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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Preface

The Centre for International Economics was commissioned by the Mount Isa City Council to prepare this Economic Development Strategy. The Strategy was developed iteratively over several months in the second quarter of 2017 in close collaboration with Mount Isa’s Mayor, Deputy Mayor, Councillors, Council CEO and many other key local, regional, national and international stakeholders. The Strategy is to come into effect from 1 July 2017 and is to be pursued over three years. The Council is responsible for the Strategy’s implementation, including through a high degree of collaboration with a range of partners who will share in the benefits of a resilient and growing Mount Isa. The Strategy was developed using a set of parameters and guiding principles established by the Council. These subsequently allowed the agreement of objectives, timelines and the identification of 30 specific initiatives.

The Strategy was developed using a standard logical framework, namely: a review of the state of the economy; an assessment of the economic outlook, risks and opportunities facing Mount Isa; an assessment of Mount Isa’s current and future value proposition; and, the identification of a range of initiatives that singly or jointly are considered to be deliverable and which respond to one or more of the Strategy’s agreed objectives.

www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Contents

Preface

iii

Foreword — Mount Isa Mayor Joyce McCulloch

1

Summary

2

1

2

3

4

5

Mount Isa’s economy

2

The Mount Isa Economic Development Strategy

5

Introducing the Mount Isa Economic Development Strategy

6

Background

6

Objectives

6

Principles

7

Scope

7

Timetable

7

Implementation

7

Mount Isa’s economy and outlook

8

Mount Isa as a high value, mining-led economy

8

An economy built on cornerstone mines

10

High value adding employment and innovation

11

A transitional period for mining and minerals processing

12

The non-mining economy

13

An economic hub of national importance

15

Mount Isa as an inland services, logistics and resource sector hub

15

Mount Isa is important to neighbouring Cloncurry and McKinlay

16

Mount Isa’s importance to Townsville’s economy

17

Importance of Mount Isa to Queensland and Australia

19

State and Federal policy agendas relevant to Mount Isa

21

Mount Isa’s Key Value Creation Opportunities

24

The importance of diversification

24

Economic resource potential of mining

25

Economic resource potential of gas

26

Economic potential of intensified agriculture in the broader region

27

The Five Strategic Pathways and initiatives

29

Leading

29

Partnering

31

Diversifying

33

www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Expanding

35

Positioning for the Future

37

6

The Implementation

40

A

Production scenarios: low, medium and high

41

B

Queensland basins: unconventional petroleum

42

BOXES, CHARTS AND TABLES 1

Latest metrics of Mount Isa’s economy

2

2

Minerals value added for the Mount Isa region

4

2.1

Mount Isa gross value added

10

2.2

Mount Isa copper, silver, lead and zinc production

11

2.3

Production of copper metal at mines in Queensland

11

2.5

Mount Isa baseline mining sector value added

14

2.6

Agricultural value added in Mount Isa and the broader economic corridor

15

3.1

Distance required to travel from Mount Isa to population centres of similar size

17

3.2

Baseline outlook for minerals value added, Cloncurry and McKinlay LGAs

18

3.3

Throughput of the port of Townsville, 2007–08 to 2015–16

20

3.4

Proposed economic development zone

23

3.5

Interaction of the Mount Isa economy with Government priorities and settings

24

4.1

Minerals value added in the Mount Isa region

27

4.2

Potential cattle turnoff from the Mount Isa region

30

A.1

Production by primary metal, by scenario

43

B.1

Queensland basins — unconventional petroleum potential

44

www.mountisa.qld.gov.au

v

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Foreword Welcome to Mount Isa — the city of opportunity.

As the largest inland city in northern Australia, we are a critical service, logistics and resource sector hub, central to the Queensland and Australian governments’ vision for developing northern Australia.

For close on 100 years, Mount Isa has survived and thrived thanks to hard work, determination, innovation and strong leadership.

Today we are one of the most productive minerals provinces in the world, generating billions of dollars for the Australian economy.

There is no hiding, however, from the challenges the region now faces due to delayed mining investment or mine closures The Mount Isa Council’s Economic Development Strategy aims to push forward with a bold plan to create a more diverse, sustainable, vibrant economy.

Over the next three years, we’ll be rolling up our sleeves and opening our doors to expand existing industries and create new opportunities both real and yet to be imagined.

Mining will always be a cornerstone, but to truly prosper we need to diversify and I am certain those opportunities exist.

The range of ideas presented in this document are impressive and a testament to the calibre of expertise and talent that exist in our city. Some ideas are easy, many are hard, but all are possible.

The Mount Isa Council intends to lead, collaborate, partner, and innovate to create a secure future for generations to come. Mount Isa has big ambitions. Together we intend to make them a reality.

Mount Isa Mayor Joyce McCulloch

www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Summary

Mount Isa’s economy The Mount Isa economy is a powerhouse of northern Australia in general and north Queensland in particular. The CIE estimates that Mount Isa’s economy provided taxation revenue in the order of $213.0 million for Queensland and $808.0 million for the Commonwealth in 2015-16.1 However, the Mount Isa economy is facing the prospect of declining mining activity.

Nevertheless, the mining industry outlook may be significantly more favourable if companies extend their mining life and develop new mines in accordance with global commodity prices.

The demand and supply of minerals (using inferred and indicated resources) would suggest that even under the low commodity price scenario modelled by the CIE, an additional $437 million in value added per year, on average, could be achieved compared with the baseline outlook.2 This would translate to approximately $79.1 million in royalties and other state taxation revenue and $294 million in federal taxation revenue on average, each year, for thirty years. Further, the impact of minerals production under the medium scenario would be almost to double the state and federal taxation stream.

What is Mount Isa’s economy worth?

Mount Isa is the largest economic, logistic and services centre for a huge portion of northern Australia. It is an important driver for numerous other regional economic centres, especially Townsville. It generates substantial tax, royalty and export revenues for the Queensland and Australian treasuries and economies. In addition, Mount Isa’s economy has delivered relatively high levels of value added (and therefore wages) and innovation compared to the rest of Queensland or Australia.

Table 1 summarises the latest metrics of Mount Isa’s economy. Importantly, Mount Isa directly contributes an estimated 0.8 per cent of the value added of the Queensland economy, 55 per cent of which is directly generated by the mining sector. Mount Isa’s second largest industry after copper ore mining is the services sector, including business services, health, government administration and services, all of which are, in turn, driven by the mining sector.

A.1

Latest metrics of Mount Isa’s economy

Metric Value added, 2014-15

Mount Isa’s contribution $2.4 billion or 0.8% of Queensland’s industrial value added

Direct mining sector value added, 2014-15 (excluding manufacturing)

$1.34 billion

1 Includes direct and indirect taxation as a result of consumption and business-induced demand.

2 Averaged over the 30 year period from 2015-16 to 2044-45. Based on CIE modelling in

November 2016, using production estimates for 2015-16. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Major industries, 2014-15

Copper ore ($784.2 million), Services ($759.4 million), Silver-lead-zinc (Silver-lead-zinc ore mining)

Largest services sectors, 2014-15

Business services, Health, Government Administration

Value added per employee, 2014-15

$204 000 per year (Mount Isa) $123 000 per employee (Queensland)

Resident population, June 2016 Employed persons, December 2016 Unemployment, December 2016 Estimated taxation collection for Queensland, 2015-16 Estimated taxation collection for the Federal Government, 2015-16

21 998 persons 10 950 employees 8.2 per cent $212.8 million (including $95 million in royalties)a $808 millionb

a Includes royalty revenue reported by the Queensland Resources Council, plus CIE modelling of the direct and indirect contribution of Mount Isa to other Queensland taxation streams, principally payroll and land taxes. This is estimated through modelling of the impact of a reduction in mining value added on the state and federal taxation streams, and applying the resulting taxation per $ value added proportionately to the existing mining base at Mount Isa. b Includes CIE modelling of the direct and indirect contribution of Mount Isa to Australian Government taxation streams.

