Welcome to the **The Conversation Election 2013 State of the Nation* essays. These articles by leading experts in their field provide an in-depth look at the key policy challenges affecting Australia as the nation heads to the polls. Today, we examine Australia’s mining and resources boom, its challenges and how we are positioned for the future.*
Australia has a massive global advantage - thanks to its geology. Almost 60% of the continent remains to be explored for minerals and energy.
But the harsh reality is, it won’t be explored without a national vision that balances development with social and environmental constraints.
Natural resources are now at the centre of political, economic, social and environmental debate. Driving this is the world’s growing population and shifting dynamics of the global economy.
Nowhere has this debate been more polarised than in Australia where, on the topic of minerals and energy, national and commercial interests compete on the global stage.
So, how should we proceed if we are to embrace our geological riches?
The distribution and development of minerals and energy has shaped our nation. The future will be no different. But how we best manage this development has been lost in the noise.
Two important truths are often overlooked.
First, we are all consumers and beneficiaries of the natural resources provided by planet Earth. So we all share the consequences of our decisions.
Second, “earth systems” and the global economy are inextricably linked and changes to these systems have far reaching implications.
Our iron ore exports, for example, drive growth in WA but also feed steel mills that generate employment, and drive greenhouse gas emissions around the globe. There is no doubt that the sector and its accompanying services sectors are integral to the health of Australia’s economy – mineral and energy resources make up the largest portion of Australia’s exports (A$191 billion of A$317 billion).
Demand and the price of resources are cyclical, but the trend over the last 200 years for mineral resources has seen demand increase and metal prices decline. For our energy resources such as coal and gas the demand will also continue. As CSIRO’s Dr Alex Wonhas recently noted, despite the rapid growth in renewable energy, the International Energy Agency forecasts that 75% of global energy will still be met by fossil fuels by 2035.
To talk of the “extractive industries” without looking at their impact on our lives is a constant source of tension in the resources debate. So we need to seek solutions built on a strong knowledge base and strong understanding of all views.
What are the big hidden challenges?
Technical challenges facing the resources industry are many and well documented: declining quality of current deposits, reduced rates of discovery of new resources, cost and productivity pressures, safety and environmental concerns, and shifting social expectations.
Many of these issues are directly addressed by industry and the research community. A core role of CSIRO is to build cohesion across these sectors and align industry and research interests with the national interest.
Inevitably, mining companies are driven by single development opportunities, rather than taking a national view. And that’s where things get interesting. At the national level, there are several constraints that make it difficult to ensure mining benefits the nation.
First is knowing what we have and recognising that it is finite: ore-forming processes operate slowly thus energy and mineral resources are non-renewable assets. Our history of resource development means that known assets are already highly depleted.
It may surprise you to know that we have only a limited understanding of the distribution and variability of many of our resources. One inevitable consequence of this is that newly discovered deposits are under pressure for rapid development, because there are limited known alternatives. Declining discovery rates will make this challenge more acute with time. These hidden deposits represent Australia’s “future options” and so we must enable successful exploration.
Second, quality is king in resource developments: some deposits are called “company makers” – these are high quality resources of giant scale. Broken Hill, Kalgoorlie, Olympic Dam, Bendigo, and the Bowen Basin all fit in this basket. These kind of deposits can weather cyclic commodity markets and generate sustained wealth. In fact, Minex Consultants estimate that for base metal discoveries from 1985 to 2003 globally, 14% of the deposits deliver over 65% of the total value.
Many Australian deposits are either too complex or too low quality to justify commercial development. For example, two-thirds of our nickel is tied up in oxide deposits that are large scale but their low grade and complex mineralogy preclude developing them. We need a strategy to deliver “company makers” and national wealth creation.
So what can we do differently to better manage the interface between individual companies, resource industries and the national economic and social needs? One solution is to better balance today’s pressures with long-term industry transformation through research and development. On a national scale our efforts to do this remain fragmented.
Tackling discrete issues will not lead to transformation. The industry and research community need to put together the pieces of the puzzle – from exploration to metal production and manufacturing.
Initiatives such as UNCOVER, led by the Australian Academy of Science, do this. Because of UNCOVER, we will better understand our national endowment of mineral resources. This will help us make better decisions about mining, processing and metal production.
At a more strategic level, we need to recognise that fragmented conversations at a local or operational scale no longer deliver long-term value. At worst they send mixed messages to industry, investors and the community.
We need to start with an all-encompassing national conversation about the future of the sector. This must include a frank and balanced exchange about what is really driving development options. It needs to deliver a national vision for the development of resources that frames the principles to which we aspire, so that any policy uncertainties remain within a national strategy.
Then, and only then, will we be able to manage our resources effectively and deliver shared solutions that acknowledge short-term interests but position Australia strategically for the long-term.
This is clearly a national issue with major implications for Australia’s future and what we, as Australians, want our future to be.