Dig it

Mining in Australia and other mining services are on a roll. By JASON BAKER of IBISWorld.

By Jason Baker

Several mining industries have enjoyed strong growth in recent years in Australia, most of all copper and gold ore, silver-lead-zinc and iron ore mining. This has also helped to benefit those enterprises that provide services to the mining segment.

As the demand for copper rises, prices have skyrocketed in the past few years. Prices soared in the second half of 2003 and throughout 2004, propelled upward by surging industrial growth in China, which translated into sharply higher copper demand, and a weaker US dollar.

Low copper stocks contributed to the price rises, as buyers feared shortages. High prices resulted in strong revenue growth for the copper ore mining industry.

Revenue in the gold ore mining industry has been volatile, but large gains are expected to occur in this year, and the following years that will benefit the industry. IBISWorld estimates that this industry will show annual average growth of 7.6% over the five year period to the end of 2006-07.

In the silver-lead-zinc ore mining industry, performance is expected to be very strong over the five years to June 30, reflecting soaring US dollar prices for zinc, lead and silver, as well as generally higher levels of production.

Despite the appreciation of the Australian dollar over this period, zinc, lead and silver prices also rose in Australian dollars. Real industry revenue is expected to expand at an average annual rate of over 17%, with real industry value added rising at an average annual rate of about 19%.

The iron ore mining industry in Australia has witnessed massive gains in industry revenue in the last five years and this trend looks set to continue into the next five years.

IBISWorld estimates that this industry will show average annual growth of 23.4% over the five year period to the end of 2006-07, and revenue is expected to rise at an average annual rate of almost 8% over the five years ending in 2011-12.

Surging minerals prices and strong demand for a range of minerals in the latter part of 2003-04 and 2004-05 revived other mining activity in 2004-05. Industry revenue is estimated to have increased by almost 16%. Overall industry revenue is expected to expand by about 5% per year. The strong growth in value added reflects rising industry employment, as well as improved profitability.

In the mineral exploration industry, IBISWorld estimates that this revenue will grow at an average annual rate of 13% during the five year period to 2006-07.

As mining continues to perform well, at least for the following few years before supply and demand steadies, enterprise providing services to mining will still stand to profit.