Source: The CIE.

Mount Isa has an important future economic and strategic value Chart 2 shows the various mining value added scenarios projected for the region. The baseline shows the current outlook based on company announcements on the life of Mount Isa’s mines (the baseline). However, the demand and supply for minerals (using inferred and indicated resources) where companies extend their mining life and new mines are developed as commodity prices allow, would suggest that even under the low commodity price scenario, the mining industry would continue to be an important one for Mount Isa, Queensland and the rest of Australia.

■ In undiscounted terms, moving to the low scenario (compared to the baseline) would deliver an additional $437 million each year in mining value added, and $607 million under the medium scenario.

– The Queensland Government would be expected to benefit from additional royalty and taxation revenue, potentially in the order of $79 million per year under the low scenario and $158 million under the medium scenario.3 – The Australian Government would be expected to benefit by approximately $294 million per year under the low scenario and $581 million under the medium scenario.

3 There are significant challenges in estimating the potential improvement in royalty revenues

from further developing the regional mineral resources. These include the variable nature of royalties across specific commodities, royalty-free thresholds scaling with prices and deduction of ‘selected expenses’ for businesses. www.mountisa.qld.gov.au

3

Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.1

Minerals value added for the Mount Isa region 1800

1600

Mining value added ($m)

4

1400 1200 1000 800 600 400 200 0 2014-15

2019-20 Baseline

2024-25

2029-30 Low

2034-35 Medium

2039-40

2044-45

High

Note: Excludes non-metallic mineral mining and quarrying (such as construction materials). Under the ‘baseline’ the production of minerals is limited to large mines that are currently operational, plus the addition of phosphate rock mining at Paradise and Paradise South. Mines are assumed to produce until their demonstrated reserves are exhausted or the announced end of mine life. The ‘Low’ scenario reflects the development of economic resources through the extension of the operational lives of existing mines and development of mines close to production.

Data source: The CIE.

Expanding mining and diversifying for resilience The Mount Isa economy has not significantly diversified beyond the foundational industry of mining and minerals processing, and the mining industry itself is concentrated around several key mines. A small number of large players dominate total mining production and employment in the North West Minerals Province. In Mount Isa, there is a heavy reliance on Mount Isa Mines (MIM), owned by Glencore, with an estimated 9 280 jobs linked to both MIM’s mining and processing operations.4 The particular strength of these businesses include their access to ‘giant’ resources in terms of both size and resource quality, the long period over which they have been established and operational, and their inclusion in global corporate structures. The risk to Mount Isa of this high degree of concentration, however, is exacerbated by the lack of new entrants into the mining sector. A relatively small number of mines are now in the pipeline and in a position to be in commercial production over the next five to seven years.

Many projects have been put on hold or abandoned for various reasons, including due to falling prices since the global financial crisis as well as due to the risks associated with operating in a remote and expensive environment. Industry reports that there are many tenements of potential exploration land that are being “land banked” by larger companies.

Many observers await the discovery of the next ‘giant’ resource to reverse these trends.

However, it is a priority to reduce the region’s reliance on the incumbents by increasing the number and diversity of businesses in the minerals sector.

4 Modelling by Elliott Whiteing and AEC Group, 2014. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

The Mount Isa Economic Development Strategy The Strategy focuses on value creation opportunities that grow investment and employment.

The Strategy set out concrete actions over a three-year time horizon, and identifies 30 specific initiatives. These initiatives sit within five strategic pathways that are: ■

Leading — Providing the highest quality and united leadership to deliver a number of key initiatives and programs as well as the overall leadership to deliver this Strategy over the next three years.

■

Partnering — Partnering diligently and collaboratively with existing and new partners and other levels of government to deliver the initiatives that will drive the economy.

■

Diversifying — Increasing the diversification of the economy, in both the mining and nonmining sectors, as a way of building greater social and economic resilience.

■

Expanding — Pursuing new investment in Mount Isa Mines, the development of major new resource and gas projects, as well as expanding the services sector, not least because such a huge expanse of Australia’s north depends on it.

■

Future Positioning — Pursuing prospective industries and projects that may be over the horizon and not yet tangible, or which have a very long gestation period, but which nevertheless will help secure a prosperous future for Mount Isa in the long term.

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

1 Introducing the Mount Isa Economic Development Strategy

Background The Mount Isa City Council (Council) has a strong focus on delivering a prosperous and sustainable future for Mount Isa and its community. Accordingly, the Council has commissioned the preparation of this Economic Development Strategy (Strategy) to guide the Council’s efforts over the next three years to the end of 2019-20 to develop the economy.

As the analysis underpinning this strategy shows, Mount Isa is a critical regional centre – it is the largest population base and service centre in inland northern Australia. The Council recognises that a strong and growing Mount Isa delivers economic and social benefits and security beyond Mount Isa’s city boundaries to wide areas of northern Australia, especially north Queensland, as well as to Australia as a whole.

The Council recognises that its city, which is located within the World’s greatest single minerals province – the North West Minerals Province – is facing a period of significant uncertainty and potential transition. This is the result of several mines approaching the end of their reserves5, as well as limited or delayed development of new mines. The network of existing and prospective mines support the extensive value adding minerals processing infrastructure in the wider region, as well as and extensive supply chain and a highly dispersed direct and indirect employment effect in Mount Isa, other proximate regional centres and Brisbane.

5 Broadly, reserves are the component of mineral resources that are deemed economically viable. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Objectives The Council has adopted a series of seven objectives to underpin the scope and implementation of the Strategy. The objectives are to: ■

attract and facilitate new investment

■

expand employment

■

increase economic and social resilience

■

grow and diversify the economy

■

create enhanced opportunity

■

demonstrate Council’s commitment to economic development

■

provide direction to policymakers at the state and federal levels.

Principles The Council has adopted a number of principles to guide the preparation of the Strategy. The guiding principles are that: ■

the Council will attach utmost importance to providing local leadership

■

the strategy will be concise and action-focused

■

economic diversification will be a key theme of the strategy

■

the Council will position itself as a partner with other levels of government

■

the Council will collaborate extensively with the private sector.

Scope The Council intends to be ambitious as well as realistic in identifying the opportunities, challenges and risks to be pursued and addressed in this Strategy. The Strategy will seek to manage these challenges, to mitigate the risks to existing business and investment in the region, and to take advantage of new opportunities for an expanded and diversified future for the region.

The scope of the Strategy covers the following elements: ■

understanding Mount Isa’s economy and outlook

■

clarifying Mount Isa’s linkages to the regional and national economy

■

identifying Mount Isa’s value creation opportunities

■

defining and prioritising these opportunities

■

maintaining an implementation plan for the Strategy.

