Mining Industry in Australia: Recent Changes and Impacts

This article discusses the recent changes in the mining industry in Australia and their impacts. It covers the major minerals mined, market participants, market structure, and the debate on approving an open coal mine at Bylong Valley.

Running head: ECONOMICS
Economics
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1ECONOMICS
Table of Contents
Introduction.................................................................................................................................2
Market description.......................................................................................................................2
Mining in Australia...................................................................................................................2
Market participants..................................................................................................................3
Structure of the market............................................................................................................4
Changes in market condition and their impacts..........................................................................4
Conclusion..................................................................................................................................6
List of References.......................................................................................................................7

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Introduction
In the Australia’s economy, among several other industries, mining industry is found to
play an important role. The industry attracts special attention due to its contribution in Gross
Domestic Product, generation of employment and earnings from export. Contribution of
Mining in the GDP of Australia is found to be nearly 7 percent. Mining accounts, a
considerably large share in total export of Australia. Large reserve of mineral resources has
helped to nation to develop a wide spread mining industry (O'faircheallaigh 2017). Most of the
minerals in Australia are exported across the world with least processing requirement in
onshore. Australia is among the top five leading producers of Gold, Iron Ore, Zinc, Nickel and
Lead. The mining industry undergone a long period of expansion known as resource boom
started in 2003. The glorious period mining remained till 2013. During this time Australia
enjoyed a favorable condition in terms of trade. Along with this exchange rate was in favor of
mining and global commodities price increased significantly. Australian significantly benefitted
during this time from rapid increase in exported minerals especially that of coal and iron ore
(Chapman, Plummer and Tonts 2015). The glorious period of mining however came to an end
after 2013 due to changes in global economic condition. The paper discusses recently
changing condition of mining industry in Australia in reference to published news article.
Market description
Mining in Australia
There are several mineral resources that are mined in Australia. Some of the important
minerals mined in Australia are discussed below
Gold Mining
In the history of Australian mining, Gold mining holds an important position. Back in the
period of early 1990, Australia experienced the first economic and mining boom by arrival of
Great Southern Land in form of gold rush. The boom in coal mining during the colonial era
attracted many people all around the world with the dream of becoming rich using Australia’s
soil. In modern Australian economy, gold mining has a crucial role. In the global market,
Australia is known as the second biggest producers of Gold taking place only behind China.
The industry produced nearly 287.3 metric tonnes of gold as recorded in 2016. Gold mining in
Australia account nearly 9 percent of world’s output (ig.com. 2019). In the Australian
economy, Gold ranked third in the list of exported commodity after coal and iron ore. In the
industry, one major player is Newcrest Mining. The company specializes in mining, exploring
and sales of gold and gold-copper product.
Coal mining
Coal is one major exported minerals of Australia. Through export coal provides one
major source of income to the economy. Australia has a good trade relation with emerging
Asian economies. With a large stock of coal Australia has played an important role in
economic rise of these nations. In the global economy, Australia is regarded as the fourth
largest producers of coal after United State, China and India. Australia is also the largest
exporter of coal in the world (Minerals.org.au. 2019). In the past few years, demand for coal
has decline significantly due to the shift towards a sustainable resources and cleaner energy
production. Large scale players in the industry like BHP Billiton and Rio Tinto are still able to
draw large amount of profit from coal mining.

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Iron ore
Another vital mineral resource in Australia is iron ore. Australia is the second largest
producer of iron ore after China (Ipaustralia.gov.au. 2019). Australia produced nearly 824
million metric tonnes of iron ore accounting nearly 25 percent of total output of world.
Uranium mining
In Australia Uranium mining started since the twentieth century. As recorded in 2016,
Australia possesses 29 percent of world’s uranium resources. Australia produced 11 percent
of total uranium produced in the world.
Other minerals
There are various other minerals as well giving corporate sector of Australia to
establish an intensive, diversifying and profitable mining industry. The industry is also
responsible for extraction, production and sales of several high-demand commodities
(Sincovich et al. 2018). These are metals such as copper, aluminum, nickel, natural gas along
with precious metals such as diamonds and silvers.
Market participants
There are nearly 26 public listed metals and mining companies on ASX 200 alone
building high weighted materials sector. The mineral sector of Australia constitutes almost 18
percent of ASX200. The mining industry along plays a crucial role in guiding movement of
share prices in Australia. Some large corporate players of Australian mining include Rio Tinto,
BHP Billiton, South 32 and others. The success and failure of the big industry players are
monitored by press and investors help to evaluate the state of personal and national wealth.
Rio Tinto
Rio Tinto is one of the two biggest mining companies of Australia. 44 percent sales of
the company are derived from iron ore extraction and export. In addition to iron ore, the
company also focuses on mining coal, copper, aluminum and gold (Svobodova, Yellishetty
and Vojar 2019). The company benefitted largely from the resource boom in during 2000s
and is currently taking strategy to expand business into east Asia.
BHP Billiton
This is the largest company in Australia after the Commonwealth Bank of Australia.
When come to mining industry, BHP Billiton is the largest miner in ASX list. The company
specializes production and exploration of gold, iron ore, copper and coal. The company also
operates in areas such as exploration of petroleum, production and refineries.
South 32
As per the ASX list, South 32 is the third largest miner after BHP Billiton and Rio Tinto.
The company mainly focuses on producing base metals such as aluminum, alumina, silver,
lead, nickel and zinc (Eklund 2015).

