also claims the mining boom is blowing out the country’s account deficit saying the International Monetary Fund expects the current account deficit will reach 6.5 per cent of GDP in the medium term.

“It’s amazing to compare the rhetoric of the mining industry with the reality of the national accounts,” Denniss said.

“Not only is the mining boom reducing the competitiveness of other exporters but the enormous outflow of profits to the foreign owners of the mining companies is driving up the net income component of the current account.

“It might seem bizarre, but Australia is set to simultaneously experience a mining boom and a blow out in our current account deficit.

“The mining industry is in the middle of planning massive further expansions. But the faster the expansion of the mining industry, the lower the level of employment in other industries will be.”

THE BOURSE WHISPERER: Kiruna Iron AB, the wholly owned subsidiary of ASX-listed Scandinavian Resources, has entered into a cooperation agreement with Boliden Mineral AB.

The agreement covers the Lannavaara Permits located approximately 70 kilometres north-east of Kiruna, in the Norrbotten Region of northern Sweden.

Boliden is a leading European metals company focused mainly on zinc and copper with operations conducted across mining and smelters.

Kiruna Iron is the largest permit holder in the Kiruna district and controls the majority of the district’s historical iron deposits and is striving to become a producer of premium quality iron concentrate.

“It is a pleasure indeed to enter into this Agreement with Boliden, as they have a proud history in Sweden,” Kiruna Iron technical director Olof Forslund said in the company’s announcement to the Australian Securities Exchange.

“We hope this will be the start of a long term relationship whereby we both have exploration success at Lannavaara.

“We will soon commence detailed assessment of the historical work completed by the Geological Survey of Sweden prior to planning our own activities.”

The Lannavaara Permits contain the Kevus and Teltaja iron deposits that were discovered in the early 1920’s.

Work carried out by the Geological Survey of Sweden (SGU) in the early 1970’s resulted in both deposits being investigated by detailed geophysical surveys as well as seven diamond drill holes into each for a total of 1,500m.

The purpose of the agreement between Kiruna Iron and Boliden is to explore the Lannavaara Permits for the mutual benefit of both companies.

This is based on Boliden being focused on zinc, copper, gold, silver and lead while Kiruna is focused on iron.

The cooperation will enable the companies to minimise costs for exploration of the Lannavaara Permits and to share the results of exploration.

In consideration of the exploration right, Kiruna has undertaken to invest US$1.5 million in exploration expenditure on the Lannavaara Permits within five years.

If it meets this minimum commitment it will have earned a 100% interest in the iron (only) rights.

If the minimum commitment is not met, Kiruna will not have earned any interest at all.

After the minimum commitment has been met, Kiruna must then invest US$1 million in exploration expenditure every three years to maintain its interest.

If the continuing commitment is not met Kiruna will not earn any interest in the iron rights except in relation to exploitation concessions granted by the expiry of the last period or subsequently granted as a result of an application made within that time.

Kiruna will provide Boliden, free of charge, any and all exploration data it collects with respect to the Lannavaara Permits.

A further agreement will be entered into if either Boliden or Kiruna wish to proceed to mining.

THE DRILL SERGEANT: Venturex Resources has received encouraging results from exploration drilling currently underway at its Whim Creek copper mine project in Western Australia.

The drilling is being conducted approximately one kilometre to the west of the company’s existing Mons Cupri copper-zinc deposit, which has a JORC Resource of 4.94 million tonnes at 1.6 per cent copper equivalent.

So far Venturex has drilled eight RC/diamond holes to test induced polarisation (IP) anomalies associated with the target Mons Cupri horizon.
 
According to the company this drilling has revealed the dip of the Mons Cupri stratigraphy to be shallower than it expected it to be and has now provided an area measuring several square kilometres of near-surface exploration potential.

The thickness and intensity of the mineralisation intersected generally increases to the west, which the company considers suggests the presence of a second mineralising centre.

“The company is highly encouraged by the broad and shallow extent of the target horizon in the Mons Cupri West area – and also by the extent of copper-zinc mineralisation revealed by the drilling thus far,” Venturex Resources managing director Tim Sugden said in the company’s announcement to the Australian Securities Exchange.

“We may be seeing the distal parts of a new volcanic centre that may host undiscovered copper-zinc deposits.”

Mineralisation intersected in completed holes to date includes:
 
– 2.0 metres of visible (~5 vol%) chalcopyrite and sphalerite mineralisation in the hanging wall Rushall Slate from 39 metres;

– 23m, from 170.4m, of disseminated pyrite (~3-7 vol%) with minor chalcopyrite-sphalerite (<1 vol%) mineralisation associated with strong chlorite-sericite alteration within the Mons Cupri unit, which the company said is typical of the known Mons Cupri feeder system;

– 1.5m, from 175.5m of disseminated chalcopyrite, sphalerite and galena (~2-5 vol%) associated within chlorite-sericite alteration on the Rushall Slate – Mons Cupri unit contact;

– Strong quartz-chlorite-sericite alteration in the Mons Cupri unit, just below the Rushall Slate contact containing a narrow zone of 0.2m from 208.2m, of strong stockwork chalcopyrite mineralisation (~5 vol%); and
 
– A 26.7m zone of strong chlorite-sericite alteration from 285.3 metres, containing moderate disseminated pyrite (~3-6 vol%) followed by 4.4m, from 294.3m, of disseminated sphalerite and galena (~2-5 vol%) mineralisation. A second 2.3m thick zone of disseminated sphalerite mineralisation (~2-5 vol%) was intersected at 312m.