Timetable The Strategy will have a three-year life, running from the start of 2017-18 to the end of 201920, to coincide with Council’s financial year and the electoral life of the current Council. In line www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

with its intention to be both ambitious and realistic, the Council has chosen a relatively brief life for the Strategy to ensure the Council maintains an action-oriented focus on concrete and near-term opportunities.

Implementation The Council will maintain a practical implementation tracking system of progress achieved in delivering the Strategy over the next three years. This implementation plan will include an ongoing series of specific, measurable and strategic actions and targets. To implement the Strategy, the Council will use existing internal resources as well as co-opt external experts.

The Council also intends to collaborate extensively with other levels of government, the Mount Isa community and the private sector.

www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

2 Mount Isa’s economy and outlook

The Mount Isa economy is built on a highly innovative mining industry and a world-class mining resource. In 2014-15, mining was directly accountable for over 55 percent of Mount Isa’s economy of $2.4 billion in value added. Indirectly, mining has provided a critical mass of industry and population base to support a thriving services sector. Mount Isa’s mining industry also supports the broader North West Minerals Province, underpinning the rationale for existing and future infrastructure investment, as well as through innovation in the processing sector and associated benefits for phosphate mining and fertiliser production. Yet the Mount Isa economy is facing a transitional period, with uncertainty around the future levels of mining investment and activity.

Mount Isa as a high value, mining-led economy In 2014-15, the Mount Isa economy was worth over $2.4 billion in value added terms (shown in table 2.1).6 This represents a contribution to value added per employee of approximately $204 000 per year in 2014-157, compared to $123 000 per employee across Queensland.8 6 Industry gross value added (GVA) refers to the total value of goods and services produced by an

industry after deducting the costs of goods and services used in the process of production. The CIE used ABS data on GVA by industry in 2014-15 to establish GVA per employee (full time equivalent), by industry at the national level. This is then scaled to reflect employment data by sector, by Local Government Area in 2011, as well as up-to-date mining employment data.

This approach was chosen because there are no direct GVA data for the local mining industry and because the parameter of GVA per employee appears stable across commodities.

7 This is taken across the 10 950 persons employed in 2016. www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

The Mount Isa economy is built on a world-class mining resource continuously mined since the early 1920s, directly generating $1.3 billion in value added terms in 2014-15. This is predominantly comprised of: ■

copper ore mining, representing $784.2 million in value added terms

■

silver-lead-zinc ore mining, representing $343.6 million in value added terms.

The mining sector has enabled a range of other industries to operate successfully in Mount Isa, either directly through mining-led service demand, or indirectly by providing a critical base of population and skills. The value, depth and quality of these services and other industries is largely underpinned by Mount Isa’s mining industry. This includes: A.1

Mount Isa gross value added 2014-15

Sector

Mount Isa LGA $m

Agriculture

28.0

Coal

6.7

Oil

3.0

Gas

3.0

Iron ore mining

21.3

Copper ore mining

784.2

Gold ore mining

115.8

Mineral sand mining Silver-lead-zinc ore mining

343.6

Bauxite, nickel ore and other metal ore mining

1.4

Non-metallic mineral mining and quarrying

2.7

Exploration and other mining support services

58.6

Electricity

53.2

Other utilities

7.2

Manufacturing

68.0

Construction

176.9

Services

759.4

Total

2 434

Mining excluding manufacturing

1 341.0 %

Share of mining excluding manufacturing

55

a Additional region of importance to Mount Isa (due to Cannington Mine).

Note: Century mine is included, although it is technically in the Burke Shire, with its last year of production being 2015.

Source: The CIE.

■

both a copper and a lead smelter in Mount Isa, operated as a part of the Mount Isa underground mine operations owned by Glencore.9 The copper smelter is essential to

8 In 2014-15, Queensland’s total industrial value added in 2014-15 was $288 806 million, across

2.32 million employees based on ABS State Accounts.

9 Glencore is a global mining company, producing copper, zinc and lead, nickel, ferro alloys,

alumina and aluminium, coal and oil, as well as agricultural products. Glencore operates in www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

both Mount Isa and the region, as it provides the sulphuric acid, produced as a by-product of smelting, used by Phosphate Hill10 to make fertiliser ■

a thriving services sector, worth $759 million in value added terms per year, which is essentially driven by the mining sector but also by the demand for services from across a wide area of northern Australia

■

a ‘hub’ of demand and supply for services including business, health, education, retail and wholesaling, transport, mechanical repairs and hotels and restaurants/cafes.

An economy built on cornerstone mines The cornerstone of the mining industry in Mount Isa has been its giant mines (shown in table 2.2), including the Mount Isa underground mine and open pit operations. The Mount Isa underground copper mine is the largest copper mine in Queensland. It has historically produced copper of a very high ore grade of 2.3 per cent, which compares to a more typical global standard of 1 per cent. Other significant mines are the Mount Isa Mines silver-leadzinc mine and the George Fisher mine, owned by Xstrata.

A.1

Mount Isa copper, silver, lead and zinc production2014-15 Copper

Silver

Lead

Zinc

kt

kt

kt

Kt

0.75

0.51

1.1

Century

Potential mine life (if not extended)

2015-16 (closed)

Lady Annie

25a

2017-18

Mount Isa underground

163

2019-20

Mount Isa silver-lead-zinc mine

23.2

11.1

15.6

2034-35

George Fisher

15.3

8.9

17.0

2034-35

a Production expected to be low at around 9 kt per year as the mine nears end of life Source: The CIE

The North West Minerals Province delivers most of the copper and silver-lead-zinc metal in Queensland. As shown in table 2.3, the North West Minerals Province accounts for close to all of the State’s copper production. The Mount Isa underground copper mine is by far the largest contributor to copper production in the North West Minerals Province. However, the contribution of the NWMP to Australia’s total copper production is only 30 per cent.

A.2

Production of copper metal at mines in Queensland kt

Mine

Subregion

2014-15

2015-16

2016-17

Mt Isa underground

Mount Isa

163

163

163

over 50 countries with over 155 000 employees, and are listed on the London, Hong Kong and Johannesburg stock exchanges.

10 Phosphate Hill is Incitec Pivot’s site for the manufacture of ammonium phosphate fertiliser,

located in the Cloncurry LGA. To make fertiliser it currently uses the sulphuric dioxide (transformed to sulphuric acid) supplied by the Mount Isa copper smelter. www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.3

Estimated production of lead and zinc metal at mines in Queensland, base case

kt Deposit (Region)

Lead production 2014–15

2015–16

Zinc production 2016–17

2014–15

2015–16

2016–17

Century (Mount Isa)

68

47

0

464

211

0

Mount Isa (Mount Isa)

84

84

84

243

243

242.8

George Fisher (Mount Isa)

45

17

0a

129

49

0a

Lady Loretta (Mount Isa)

40

15

0

116

43

0

220

208

208

112

120

120

Other

4

0

0

8

13

0

Total

461

370

291

1 071

679

362

Cannington (McKinlay)

a The CIE’s modelling of the base case reflects 2014-15 data, and incorporates the cessation of mining production at the George Fisher and Lady Loretta mines. Glencore announced a cessation of mining production at both mines in late 2015; however, the CIE notes that the George Fisher mine has become operational again, as indicated by stakeholder consultation and company reports.

