Boston, MA -- (SBWIRE) -- 07/21/2012 -- Australia will remain a leading player in many segments of the global mining industry. Owing to its substantial deposits, the country possesses an array of minerals including iron ore, nickel, bauxite, copper, gold, silver, uranium, diamonds, zinc and coal. We expect that the value of the mining sector will reach US$122.6bn by 2016, growing at an annual average rate of 4.3% over the forecast period, from US$99.6bn in 2011.

Iron Ore To Drive Output Growth

We forecast iron ore production output to show the greatest increase in output reaching 758mnt (million tonnes) in 2016 from 488mnt in 2011, marking an average annual growth of 9.2%. As iron ore accounts for the largest proportion of the mining sector's value by output, between 30% and 40%, this increase will have a significant bearing on the country's mining sector value. This growth will be driven by BHP and Rio Tinto, as the former expects to increase output from 164mntpa to 220mntpa in 2014 at its operations in Western Australia, while the latter is increasing production from 156mnt to 283mnt at its Pilbara operations in 2015. We expect Australia to remain the world's largest bauxite producer with output growth averaging 6.3% a year, reaching 94.8mnt in 2016, from 70mnt in 2011. The vast majority of this growth is due to expansion plans at Rio Tinto's Weipa mine, the world's largest bauxite mine, which is expected to see production rise from 18mntpa to 50mntpa in 2013.

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Regulatory Environment

Australia's mining sector is one of the most business-friendly in the world, with domestic companies and overseas miners operating in the country. We expect Australia to remain a highly attractive destination for foreign investment despite the recently proposed 30% tax on mining companies' profits in coal and iron ore production. Indeed, we do not expect that the proposed tax will have a significant impact on investment in the country's mining sector as these concerns are likely to be outweighed by the country's mineral wealth. Moreover, the bill could be watered down as the ruling coalition has a majority of only one seat and thus it may be difficult to push the bill through parliament without compromise. If the bill is implemented, it is expected to come into force from July 1 2012.

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