Perth

Poised for a mining boom?

The capital city of Western Australia (WA), Perth, is home to many of the mining companies which grace IRJ’s pages. As metals prices rebound, consumer confidence is renewed and investment pours into this growing city, rumours of an oncoming mining boom are rife.

Perth has a population of approximately 1,650,000 according to 2009 figures from the Australian Bureau of Statistics. The city ranks fourth in Australia’s cities and came fifth in The Economist’s 2009 rundown of the world’s most liveable cities. The wider state of Western Australia contains more than 270 operating mines and makes up approximately 70 per cent of Australia’s gold, nickel, tantalum and other metals.

We take a closer look at “the city of lights,” which so many of our friends call home.

Perth and the GFC

In and around 2008, Perth’s economy took a few hits. Major mining operations let workers go and either shut up or shrank down shop as the wave of belt-tightening swept through. This was inevitable; cash was in short supply and the typically dependable raw materials and minerals demand from China had depleted. Western Australia had acted as the go-to for steel, base metals and other resources for the Asian markets but as the world groaned under the weight of the GFC, mining operations in this resource haven were hit hard.

This was by no means limited to the Perth region. In the wake of the GFC, it was reported that the world’s largest 40 mining major players dropped by approximately 40 per cent. However Perth, the hotspot for headquarters for the endless mining companies throughout Western Australia, acted as a microcosm for the worldwide turn of events.

The batten down of the GFC was not entirely the catastrophe it might first appear to be. In China, the Beijing government acted quickly in executing its four trillion Yuan anti-GFC stimulus package. This stimulus package targeted ten main areas including water, electricity, the environment, transportation, rural infrastructure and technological innovation. By June 2009, the government announced that half of these funds had been allocated. This in turn rejuvenated investment in West Australian resources exported to Asia. Commodity prices climbed, investment increased, and things took a positive turn.

Perth poised for the boom

One example of the significant investment in Perth is the $50 billion Gorgon Liquefied Natural Gas Project. Situated on Barrow Island of the north coast, Gorgon is the largest investment resources development project Australia has ever seen. It also promises to generate around 10,000 jobs and A$33 billion investment in Australian goods and services. The Perth government gave Gorgon the go ahead in September 2009 then on December 1, 2009, the ground breaking ceremony was held to mark the commencement of construction. Gorgon will result in 45 million tonnes less greenhouse gas emission once in operation. Major construction is due to begin in the second half of 2010, and the plant has set a first gas date of 2014.

As investment in Perth strengthens, commodity prices rise and mining investment goes with it, the next area to be directly affected is the real estate market. With more jobs comes a more populous city, and with this comes more dwellings, which results in more investment in infrastructure and construction. The state of Western Australia has the fastest population growth in the whole of Australia, with approximately 110 people moving there each day. In September 2009, house prices in the state went up by 1.5 per cent following 18 months of negativity. This is taken as a strong sign of surging reinvestment and interest in the area. One example of this infrastructural boom is the build of a new hospital. The Perth State Government is investing A$1.76 billion dollars in building the Fiona Stanley hospital in southern Perth. Fiona Stanley will generate around 3,000 jobs and will open in 2014.

With base metals and resources for construction accounted for, it is important we also consider the gold mining in the region.

Mining conglomerate Newmont Mining Corporation has a very special project underway in Boddington, 130 kilometres from Perth. The Boddington mine is one of the largest undeveloped gold deposits in the world. Newmont’s three billion dollar project began operation in 2009, and is expected to reach an annual production rate of one million ounces, pushing Australia’s gold production up by 15 per cent within the coming year.

Perth’s positioning in Western Australia—which is directly next to the Indian Ocean—and the state’s plentiful resources supplies have allowed for natural ties to emerge between this region and Asian commodities exportation. Some worry that this resurgence is inextricably linked to the results of the Beijing anti-GFC stimulus package, and the cash injection it has resultantly rippled into the Australian state. However, it is important to remember the relationship between Asia and Western Australia prior to the economic downturn, and in light of this recent investment mining activity and related factors suggest that things are returning to normal, not enjoying a short-lived revival.

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