Source: Bureau of Resources and Energy Economics; company reports; media reports; CIE estimates.

Lady Annie

Mount Isa

25

9

9

Mt Isa open pit

Mount Isa

0

0

0

Eloise

Cloncurry

13

13

13

Osborne

Cloncurry

25

25

25

Ernest Henry

Cloncurry

50

50

50

Total for North West Minerals Province

276

260

260

Total QLD

287

260

260

Source: CIE estimates and various data.

Table 2.4 shows the dominance of the Mount Isa province in Queensland’s lead and zinc production. Mount Isa plus the Cannington mine in the McKinlay Local Government Area (LGA) accounted for 100 per cent of lead production in 2015-16, and over 98 per cent of zinc production in that same year. Dugald River in the Cloncurry region, primarily producing zinc, will account for upwards of 152kt in lead and zinc production from 2017-18. Glencore announced a cessation of mining production at George Fisher and Lady Loretta in late 2015. However, the CIE understands that the mining operations at George Fisher have now recommenced11, producing a modest share of overall lead and zinc mining output.

Cannington mine produces lead and zinc concentrates with a high silver content, attracting additional royalties on the silver content that is not identified in the Table 2.4.

High value adding employment and innovation Mount Isa supports high value adding employment for its workers and is largest population and employment base in inland regional Queensland with the exception of Toowoomba.

There were approximately 10 950 employees in Mount Isa in 2016.12 Wages of $372 million 11 See Glencore, 2017. Mine to Market, No. 152, March/April 2017.

12 Estimated using the ABS labour force data and the unemployment rate. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

were paid to mining industry employees or an average of $132 800 per full time equivalent employee in 2015-16.13 Payments to contractors, including labour, capital and materials components, are additional.

Indirect expenditure and consumption-induced effects flowing from the mining industry has a significant impact on employment in Mount Isa. Roughly, one-third of all employees are directly involved in mining, predominantly Metal Ore Mining14, with the mining industry indirectly supporting the remaining two-thirds of employees working across non-mining areas.

Mount Isa’s mining industry has been highly innovative in both mining and processing operations. For instance, Mount Isa Mines has been a great innovator across a range of areas including underground mining techniques, the scale of blasting use, mine fill and tailings disposal techniques, the automation of processing and control facilities, and the development of new equipment and techniques for fine particle flotation. In addition, Mount Isa Mines has developed techniques to successfully recover sulphuric acid as a part of its normal production cycle for use in the production of fertiliser at Phosphate Hill.

However, unemployment in Mount Isa has been increasing over the last several years. In December 2016, the estimated labour force of Mount Isa was 11 926 persons, with an unemployment rate of approximately 8.2 per cent. 15 Unemployment has been worsening since 2013.16 As a result the town has also slightly declined in size by about 800 residents from its peak in 2013 of 22 780 residents.17

A transitional period for mining and minerals processing The Mount Isa region and the North West Minerals Province is facing a transitional period, with uncertainty around the future levels of mining investment and operational activity. The Mount Isa region has already endured the closure of the Century zinc mine in 2015.

Importantly, there has been no commitment to the continuation of Queensland’s major copper mine in Mount Isa from 2019-2018 and indeed there are occasional messages from Glencore about the possibility that it will need to close its smelters.

13 Queensland Resource Council, 2017. ‘What are resources worth to Mount Isa: 2015-16

financial year’, https://www.qrc.org.au/wp-content/uploads/2016/10/MountIsa_LGA_2016-1.pdf 14 According to the Working Population Profile for Mount Isa, supplied by the latest (2011) ABS

Census of Population and Housing.

15 Australia Department of Employment Labour Market Information Portal, ‘Mt Isa: Unemployment

rate time series, December 2016’.

16 Department of Employment, 2017. ‘Labour Market Portal: Mt Isa: Unemployment Rate Time

Series, December 2016’.

17 Queensland Treasury, 2017. Queensland Regional Profiles: Mount Isa (C) Local Government

Area (LGA), Queensland Government Statistician’s Office.

18 The end of production for the Mt Isa Copper Mine is calculated using production and reserves

data contained in 2015 production and resources and reserve reports of Glencore (production continues until reserves are exhausted) www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.1

Mount Isa baseline mining sector value added 1400 1200

Mining value added ($m)

14

1000 800

600 400

200 0 2014-15

2019-20

2024-25

Other Metal Ores

2029-30 Other Mining

2034-35 Chemicals

2039-40

2044-45

Other Metals

Note: Includes non-metallic mineral mining and quarrying as well as exploration. Other metal ores include zinc, copper, gold and silver.

Bottoms up modelling is undertaken for key industries including copper, silver-lead-zinc, phosphate and fertiliser, however gold gross value added was assumed to be constant.

Data source: The CIE.

The major economic driver for the potential closure of the Mount Isa copper mine is the exhaustion of high-grade copper reserves. The ongoing operation of the copper mine supports smelting and refining activities in Mount Isa and Townsville.

Similar transitional periods are being faced in the neighbouring regions of Cloncurry and McKinlay with an uncertain outlook for Cannington mine in McKinlay from 2020-2119 and for Ernest Henry mine in Cloncurry beyond 2027-28. This cumulative uncertainty adversely affects future infrastructure planning and investment in the region. In addition to the risks facing Mount Isa specifically, the entire North West Minerals Province faces a decline in minerals production over the medium term, from 3.5 Mt in 2014 to 2.1 Mt by 2022 (under the baseline outlook).20 The outlook for mining in Mount Isa, based on company announcements and the mining of ‘bankable’ resources, is shown in chart 2.5. While phosphate rock production is expected to increase (as shown in red), resulting from developments at Paradise and Paradise South projects, the announced reserves across existing zinc, copper, gold and silver (classed as ‘Other Metal Ores’) mining operations suggests a significant decrease over the next 10 years.

■ However, strong demand from China and India as well as the continuing availability of minerals in the Mount Isa region supports a different outlook (discussed in chapter 3).

19 The end of mine production at Cannington is calculated using production and reserves data

contained in 2015-16 annual report of South 32 (production continues until reserves are exhausted) 20 The CIE, 2017. Economic analysis of the Mount Isa to Tennant Creek Railway. Prepared for

MITCR Procurement Oversight Committee. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

The recent announcement of Sun Metals’ expansion of their refinery capacity 21 in Townsville will be positive for Mount Isa, with some zinc concentrate produced from Mount Isa being refined at Sun Metals.

The non-mining economy The non-mining industry in Mount Isa is comprised of services, construction, utilities and agriculture. Agriculture is the only sector in Mount Isa’s economy that is relatively independent of mining-led economic activity and the population and skills base that it supports. However, agricultural value added currently represents a very small share of Mount Isa’s economy, and one that is dependent on cattle.

The northern areas of Australia have vast amounts of undeveloped land, currently used mainly for grazing. Agricultural land is either used extensively, with very low stocking rates, or not grazed or utilised. This is similarly the case for Mount Isa and neighbouring Local Government Areas across inland northern Queensland, where minimal cropping activity occurs. This means that there is a highly limited ability to increase stocking rates, and the region is dependent on southern feedlots for finishing.