The RC and diamond drilling is part of an ongoing near-mine exploration program being undertaken by Venturex.

The planned drilling comprises 1,400m of which 911m have been completed.

The company anticipates a further two holes will be completed prior to the commencement of a down hole geophysical survey program scheduled to commence in mid-September.

THE DRILL SERGEANT: Chile-focused ASX-listed Hot Chili has completed its first resource estimate at its Productora copper-gold-molybdenum project.

The maiden resource estimate comes on the back of an intensive ten month drilling program and just 15 months after the company completed its listing on the ASX.

The Productora Resource estimate stands at 85.1 million tonnes grading 0.6 per cent copper, 0.1 grams per tonne gold and 146 grams per tonne molybdenum for contained metal of 483,000 tonnes of copper, 290,000 ounces of gold and 12,418 tonnes of molybdenum.

Approximately 37% of the resource estimate comprises indicated material and 63% inferred material.

The majority of the indicated resource lies within the first 200 metres from surface.

The mineral resource estimate is confined within the central lease area of the company’s Productora project.

Hot Chili controls 12.5 kilometres of strike along the main mineralised trend at Productora through its own 100% tenure, purchase-option agreements and a 65% earn-in agreement with Chile’s largest iron ore producer CMP over its landholdings at the project.

The central lease contains the operating Productora underground copper mine, which was not included in the current resource estimate.

Hot Chili is now preparing to exercise its 100% purchase option right with the owners of the central lease.

The company is committed to a cooperative relationship with the operators of the underground mine at Productora to ensure that mining is allowed to continue under a capped production arrangement during the company’s development phase.

“The resource milestone crystallises an important stage in our progress as we transition the company from explorer to project developer,” Hot Chili chairman Murray Black said in the company’s announcement to the Australian Securities Exchange.

“Our focus now will be to rapidly expand the resource along the entire 9.5 kilometre mineralised trend while also getting economic studies underway.

“The location, size, grade and shallow depth of the initial resource give us confidence that Productora is quickly emerging as one of Chile’s newest copper developments.”

Hot Chili has commenced a 55,000m reverse circulation (RC) and 8,000m diamond drilling program which aims to expand the initial resource adjacent to, along strike, and at depth.

Part of the diamond drilling program will aim to up-grade the categorisation of the central area resource from Inferred to Indicated.

THE BOURSE WHISPERER: Australian mid-tier gold producer Saracen Mineral Holdings has completed an update of its JORC-compliant Mineral Resources and Ore Reserves statements.

The company has increased its total Resources (Measured, Indicated and Inferred) by ten per cent to 3.6 million ounces of gold.

The main contributor to the increase came from a 740% increase in the Butcher Well deposit resources taking it from 25,000 ounces to 221,000 ounces.

The company’s Ore Reserves decreased by 6.8% from 885,000 ounces to 825,000 ounces.

Saracen said however, that by taking mining depletion into account since its last published statement in August, Ore Reserves have actually increased by around 45,000 ounces.

Next month Saracen is scheduled to commence underground trial mining at its high-grade Red October project.

Red October is one of a number of underground development and resource definition programs the company has slated for 2012.

With a $25 million exploration budget to spend Saracen will also continue working on the Butcher Well area, located ten kilometres west of Red October.

“Saracen is fortunate to have such a resource base which could underpin our operation at Carosue Dam at current production rates for at least a decade,” Saracen Mineral Holdings executive chairman Guido Staltari said in the company’s announcement to the Australian Securities Exchange.

“The great opportunity in the next 12 months is to bring to book the underground potential at various deposits like Red October, Deep South, Whirling Dervish and Porphyry.

They currently represent a small part of our reserve inventory, but can make material differences by the nature of their higher grade, and lift our production profile towards 250,000 ounces per annum in coming years.”

Saracen’s total underground Mineral Resources currently stands at 4.3 million tonnes at 4.3 grams per tonne for 598,000 ounces of gold, with only 70,000 ounces (8%) from the Porphyry underground currently included in the Ore Reserves statement.

The deepest drilling undertaken so far across all of the resources is less than 400 metres below surface, with the $25 million exploration budget targeting extensions of high grade mineralisation up to 800m below surface, as well as a range of other greenfields and brownfields targets.

The company’s priorities for the $25m exploration budget 2011-2012 are:

– Extending existing resources at depth, targeting high grade mineralised zones;

– Conversion of existing resources into reserves (both open pit and underground);

– Underground diamond drilling at Red October targeting high grade extensions along strike and down dip of existing resource; and

– Greenfields exploration, primarily in the Lake Carey and Porphyry regional environs.

Saracen also intends using bulk samples from Red October for metallurgical response as well as an intensive drilling campaign to provide the basis for a proposed inaugural reserve estimate in 2012.