QLD Resources Investment Commissioner Todd Harrington.
BY ELIZABETH FABRI
QLD Resources Investment Commissioner Todd Harrington will be part of a panel discussion on Transforming Regional QLD at the upcoming QME conference and exhibition in Mackay. We spoke with Mr Harrington ahead of the event about the biggest issues facing the industry, investment opportunities, and the global importance of QLD metallurgical and thermal coal.
Q. What topics will you cover as part of the QME panel discussion on Transforming Regional QLD?
QLD has got some of the best geology. We’ve got the best metallurgical coal, some very good thermal coal, we’ve got copper, lead, zinc, silver, and then oil and gas, both conventional and unconventional.
The vast majority of those commodities have had significant price improvements over the last 12 to 18 months; nearly all of those sectors 18 months ago were in a lot of pain. Because prices were so low there was cost cutting, deferred work programs, [and] service towns like Mackay and other regional support towns really suffered.
Sentiment for that reason was low for both investors and for [resources sector] companies.
Since then commodities have all rebounded, and they have rebounded significantly. If you think of the coal sector – metallurgical coal was $88 exactly two years ago and it’s well over $200 now. The turnaround has made everyone busy again.
We’ve seen some companies move a little bit slowly to fast track major expenditure items, but what we’ve seen is deferred work programs scheduled back in.
And most of the contractors, (whether they provide equipment or services), have a full book of work, and a bit of a wait to get them at this point in time which is a great position for our industry.
Because prices are so strong, the mining companies themselves are [also] returning to profit. The profits are then reinstalling confidence that they’ll look to open up some additional growth projects.
Q. What current projects are you are excited about?
In the last two to three months there has been three adjacent metallurgical coal projects announced and now looking to be fast tracked and built. That’s within the central QLD region of the Bowen Basin.
You’ve got Pembroke’s Olive Downs project; right next door to it Whitehaven’s Winchester South; and right next door to it on the western side, South32 and Aquila are now looking to reinvigorate Eagle Downs mine.
Outside of coal there’s certainly some exciting zinc opportunities as far north as Chillagoe. As we head out towards Mt Isa, copper, zinc and a number of other minerals, there is a lot of exploration now going out the back of these areas.
And then you return to our oil and gas side of things, where pricing has returned significantly. If you overlay this east coast gas crisis demand against limited supply and the fundamentals for the gas explorers is particularly good as well.
It’s a perfect storm of positive elements that haven’t been here for a while, and have all come back to the table.
Q. What are you looking forward to most about this month’s QME?
Mackay is a regional hub which is a great cross-section of the mining, equipment technology and services (METS) industry, and for me it’s a great read of where things are at.
I’m a former Mackay resident and spent a long time in the industry up there myself prior to coming into Government, so I’m looking forward to seeing where individuals and companies are at, and how things are going for them, and areas of focus that may not be obvious.
Last time when we were [here], because the industry was so bad, a lot of those companies were looking at the international market as a source of forward work (specifically the services companies).
I think everyone now is head down and focused on the work that’s in our current market. And I think like all of the conferences we have seen over the last three to six months – whether they be straight investment or mining services – the takeaway that you get is people’s confidence in the sector.
I’m looking forward to seeing that [confidence] from the crowd, because it should be as the sector rebounds.
Q. What are the biggest challenges facing the regional QLD mining region at present?
I think it’s the rebound factor. I think people got so badly burnt and some of these towns got really decimated.
In some of these towns even the pubs went into administration and closed down.
As jobs come back to these centres it’s about returning basic services, having people’s confidence that this sector won’t decline again in another month or two, and that the pricing and commissions are here to stay for the foreseeable future.
All of the towns have the infrastructure they need (prior to the last boom there was a housing shortage in most towns).
So, certainly for the interim, it’s not a wave of construction we need, it’s a wave of support services and systems that make these towns really function strongly.
Pricing has gone up and down like a yoyo particularly in the coal industry, which is a major exporter in our State. But it’s been high now for a while, and substantially high.
I think the view for most people is even if the prices wane a little further, it’s still in positive territory and the fundamentals are really strong.
Q. You’re originally a geologist by profession. What opportunities do you see for QLD exploration?
If we were to have this conversation any time over the last 10 years, one or two of the commodities were going particularly strong and therefore [explorers] would move across green and brownfields projects chasing them.
But we’ve got a very good situation at the moment. If you’re an explorer its worth exploring for both metallurgical and thermal coal; they’re both at record prices.
On the mineral side of things; [there is] copper, zinc, even gold, and then more strategic minerals like vanadium or cobalt.
Even oil prices are well over $70 a barrel up from $30, which is dragging up the gas price.
So the really nice situation for all explorers is that the pipeline and infrastructure can support more growth.
While these commodity prices are high, we’re seeing junior mining companies raising small amounts of money on the stock market (again that was impossible to do the last few years as they went into survival mode).
Even some of the bigger companies [which] stopped exploring themselves are now back in that focus area. It’s really encouraging for geologists like myself.
Q. Xcoal Energy and Resources chief executive Ernie Thrasher recently said the end of coal was “fake news” and the coal industry in QLD has potential to expand dramatically. Do you agree?
I definitely agree, based on fundamentals and fact. Firstly, QLD is dominated by metallurgical coal, probably in the order of 70 per cent to 30 per cent thermal coal.
The metallurgical coal is not used for energy; it is not part of the Paris Agreement, it is used with iron ore to make steel.
Even if you want to just use solar panels and wind turbines or build more bridges, you can’t do it without metallurgical coal – there is no other way.
The fundamentals of metallurgical and thermal coal are very separate.
But those fundamentals are very strong, both on strategic supply and what the world needs moving forward.
Then you overlay pricing which is over $US200 a tonne; they’re very healthy pricing margins and QLD has some of the best metallurgical coal you can get, and second to that we control 55 per cent of the global market.
You then overlay thermal coal, which can be substituted by other forms of energy.
The Paris Agreement itself, through their own studies that they’ve published, has shown as the world declines from thermal coal, the need for Australian premium thermal coal will actually increase through to 2024.
It’s in their own numbers, so as percentages go down, our net tonnes go up, because most of our coal is double the quality of any coal you can get in India, for example.
Coal is socially unpopular. In my view, I think it’s an unfair situation because most people don’t even understand the use of metallurgical coal, at all.
Q. How can QLD attract greater resources investment, and what investment prospects are out there?
I think even if we can maintain the resources investment we’ve had over the last 12 months we’d all be doing high fives.
There’s been so much resources investment in this State in the last 12 months; it’s hard to quantify.
I think the key for us is to give clarity of investment proposals.
Quite often companies don’t position themselves as well as they could; they just talk about the geology side of the story.
But when these very strategic investors come from New York or some other part of the world, they are very focussed on any port or rail constraints or opportunities.
They’re very mindful about operating cost positions, combination provisions – all the other sub factors more than just geology.
At different times, I often try to help lots of different range of parties.
In the smaller end of town, they can collate some more information (and at Government we’re happy to help them do this) to make their sales pitch more comprehensive and easier for international investors to understand.