Table 2.6 shows the high contribution of livestock to agricultural value added in Mount Isa and across all inland regions from Mount Isa to Charters Towers.

Currently aquaculture in Queensland is conducted primarily along the coastal regions in the Northern, Far North and Brisbane/Moreton Bay areas. However, the CSIRO has recognised that there is an opportunity for inland freshwater aquaculture. Environmental factors make the Gulf of Carpentaria (including the Leichhardt River) a favourable location for aquaculture, however, its development may be limited without accompanying infrastructure investment to facilitate its transportation to markets.22 A.1

Agricultural value added in Mount Isa and the broader economic corridor

Livestock

Mount Isa

Broader economic corridor a

$m

$m

24.6

253.0

Crops

2.0

Forestry Fishing

3.3

14.2

a Includes LGAs of Charters Towers, Flinders, Richmond, McKinlay, Cloncurry and Mount Isa. Excludes Townsville.

Note: Based on 2014-15.

Source: The CIE.

21 Townsville Bulletin, 2017. ‘Sun Metals in Townsville investing in solar as part of power

upgrade’.

22 The CIE, 2013. Aquaculture in Queensland: Prioritising regulatory reform. Queensland Office of

Best Practice Regulation. www.mountisa.qld.gov.au

15

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

3 An economic hub of national importance

Mount Isa is the largest inland city in northern Australia. It is a critical services, logistics and resource sector hub, making it a strategically important for the Queensland and Australian governments’ vision for developing northern Australia. Mount Isa and the North West Minerals Province are also critically important to the Townsville economy due to downstream benefits from mining processing and transportation services, and the associated impact on employment demand. The Mount Isa economy also produces substantial employment in Brisbane. Based on CIE modelling, the Mount Isa economy contributed $212.8 million to Queensland taxes and $808.0 million to Federal Government taxes in 2015-16. All levels of government — local, state and federal — will be required to respond to the challenges facing Mount Isa and to collaborate to take advantage of opportunities.

Mount Isa as an inland services, logistics and resource sector hub Mount Isa’s location and established role as an infrastructure hub for the greater region make it a strategically important city for the Australian and Queensland governments’ northern Australia development agenda. For example, Mount Isa is the only regional base for north Queensland outside of Cairns for the Royal Flying Doctors Service, and services the Gulf, the Barkly Tablelands in the Northern Territory, as far east as Hughenden and as far south as Bedourie. Further, the North West Hospital and Health Service in Mount Isa covers an area

www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

of over 300 000 square kilometres and services the rural and remote communities within North Western Queensland and the Gulf of Carpentaria. 23 Due to its established role as an infrastructure hub, Mount Isa is well positioned both with respect to the commitment to northern Australia and to the expansion of private sector enterprise. Chart 3.1 shows that Mount Isa is the largest population base in the inland of Australia’s north, stretching 780 kilometres east to Cairns and Townsville, 1476 kilometres south-east to Toowoomba, 1302 kilometres to Darwin and 666 kilometres to Alice Springs.

A.1

Distance required to travel from Mount Isa to population centres of similar size

Note: Estimates are to the nearest 1000.

Data source: http://blog.id.com.au/2016/population/australian-population/latest-population-figures-top-50-largest-cities-and-towns-inaustralia/

Mount Isa is important to neighbouring Cloncurry and McKinlay The various Local Government Areas (LGAs) of the North West Minerals Province24 depend on each other for the critical scale to support the underlying infrastructure as well as the case for future investment by the private and public sectors in this region. The various LGAs 23 Queensland Health, 2013. Mount Isa Health and Hospital Service

https://www.health.qld.gov.au/mt_isa 24 The North West Minerals Province includes both the Mount Isa and Cloncurry Local

Government Areas, with neighbouring McKinlay (and the giant ‘Cannington mine’) adjoining Cloncurry. www.mountisa.qld.gov.au

17

Mount Isa Economic Development Strategy 2017–18 to 2019–20

mutually benefit from the demand and supply of services based predominantly in Mount Isa, particularly in mining support, health, education and transportation. Therefore, Cloncurry and McKinlay are likely to respond positively to the types of policies and investments needed to promote investment and diversification in Mount Isa. Cloncurry’s economy of $635.9 million in value added terms in 2014-15 is highly dependent on the Ernest Henry copper mine and the remaining ‘giant’ resource, Dugald River, which is scheduled to commence operations in 2018 and continue until 2035. The McKinlay economy that is worth $379.7 million in value added terms is dependent on the Cannington lead mine, which is scheduled to close in 2019-20.25 Chart 3.2 shows the outlook for minerals value added in Cloncurry and McKinlay LGAs, based on mining of available reserves26 with no further mining of the (otherwise available) measured and indicated resources.

A.1

Baseline outlook for minerals value added, Cloncurry and McKinlay LGAs 1000 Cloncurry

Minerals value added ($m)

18

McKinlay

800

600

400

200

0 2014-15

2019-20

2024-25

2029-30

2034-35

2039-40

Data source: The CIE.

The possible closure of the Mount Isa Mines copper smelter in 202227 would increase Phosphate Hill’s costs because the plant would have to either bring in more sulphuric acid from Townsville or, more likely, be reconfigured to burn more imported sulphur. This could change the viability of Phosphate Hill and have a potentially dampening effect on the development of phosphate rock resources throughout the Mount Isa and Cloncurry regions at Korella and Paradise South and the associated benefits from their development over the next 30 to 50 years.

25 Calculated using production and reserves data contained in 2015-16 annual report of South 32

(production continues until reserves are exhausted).

26 Broadly, reserves are the component of mineral resources that are deemed economically

viable. Therefore, to construct a ‘baseline’ for production we simply assume the mines produce at their current rates until all reserves are exhausted.

27 Glencore, 2015. ‘Mount Isa Mines copper smelter and Townsville copper refinery extension

announcement’, 10 November 2015, http://www.glencore.com/media/news/p/mount-isa-minescopper-smelter-and-townsville-copper-refinery-extension-announcement. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Mount Isa’s importance to Townsville’s economy Mount Isa and the broader North West Minerals Province is of great importance to Townsville and, to a lesser extent, Cairns. This is particularly the case given the high levels of unemployment currently experienced in Townsville of around 11.3 per cent in March 2017, representing an increase of 32 per cent over the previous 12 months.28 The Mount Isa region supports high value adding employment in Townsville. The Mount Isa Mines copper mine currently supports a refinery in Townsville, employing 180-200 people directly, with estimates of a further 800 jobs indirectly flowing from the smelter and refinery. 29 This represents over 1 per cent of the 98 700 persons employed in Townsville in March 2017.

Additionally, mining activity in the North West Minerals Province directly supports demand by its workers for housing (and associated services) in Townsville. This is particularly important noting that house prices in Townsville have recently fallen by 3.5 per cent between December 2015 to December 2016 and are vulnerable to further downward pressure arising from any shocks to employment – and Townsville already benefits from very high levels of steady public sector spending in sectors like defence, education and health.

Mount Isa also creates substantial demand for port services and infrastructure in Townsville.

In 2016, the contribution of the transportation, postal and warehousing sectors to Townsville’s economy was over $0.56 billion. This represented around 5.4 per cent of industrial value added, down from 7 per cent four years prior. It has been estimated that there are over 4 500 jobs associated with transport, postal and warehousing in Townsville. 30 Chart 3.3 shows the impact of a fall in mining-related demand on imports (and container freight demand) and exports at the Port of Townsville. In 2015-16, the port processed 9.2 Mt, which was 30 per cent lower than the peak in 2011-12.

