David Rynne

1. Drill 2014 Conference Gold Coast 21 August 2014 Queensland’s resources: The outlook 2014 David Rynne Director Economic and Infrastructure Policy

2. Presentation outline • Overview of the QRC • The economic contribution of the QLD resources sector • Tough market conditions and industry’s positioning • Long term demand fundamentals for resources • Capitalising on these fundamentals • State and federal governments policy reform agenda

3. Who is the Queensland Resources Council? • The Queensland Resources Council (QRC) is a not-for-profit peak industry association representing the commercial developers of Queensland’s minerals and energy resources • 79 full members – explorers, miners, mineral processors, site contractors, oil and gas producers, electricity generators • 161 service members - providers of goods or services to the sector • State-based multi-commodity advocacy group formed in 2003 as successor to the Queensland Mining Council

4. 79 full members 161 service members 39 associate members

5. Economic contribution The resources ‘boom’ has delivered enormous socio-economic benefits to Queenslanders

6. The changing playing field in Queensland resources • The almost decade-long and unprecedented investment cycle has peaked • Coal and LNG in particular moving from investment to production phases • Supply has caught demand in most commodities with prices currently too low to encourage another significant supply response – especially for coal

7. Coal prices’ long journey south

8. Coal market imbalances the 2014 reality • Thermal and coking coal prices weak as market over-supplied • Demand still growing steadily – global thermal coal trade up by 5% pa – driven by India and China. Japan desperate to ensure supply given nuclear uncertainty. • Marginal suppliers to Asia (e.g. USA) being squeezed out • Costs and shareholder returns focus • Australian producers waiting for someone else to blink, but can it last? • Signs that rail providers willing to share some pain on ‘take or pay’ • 25 per cent of all Qld coal produced at a loss (and half of all thermal coal) • 10 per cent of all Qld coal produced at a loss of more than $US14/tonne

9. Substituting lousy prices with record volumes

10. Metals prices Source: London Metals Exchange

12. Industry positioning (here and now) • SURVIVAL! Companies working their way back down global cost curves • Improved productivity from best resources/targeted operations • Higher production counter to low prices and fixed costs • Maintain tenements by doing bare minimum • Respond strongly to ideological opposition (masking as environmental activism) to shore up social licence now and into the future

13. Industry positioning (medium to longer term) • Wait for price recovery and attract capital • Put capital into sustaining production and focus on brownfield expansions • Look for more gas for existing project • Look for acquisition opportunities • Get project approvals – a pre-condition for attracting capital • Complete feasibility studies • Diversify: other commodities, countries

14. Global demand fundamentals Title Subtitle

15. Global demand fundamentals

17. Positive outlook – addressing energy poverty a UN priority Current renewables can’t deliver reliability and scale to lift billions from poverty Skyrocketing electricity demand dictates we must make more from everything we have – coal, gas, uranium, renewables. 1.3 bn people without electricity; 2.7 bn without clean cooking facilities

18. Capitalising on these opportunities (QRC CEOs) Uncompetitive costs (labour, energy, transport, taxation) and productivity * Regulatory uncertainty, ad hoc policies, sovereign risk, red tape * Regional planning policy, legislation * Ability to raise capital – both for majors and juniors Commodity prices (low), exchange rate (high) Infrastructure access, government vacating space Activists’ attacks, community sentiment * Of particular concern to the exploration sector

19. Avg per annum change between 2006 and today • + REGULATION!! • Approval time for a new mining project • 7 months on average in 2002 • 18-36 months in 2012 • Govt’s are aiming to halve this • Approval time for an exploration permit • 22 months on average in 2013 • Govt is aiming to get this down to 6 months

20. How exploration managers rate Queensland

21. How exploration managers rate Queensland

22. How exploration managers rate Queensland

23. How exploration managers rate Queensland

24. Government reforms to encourage production • Abolish the carbon tax • Abolish the MRRT (difficult to do given Senate resistance) • ‘One stop shop’ for environmental approvals • Reduction in green and red tape • Government’s fiscally are very constrained so unlikely to see direct investment but perhaps recycled capital from privatisations

25. Government reforms to encourage exploration • $32m over three years for pre-competitive geological programs • Development of ResourcesQ being a 30 year vision for the QLD resources sector • Exploration Development Incentive scheme for investors ($100m over 4 yrs) • Streamlining the assessment pathway for coal and mineral exploration permits to 6 months (12 months where applications are subject to native title) • Prioritising the technical assessment of work programs at the start of the application process so that explorers are advised within 90 days of lodgement whether their exploration program has been approved or rejected • Modernising Queensland's Resources Acts

26. Drill 2014 Conference Gold Coast 21 August 2014 Queensland’s resources: The outlook 2014 David Rynne Director Economic and Infrastructure Policy