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Structure of the market
In the Australian mining dominance of few large companies makes the industry highly
concentrated. The concentration ratio is found to be high for the industry (The
Conversation.com 2015). There are though many ASX listed companies operate in the
industry, a significant portion of production has been dominated by few players. Some of the
dominating mining companies in Australia include Rio Tinto, BHP Billiton, South 32, Shell,
Xtrata, Chevron and Woodside Petroleum. High market concentration indicates that the
industry follows an oligopolistic market (Cowell 2018).
Changes in market condition and their impacts
At the beginning of mining industry expansion coal was one vital minerals. During the
resource boom rapid in demand and price of coals largely benefitted mining industry and
Australian economy as a whole. However, with passes of time the importance of coal has
reduced gradually (Nichols 2019). Considering huge carbon emission from burning coal
Australia has gradually shifted its focus on non-renewable resources in order to meet clean
energy target. This has led to a change in market perception of coal.
The chosen article critically discusses consequences of two recent mining project on
environment and on the industry. The Land and Environment Court of NSW has currently
taken the decision to withheld a new open cut coalmine located in the Hinter Valley. The
decision has taken considering the ground of argument related to adverse consequence of
climate change from opening the mine. With this, other large scale mining projects have come
under doubt. There are currently two big mining projects those are under the remittance of the
concerned commission (Goetze 2019). One is Bylong Valley coal mine situated in the north
east of Mudgee and the other is Wambo Open Cut expansion situated near Singleton.
The proposal of Bylong Valley project was submitted for approval in last year October.
Successful implementation of the project is likely to come with some positive consequences.
Once approved, the plan is to extract nearly 6.5 million tonnes of coals every year for the
coming 25 years. Coal mining being one of the labor-intensive work, approval of the project
would create 645 new jobs. The project is also important in terms of foreign investment
(lockthegate.org.au 2019). The land previously remained unused for mining would be an
attractive destination for greenfield investment project with Kepco, largest electricity company
of South Korea being the largest investors.
As against the interest of miners and investors there are opposition coming from
farmers. Farmers claim that the area comprises some of the most fertile soil of the nation
necessary for producing fresh products. Below the soli however there is stock of high quality
coal that had a relatively low emission. The high quality coal has a particularly high demand in
countries like Japan and South Korea (Cox 2019). The positive impact of the project approval
can be modelled using the following demand and supply model.

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Figure 1: Market perception of approval of Bylong Valley Project
(As created by Author)
In figure 1, the demand curve of coal is given as DD. The associated supply curve of
coal is given as SS. Equilibrium in the market is attained at E. Price and quantity corresponds
to equilibrium position in the market are P* and Q* respectively. Now, if the commission
approved Bylong Valley Project, then the nation is able to extract the high quality coal
underneath the fertile soil. There would be an increase in demand for coals from overseas
investors boosting overall demand of coal industry (Baumol and Blinder 2015). Consequently,
this would cause a rightward alteration in the coal demand curve to D1D1. The new equilibrium
in the market occurs at the point E1. As demand expands, there is an expansion of overall
industry as indicated by an increase in equilibrium price and equilibrium quantity.
Not only the mining industry benefitted from such expansion but also the overall
economy benefitted from increase in foreign investment, Expansion of employment in mining
sector would increases overall employment in the economy resulting in a lower
unemployment (Cox 2019). There is however significant protest against the project on the
ground of climate change due to carbon emission from coal.
Recently the Chief Justice of Land and Environment Court has refused proposed
project Rock Hill coal mine located near Gloucester. It has argued that project would
contribute to an increase in emission of greenhouse gases that needs to be cut for meeting
the agreed target of climate change. Burning of coal mine from Bylong has been proposed to
create five times more greenhouse pollution relative to Rocky Hill. The authority needs to
consider global emission generated from mining. Most policymakers are of the view that
Bylong is a prime land for growing agricultural produce and a beautiful valley. The coal mining
should not be there. As against this Kepco has submitted report of it comprehensive review of
possible environmental impact associated with the project. The company proposed that the
project has a relatively smaller risk in terms of global and Australian emission.