28 Queensland Treasury, 2017. ‘Labour force — Townsville SA4, March 2017’. Queensland

Government’s Statistician’s Office. Available at http://www.qgso.qld.gov.au/products/reports/reg-labour-force/townsville-201703.pdf 29 ABC North Queensland, 2015. ‘Glencore’s Mount Isa copper smelter, Townsville refinery to

stay open until 2022’, Available at: http://www.abc.net.au/news/2015-11-10/north-queenslandglencore-copper-smelter-and-refinery-to-stay/6927016 30 Port of Townsville, 2015. Port operations, intermodal freight and storage.

https://www.townsville.qld.gov.au/__data/assets/pdf_file/0024/9357/PDI0302-001-Portoperations-intermodal-freight-and-storage-information-sheet.pdf www.mountisa.qld.gov.au

19

Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.1

Throughput of the port of Townsville, 2007–08 to 2015–16 14 Exports plus imports

Exports

12 10

mt

20

8 6 4 2

0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Note: Includes volumes for the Townsville nickel refinery.

Data source: Queensland Department of Transport and Main Roads, Trade statistics for Queensland ports and port of Townsville.

Importance of Mount Isa to Queensland and Australia Mount Isa’s economy has far-reaching impacts on Queensland’s economy and the rest of Australia through generating business and consumption demand and associated employment and taxation.

Contribution to royalties and other state taxes Mount Isa delivers significant revenues to Queensland, through royalties, payroll taxes and land taxes as well as excise duties. In 2015-16, Mount Isa contributed: ■

over $95 million in royalties to the Queensland Treasury 31 or approximately 9 per cent of the value added from mining sectoral value added

■

a further $118 million in other state revenue, mostly payroll and land taxes, attributed to business sector demand and consumption effects across Mount Isa and the rest of Queensland.

The CIE estimates that the total contribution of Mount Isa’s mining industry to taxation for Queensland in 2015-16 was $212.8 million (and this is reflecting a recent fall in mining production).

Additionally, Cloncurry and McKinlay provided a further $164 million in royalty revenue in that year, according to the Queensland Resources Council (QRC).32 Therefore, the North West Minerals Province (including McKinlay) delivered over $259 million in royalty revenue in 2015-16 or 12 per cent of total royalties collected in Queensland.33 31 See Queensland Resources Council, 2017. ‘Regions’.

https://www.qrc.org.au/contributiontoqueensland/regions/ 32 Ibid.

33 Ibid. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Employment in Brisbane Mining activities in Mount Isa generate a huge impact on the workforce and economic prosperity in Brisbane. Around 22 per cent of Queensland’s direct mining industry workforce resides in Brisbane.34 Based on the share of full time equivalent employees in Mount Isa, compared to other regions of Queensland, we can estimate that the Mount Isa mining industry generated around 800 full time equivalent employees in Brisbane.35 It has been estimated that in 2015-16, the direct and indirect employment generated in Brisbane from the overall minerals and energy sector was 153 445 jobs. Applying the same approach, we estimate that Mount Isa’s overall direct and indirect contribution to this was at least 6.7 per cent or 10 280 full time equivalent (FTE) employees in Brisbane, supported indirectly through induced demand from economic activity in Mount Isa.36

Taxation collected for the Commonwealth Moreover, Mount Isa’s mining sector contributes significantly to the national economy, particularly via company and personal income taxation streams. The CIE estimates that the direct and indirect contribution of minerals value added in Mount Isa to Australian Government taxation including from business and consumption-induced demand was approximately $1.03 billion in 2014-15, falling to $0.81 billion in 2015-16.

Impact of mining activity on other industries A declining economy in Mount Isa would not attract transformative and catalytic investments, including, for example, for the progression of a gas pipeline extension from Mount Isa to Wallumbilla. Previously, for instance, Mount Isa was selected over Moomba for the Northern Gas Pipeline, largely based on the existence of supplementary industries around Mount Isa and the North West Minerals Province such as Incitec Pivot. The Northern Gas Pipeline, due for completion in 2018, will connect the Northern Territory gas supplies for the first time with the LNG infrastructure and gas supply grid of eastern Australia.

The Northern Territory Government’s Power and Water Corporation will use a gas sales agreement (for surplus gas) with Incitec Pivot Limited to lock in guaranteed gas supply for approximately 10 years from the completion of the Northern Gas Pipeline (by Jemena). The investment is estimated to be in the order of $800 million to construct the pipeline, funded by the private sector, and will support maintenance and operation teams in both Tennant Creek and Mount Isa.37 As gas reserves become proven in the Northern Territory and in the

34 Using Lawrence Consulting, 2016. Economic contribution of the minerals and energy sector to

the Queensland economy 2015-16. Prepared for the Queensland Resources Council, October 2016.

35 This represents 10.6 per cent of the 7 530 full time equivalent mining and energy sector

employees in Brisbane in 2015-16 (estimated by Lawrence Consulting, 2016).

36 Using Lawrence Consulting, 2016.

37 Anderson, C., 2015. ‘Northern Territory announces Jemena to build gas pipeline to the east

coast gas supply grid.’ https://www.linkedin.com/pulse/northern-territory-announces-jemenabuild-gas-east-coast-anderson www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Georgina Basin, Jemena may consider building a further link connecting Mount Isa to the Wallumbilla gas hub (east of Roma) in Queensland.38

State and Federal policy agendas relevant to Mount Isa As the analysis shows, Mount Isa is critically important to the future economic performance of Queensland and northern Australia. There are a number of key State and Federal Government policy agendas, which are highly relevant to Mount Isa. ■ There is a high-priority commitment to northern Australia and north Queensland by the Australian Government and the Queensland Government, respectively. The Council is determined to be a constructive implementation partner for the State and Federal governments in successfully delivering against these commitments.

Key policy agendas among these are: ■

the Australian Government’s White Paper on Developing Northern Australia. The White Paper agenda includes 54 programs such as, for example, the Northern Australia Roads Program, the Northern Australia Beef Roads Program, the Cooperative Research Centre for Developing Northern Australia, the National Water Infrastructure Development Fund, and the Northern Australia Infrastructure Facility

■

the Queensland Government’s Advancing North Queensland: Investing in the Future of the North which targeted five priorities in north Queensland including roads, water, innovation and tourism.

In addition, there are several specific State and Federal policy issues that relate to Mount Isa. These include, for example: ■

the feasibility study relating to the proposed ‘missing link’ in the national rail freight network — the Mount Isa to Tenant Creek Rail Link and the associated reforms proposed to build economic activity in the economic development zone (shown in chart 3.4)

■

the North West Minerals Province Strategic Blueprint

■

investments in Flinders and Barkly highways

■

the Queensland Trade and Investment Strategy 2017-2022, Advancing Trade and Investment, which includes a dedicated, focus on north Queensland.

The proposed economic development zone between Mount Isa and Tennant Creek is shown in chart 3.4.

38 Anderson, C., 2015. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.1

Proposed economic development zone

Note: The black and white dotted line is only an indicative possible route for the MITCR. Data source: Advisian, 2016.

