Outlook for Western Australia Growth and opportunities

28th Biennial Ports WA Forum

Geoffrey Wedgwood, Deputy Director General Resources Development and Defence

20 September 2017

Department of State Development

Industry Development

Western Australia Tourism Commission

Department of Jobs, Tourism,

Science and Innovation

International Education

Office of Science

Office of Defence West

Western Australian Government – global offices

Current Context

WA merchandise exports

0

50

100

150

200

250

300

$0b

$50b

$100b

$150b

2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16

Export values Export volumes (1996-97 = 100)

Transition from investment to exports

Forecast

$0b

$25b

$50b

$75b

$100b

2008-09 2012-13 2016-17 2020-21$0b

$50b

$100b

$150b

$200b

2008-09 2012-13 2016-17 2020-21

Iron Ore LNG Other

Forecast

Investment Exports

Major Asian export markets

$0b

$20b

$40b

$60b

$80b

$100b

$120b

2001-02 2006-07 2011-12 2016-17

China Japan Korea Hong Kong Singapore India Taiwan

WA’s top services exports – by industry

$0.4b

$0.6b

$1.0b

$1.6b

$2.1b

$6.4b

$0b $2b $4b $6b $8b

Technical, trade-related & other business

Business travel

Transport

Education-related travel

Personal travel

Total services exports

2016

2006

Industry Trends

WA iron ore exports – by port

$0b

$10b

$20b

$30b

$40b

$50b

2012-13 2014-15 2016-170 mt

200 mt

400 mt

600 mt

800 mt

1000 mt

Port Hedland Port Walcott Dampier OtherNote Bar = volume (left axis) Line = value (right axis)

Iron ore outlook Chinese demand

• Economic conditions in China have supported the iron ore price in recent months

• Chinese demand is expected to hold up, but additions in low-cost supply will see some downward pressure on the price

What next?

• Western Australian iron ore exports:

2005-06: 243 million tonnes

2015-16: 757 million tonnes

2020-21: 835 million tonnes

• Iron ore benchmark price:

2017-18: US$67.2 per tonne

Major iron ore developments*

Project Anticipated Capital

Expenditure

Silvergrass mine expansion $468 million

Yandicoogina Oxbox $247 million

Western Turner Syncline Stage 2 mine extension

$200 million

Koolan Island seawall re-build $97 million

Balla Balla mine, rail and port $5.6 billion

Koodaideri mine $3.1 billion

South Flank deposit up to US$3.2 billion

Firetail mine replacement up to $1.5 billion

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*not an exhaustive list

WA LNG exports – by project

0 mt

10 mt

20 mt

30 mt

40 mt

50 mt

2012-13 2014-15 2016-17 2018-19

North West Shelf Pluto Gorgon Wheatstone Prelude

Projected*

*assumes projects will operate

at full nameplate capacity

Liquefied Natural Gas outlook New developments

• Existing projects are now in their final stages of construction and commissioning

• Future ‘backfill’ investments to maintain production at existing project capacities

LNG demand growth

• LNG demand is expected to grow rapidly, however additions to global supply will outstrip demand in the short-term

• New supply (including backfill) may be required from the mid-2020s

Other petroleum exports

In addition to LNG, the State also has other significant petroleum export markets. WA petroleum exports in 2016:

WA gold exports – by market

$0b

$5b

$10b

$15b

$20b

2002 2004 2006 2008 2010 2012 2014 2016

China United Kingdom Singapore Thailand India Others

Note: China includes Hong Kong

Gold outlook

Gold price and supplies

• WA gold sales volumes remained fairly steady, however increased gold price → 10% increase in sales value in 2016

• Gold price supported by a softer US dollar and Federal Reserve prospect of raising interest rates occurring slower than previously expected

Major gold developments*

Project Anticipated Capital

Expenditure

Gruyere JV $532 million

Mt. Morgans $220 million

Gwalia Deeps mine extension

$100 million

Dalgaranga $86 million

Monty Copper-Gold JV $75 million

Millenium up to $30 million

Matilda/Wiluna expansion $114 million

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Under consideration *not an exhaustive list

Lithium outlook Increasing global demand • The battery market is growing at an annual average rate of 15% a year • Battery demand has the potential to create big opportunities for WA’s mineral producers

New projects • Current mine production ranges from DSO to 4-6% lithium concentrate • Further processing projects under way/planned will produce Lithium hydroxide

and Lithium Carbonate

Other WA minerals export markets – 2016

Country Value ($billion) Country share

Nickel Value ($billion) Country share

Malaysia 0.4 28%

China 0.3 19%

Taiwan 0.2 14%

Others 0.6 38%

Total 1.5 100%

Base Metals Value ($billion) Country share

South Korea 0.87 27%

China 0.76 24%

Philippines 0.6 19%

Others 0.97 30%

Total 3.2 100%

Alumina and Bauxite Value ($billion) Country share

United Arab Emirates 0.97 22%

Bahrain 0.6 14%

Mozambique 0.38 8%

Others 2.5 57%

Total 4.5 100%

includes copper, lead and zinc

WA agricultural exports – by market

$0b

$2b

$4b

$6b

$8b

2003-04 2007-08 2011-12 2015-16

China Indonesia Vietnam Japan South Korea Others

Agribusiness outlook

Global demand • Global trade flow analysis of 600+ agrifood

products to high-potential Asian and Middle Eastern markets → potential for WA agribusinesses

• Future of the WA agrifood sector is highly dependent on exports, particularly to Asia

• Businesses must become increasingly internationally competitive and capture Asia’s high value, premium markets

Major agribusiness projects*

Project Anticipated Capital

Expenditure

Project Sea Dragon US$1.45b (all stages)

Wagyu Beef and Irrigation $200m

Ord East Kimberley expansion

$517m

*not an exhaustive list

WA Defence industry – Defence West • The State Government is committed to enhancing the capability

and competitiveness of the defence industry in WA: – more than $400m invested in common use infrastructure at the

Australian Marine Complex (AMC) in Henderson – appointed a Minister for Defence Issues the (Hon. Paul Papalia, CSC) – established the Office of Defence West, and – appointed a WA Defence Advocate to champion the interests of the

WA defence industry

• Henderson is already home to a world-class naval shipbuilding, repair and maintenance and heavy engineering industry: – selected by the Navy as the site for the continuous build of minor war

ships