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Apart from farmers and environmentalists, mining companies are actively participating
in the debate. The joint venture of Wambo project is likely to generate over 200 new full time
employment having social and economic benefits which would outweigh any adverse
consequences arising from climate change. They also said that the proposed project would
undertake some measures to lower emission of greenhouse gas.
Conclusion
Mining is one of the most crucial traditional sectors of Australia benefitting the
economy in various way. The contribution of mining can be realized in terms of its share in
GDP, total employment and export. Major minerals mined in Australia are Iron Ore, Coal,
Gold, Uranium, Nickel, Lead, Zinc and others. Some of the big mining companies operating in
Australia are Rio Tinto, BHP Billiton, South 32, Chevron and others. Dominating share of big
companies indicate market structure to be an oligopolistic market. However, with increasing
shift towards a cleaner energy target there is a reduction in demand for coal. The debate on
approving an open coal mine at Bylong Valley between miners, farmers and
environmentalists attract significant attention. The project has withheld on ground of its impact
on climate change. Similar is the case for Wambo open cut expansion project. Mining
companies support the project by stating that environmental impact of these projects are
relatively small and there are possible social and economic benefits that would outweigh the
environmental cost.

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List of References
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson
Education.
Chapman, R., Plummer, P. and Tonts, M., 2015. The resource boom and socio-economic
well-being in Australian resource towns: a temporal and spatial analysis. Urban
Geography, 36(5), pp.629-653.
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
Cox, L. 2019. Hunter Valley coalmine ruling buoys other anti-mine campaigners. [online] the
Guardian. Available at: https://www.theguardian.com/australia-news/2019/feb/11/hunter-
valley-coalmine-ruling-buoys-other-anti-mine-campaigners [Accessed 26 Sep. 2019].
Cox, L. 2019. Korean company planning Bylong Valley mine dismisses climate threat. [online]
the Guardian. Available at: https://www.theguardian.com/environment/2019/mar/06/korean-
company-planning-bylong-valley-mine-dismisses-climate-threat [Accessed 26 Sep. 2019].
Eklund, E., 2015. Mining in Australia: an historical survey of industry–community
relationships. The Extractive Industries and Society, 2(1), pp.177-188.
Goetze., E. 2019. Mining companies feel heat on climate change. [online] Available at:
https://www.abc.net.au/news/2019-04-17/mining-companies-feel-heat-on-climate-change-
after-rocky-hill/11021312 [Accessed 26 Sep. 2019].
ig.com. 2019. Mining in Australia: Everything You Need to Know. [online] Available at:
https://www.ig.com/au/news-and-trade-ideas/shares-news/mining-in-australia-190102
[Accessed 26 Sep. 2019].
Ipaustralia.gov.au. 2019. The Australian Mining Industry: More than Just Shovels and Being
the Lucky Country [online] Available at:
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[Accessed 26 Sep. 2019].
lockthegate.org.au. 2019. Burdening the future: IPC approves United Wambo despite air
pollution and greenhouse gases. [online] Available at:
https://www.lockthegate.org.au/burdening_the_future_ipc_approves_united_wambo_despite_
air_pollution_and_greenhouse_gases [Accessed 26 Sep. 2019].
Minerals.org.au. 2019. Australai Mining [online] Available at:
http://minerals.org.au/sites/default/files/190208%20The%20Next%20Frontier%20MCA
%20Policy%20Priorities.pdf [Accessed 26 Sep. 2019].
Nichols, L. 2019. Mine projects aplenty for IPC. [online] The Singleton Argus. Available at:
https://www.singletonargus.com.au/story/6292881/mine-projects-aplenty-for-ipc/ [Accessed
26 Sep. 2019].
O'faircheallaigh, C., 2017. Mining and development: foreign-financed mines in Australia,
Ireland, Papua New Guinea and Zambia. Routledge.
Sincovich, A., Gregory, T., Wilson, A., and Brinkman, S., 2018. The social impacts of mining
on local communities in Australia. Rural Society, 27(1), 18-34.

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Svobodova, K., Yellishetty, M. and Vojar, J., 2019. Coal mining in Australia: Understanding
stakeholder knowledge of mining and mine rehabilitation. Energy policy, 126, pp.421-430.
The Conversation.com 2015. Australia's 'five pillar economy': mining. [online] Available at:
https://theconversation.com/australias-five-pillar-economy-mining-40701 [Accessed 26 Sep.
2019].