More broadly, the policy settings of all levels of Government influence private sector investment decisions in Mount Isa. While commodity prices and global demand and supply for commodities are outside of the control of government, it is estimated that around 40 per cent of the decision to invest in mining is not due to the prospectiveness of the mine, but the governance arrangements incorporating both risk and competitiveness. 39 Table 3.5 summarises the interface between local, state and federal government settings and agendas with Mount Isa’s business environment.

39 Fraser Institute, 2017. Fraser Institute Annual Survey of Mining Companies 2016, February

2017m By Taylor Jackson and Kenneth Green, Available at: https://www.fraserinstitute.org/sites/default/files/survey-of-mining-companies-2016.pdf www.mountisa.qld.gov.au

23

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.2

Interaction of the Mount Isa economy with Government priorities and settings

Government

Areas of influence on the Mount Isa economy

Local

Water rates (set by the Water Board) Council rates Information on conducting business in the region

State

Regulations around port infrastructure, rail infrastructure and monopoly infrastructure providers Project approvals processes including exploration/mine development and environmental Property rights including security, tradability, bankability, ability to subdivide and ability to perform the highest value use across the property Progression of Indigenous land right determination, and centralisation of database for land rights Investment in road, rail, air services and the facilitation of (and investment in) energy supply (gas/electricity) to promote efficiency and contestability in infrastructure delivery Allocation of water, including high reliability water, and investment in water storage Spending of royalties on regions e.g. ‘Royalties for Regions’ The North West Minerals Province Strategic Blueprint Queensland Trade and Investment Strategy 2017-2022 — Advancing Trade and Investment, which includes a dedicated, focus on north Queensland The Queensland Government’s Advancing North Queensland: Investing in the Future of the North which targeted five priorities in north Queensland including roads, water, innovation and tourism.

State/Federal Precompetitive geoscientific data and information including capture and delivery, value add research, underexplored/covered regions, and targeted programs The development of the Mount Isa to Tennant Creek Railway Federal

Human and intellectual capital (education and training), research and development and skilled migration programs Investment in regional services such as schools, hospitals, medical and dental services, maternity services, allied health services and pharmacy The Northern Australia agenda articulated in the Australian Government’s White Paper on Developing Northern Australia, including programs such as the Northern Australia Infrastructure Fund.

Source: The CIE.

www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

4 Mount Isa’s Key Value Creation Opportunities

While the outlook for Mount Isa based on mining company announcements is for a reduction in mining-based economic activity, the demand and supply of minerals would suggest that, even with a moderate price outlook, the contribution of mining to the Mount Isa economy could be broadly sustained at current levels. In light of the globally competitive environment for mining investment, there is likely to be a significant payoff from efforts by policy makers at all levels of government to promote a low risk, attractive environment in the North West Minerals Province. Securing future investment could be worth an additional $373 million in tax each year for the State and Federal Governments under low commodity prices, and $739 million under moderate commodity prices, on average over the next 30 years.

Simultaneously, the need for diversification of the Mount Isa economy is clear – to promote economic and social resilience. Opportunities exist in Mount Isa to diversify the number and size of businesses in the minerals sector, to explore and develop future opportunities in mining, gas and renewable energy, to invest in irrigated agriculture and its potential benefits for the cattle industry in Mount Isa, and to build a broad-based economy across tourism, aquaculture and services.

The importance of diversification The Mount Isa economy has not significantly diversified beyond the foundational industry of mining and minerals processing, and the mining industry itself is concentrated around several key mines. A relatively small number of large players dominate total mining production and www.mountisa.qld.gov.au

25

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

employment in the North West Minerals Province. In Mount Isa, there is a heavy reliance on Mount Isa Mines (MIM), owned by Glencore, with an estimated 9 280 jobs linked to both MIM’s mining and processing operations and indirect job creation.40 Across the broader NWMP, there is also now a heavy reliance on the continued production and profitability of Phosphate Hill and Dugald River.

The advantages of these projects include their access to ‘giant’ resources in terms of both size and resource quality, the long period over which they have been established and operational, and their inclusion in global corporate structures. However, the risks to Mount Isa of this high degree of concentration are exacerbated by the lack of new entrants into the mining sector. A relatively small number of mines are now in the pipeline and in a position to be in commercial production over the next five to seven years.

Over the last 10 years since the GFC, many projects have been put on hold or abandoned for various reasons, including falling prices and the risks associated with operating in a remote and high-cost environment. Many observers await the discovery of the next ‘giant’ resource to reverse these trends. However, it is a priority to reduce the region’s reliance on the incumbents by increasing the number and diversity of businesses in the minerals sector.

Economic resource potential of mining Mount Isa continues to have substantial unexploited mining resources and thus has the potential to continue to add significant value to the local, Queensland and national economies. While the ‘baseline’ outlook presented in chapter 2 suggests that mining value added in Mount Isa may be halved by 2019-20, chart 4.1 shows the alternative outlook for Mount Isa based on the development of measured and inferred resources, and reflecting various global commodity price scenarios. While base metal prices have, on average, increased by 3.4 per cent in real terms between 1990 and 2016, the low, medium and high scenarios assume real price growth of 1.0 per cent, 1.5 per cent and 2.5 per cent, respectively.

The potential of the Mount Isa economy beyond the ‘baseline’ outlook, which is based on production at existing mines based on available reserves and no new developments, depends on the commitment of companies to develop both the known resources, and resources that have yet to be discovered. Indications are that substantial mining potential remains and that further work will confirm those resources.

40 Modelling by Elliott Whiteing and AEC Group, 2014. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.1

Minerals value added in the Mount Isa region 1800

Mining value added ($m)

1600 1400 1200 1000 800 600 400 200 0 2014-15

2019-20 Baseline

2024-25

2029-30 Low

2034-35 Medium

2039-40

2044-45

High

a Excludes non-metallic mineral mining and quarrying (such as construction materials).

Note: Under the ‘baseline’ the production of minerals is limited to large mines that are currently operational, plus the addition of phosphate rock mining at Paradise and Paradise South. Mines are assumed to produce until their demonstrated reserves are exhausted or the announced end of mine life. The ‘Low’ scenario is modelled to reflect the development of economic resources via extension of the operational lives of existing mines and development of mines close to production. The CIE’s quantification of these ‘economic resources’ relies on publicly available information and data from the Joint Ore Reserves Committee and from published annual reports, prospectuses and media releases.

Data source: The CIE

There are enormous economic and social risks associated with allowing Mount Isa to significantly contract, which include the potential loss of a critical mass of mining and processing capabilities, skills, and services (and in turn, a loss of infrastructure investment) while bankable resources are confirmed. This could potentially make it more expensive for companies to choose Mount Isa as a destination for investment, relative to domestic and international alternatives in the future.

Provided that companies commit to the development of resources, presumed to need some further commitment to reforms that ‘de-risk’ investment in the minerals province and associated infrastructure corridor, then global prices will largely determine which of the outcomes shown in chart 4.1 are achieved.

■ In undiscounted terms, moving to the low scenario (compared to the baseline) is worth over $13.1 billion in value added up to 2044-45, or an average of $437 million per year, in value added terms.

