WA resource sector maintains stability

THE BOURSE WHISPERER: As the country’s miners and share market keep a fretted eye looking over their respective shoulders a recent industry report has provided some optimism.

According to the Chamber of Minerals and Energy of Western Australia (CMEWA), investment in the WA resources sector is showing few signs of slowing down and will continue to be the key driver of growth in the State’s economy for 2012-13.

 

The body has released its December 2011 edition of the WA Resources and Economics Report, prepared in conjunction with KPMG.

Not only does the report conclude the resources sector is the major stabilising agent to the WA economy it is also contributing to keeping unemployment down.

CMEWA chief executive Reg Howard-Smith said seven projects – one energy, five mineral mining and one infrastructure – were completed in the six months to October 2011.

“A number of major projects are expected to begin production over the next two years, while demand for iron ore and natural gas remains very strong,” Howard-Smith said a CMEWA announcement.

“Labour demand in the Western Australia resources sector has contributed to the lowest unemployment in the country at 4.3 per cent and direct employment in the resources sector cracked the 100,000 mark for the first time in December.

“Growth in exports is forecast at a rapid pace of 8.56 per cent in 2011/12, with even stronger growth expected in 2012/13, in line with higher production of LNG over the medium term.”

Unsurprisingly iron ore provided one of the largest increases in production improving by 8.9 per cent, while titanium minerals emerged with a surge of 22.6 per cent.

 

Despite the expected increase in the production of iron ore, the products average export unit value fell 5.8 per cent during the quarter, which has cocked a few eyebrows in consternation as it marks the second consecutive quarter in which the export unit value has fallen.

The other commodity to be enjoying current financial woes is gold with the European debt crisis herding investors flock to gold which continues to be a market darling with the gold price increasing by 14.1 per cent during the quarter.

Howard-Smith was also bullish in regard to the State’s burgeoning uranium industry with exploration rates up 28 per cent.

“News of the Federal Labor Party agreement to overturn its ban on uranium exports to India and a slight relaxation by Western Australia Labor of its uranium policy may also continue to see a positive impact on exploration in 2012,” he said.

Other key findings in the December 2011 WA Resources and Economic Report included:

–    The WA resources sector continues to out-perform the All ASX and S&P/ASX 300 indexes;

–    Mineral exploration accounted for almost half of the total $970million exploration expenditure in WA, rising by 7 per cent to $482million;

–    Gross State Product is expected to grow to 4.3 per cent in 2011/12, climbing to 6 per cent in 2012/13 and 2013/14;

–    At the end of October 2011, there were 40 projects at an advanced stage of development in WA. Total capital expenditure on these projects was at a record $147.5billion – an increase of $38billion or nearly 35 per cent from April 2011; and

–    The report also identified key challenges for infrastructure development to support the resources sector.