■ Queensland would be expected to benefit from additional taxation revenue in the order of $1.2 billion to 2044-45, excluding royalties, or approximately $39.6 million per year.41 ■ The additional revenue for the Australian Government is expected to be $8.8 billion or approximately $294 million per year, on average, to 2044-45.

■ Further the impact of moving from the baseline to the medium scenario for both State and Federal Government taxation would be almost double.

41 There are significant challenges in estimating the potential improvement in royalty revenues

from further developing the regional mineral resources. These include the variable nature of royalties across specific commodities, royalty-free thresholds scaling with prices and deduction of ‘selected expenses’ for businesses. www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

The most optimistic price scenario, where commodity prices move to a level higher than before the GFC, will deliver even higher levels of production from major existing mines and will support new mines with lower quality/grade ore to be economical, such as Lady Loretta and Mount Gordan.

The long term potential for base metal mining is a function of international demand (which affects Australia via prices) and the ease of access to the resources. Commodity prices are driven by international supply and demand, factors which are normally outside of the control of governments.

Appendix A provides a summary of the key production scenarios underpinning the low and medium scenarios shown in chart 4.1.

Economic resource potential of gas Conventional and unconventional gas exploration is still at very early stages in north Queensland. The prospects that are relevant for the region are the Isa Superbasin, including shale gas at Lawn Hill, Termite Range and Riversleigh, as well as the northern part of the Georgina Basin (appendix B provides a map of these regions). However, there is limited understanding of the full potential of the area due to its remoteness and to land access, native title and other investment barriers.

Across both shale gas and oil, exploration in Queensland has been centred around the Isa Superbasin and Georgina, Cooper and Eromanga basins. The release is designed to attract junior and major explorers, and applicants are assessed according to their proposed exploration work programs. However, the latest four-year land release plan for exploration focuses on the Cooper and Eromanga Basins and not the Isa Basin.

Economic potential of intensified agriculture in the broader region The agricultural industry in Mount Isa and the broader Barkly region of north-west Queensland is limited to extensive cattle operations. The industry has adapted to a low feed and high risk environment by extending and integrating operations across large corporate producers with fattening properties and feedlots further south as well as through their large scale slaughter and marketing operations.

■ Producers are continually looking for opportunities to reduce their risk through access to additional markets.

■ There is a significant opportunity for the North West and Gulf regions to intensify and diversify its agricultural production.

In 2013, the CSIRO found the scope for irrigated developments in the Flinders Catchment to be substantial. The study found that large areas of potentially irrigable agricultural soils (more than 8 million hectares, 2 million of which is the most promising), with the ‘potential for an

www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

irrigation development totalling 10 000 to 20 000 hectares, supporting year-round mixed irrigated and dryland cropping’. 42 ■ If crops were grown to their potential, the regional gross margin of crop production could exceed $35 million per year, compared to virtually zero at present.

Despite the high risks of dryland production in the north’s challenging climate, the study found that dryland cropping has the potential as a component of irrigation development. The production of sorghum for grain or fodder could provide the cattle sector with the option of strategic feeding programs to target key markets and weight specification, and broaden narrow market windows.

■ The development of irrigated agriculture in the Flinders and Gilbert Catchments would allow for the production of supplementary feed sources for cattle in the Mount Isa region, and therefore would allow for the intensification of Mount Isa’s cattle industry. This has the potential to reduce seasonal and market risks by creating additional opportunities for holding or selling cattle, which would then increase cattle numbers and cattle turnoff, and the value of cattle turnoff.

■ In turn, the intensification of cattle production systems and demand for services associated with the broadening of agricultural activity would increase inter-regional trade in the Gulf and the North West.

Chart 4.2 shows alternative trajectories for the cattle industry in the regions surrounding Mount Isa43, reflecting the case where existing irrigation and cropping ventures already announced were completed. As commodity prices increase (from the low to the high scenario), this would support greater intensification of cattle and irrigation production. Small to medium size producers may reduce their high levels of dependence on selling into saleyards, ‘over the hooks’ or on consignment.

42 At the full storage potential of 350 GL, the water could be used to develop just 0.2 per cent of

the catchment’s irrigable soils. The irrigated area would not be contiguous, but would be in discrete irrigation areas of approximately 500–1 000 hectares each, distributed across the catchment.

43 The regions incorporated include Burke and Carpentaria and estimates of cattle numbers west

of Julia Creek. www.mountisa.qld.gov.au

29

Mount Isa Economic Development Strategy 2017–18 to 2019–20

A.1

Potential cattle turnoff from the Mount Isa region 250

200

Cattle turnoff (000 head)

30

150 Baseline Low

100

Medium High

50

2014-15

2019-20

2024-25

2029-30

2034-35

2039-40

Data source: The CIE.

The following would need to take place in order to capture these opportunities: ■

address the impediments caused by land tenure (pastoral leasehold) to allow intensive agriculture based on both large and small scale irrigation.

– At present, only businesses of corporate size have access to suitable land and are positioned to make the large investments needed to conduct intensive irrigated agriculture.

– To realise this potential, there must be the capacity to vary the use of, subdivide, sublease and borrow against land.

■

secure access to high reliability water

■

assist industry in water storage infrastructure planning, whereby offstream farm dams have been assessed as the most promising method for supporting large-scale irrigation.

Without significant improvements in the operational environment and market prospects for the cattle industry, the rebound in the cattle herd and beef production following the long period of drought recently could be delayed further into the future.

www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

5 The Five Strategic Pathways and initiatives

This Strategy aims to promote greater economic and social resilience through diversification of economic activity and businesses, reflecting key value creation opportunities, with and beyond minerals and energy exploration, production, processing and transmission, as well as the intensification of cattle production, tourism, aquaculture, gas and solar power generation.

Having set the objectives, principles and scope for the economic development strategy, the research, consultation and analysis showed that initiatives would fall within five distinct strategic pathways. The five strategic pathways – leading; partnering; diversifying; expanding; and, positioning for the future – and respective initiatives are listed below.

Leading Research shows that one of the key factors for success – perhaps the key factor – in local and regional economic development is local leadership. The Council believes it is well placed to provide the highest quality and united leadership to deliver the identified initiatives as well as provide overall leadership to deliver the economic development strategy over the next three years.

NWMP Strategic Blueprint — Council to act as implementing partner In light of some of the identified risks facing Mount Isa and the region, the Queensland Government has recently released its Strategic Blueprint, which includes a large number of initiatives designed to mitigate these risks and shore up the strength of the economy. This www.mountisa.qld.gov.au

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initiative by the Queensland Government is most welcome and is consistent with the thrust of the Mount Isa Economic Development Strategy. Accordingly, the Council has offered to act as a lead implementing partner to help ensure the successful delivery of the Strategic Blueprint initiatives.

Inter-governmental coordination committee for Mount Isa — Council to establish this safeguard and progress the future of Mount Isa As the analysis underpinning this Strategy shows, Mount Isa is a critically important economic and service centre for an enormous portion of northern Australia. Mount Isa’s success is therefore important to the nation. To ensure that all three levels of government are coordinating as effectively as possible to support business investment and effective public spending in Mount Isa, the Council proposes to establish and lead a standing coordination committee representing the three levels of government.

Mount Isa infrastructure coordinator — Council to establish this position to work across mining companies A perennial challenge in Mount Isa (but elsewhere too) is that various and competing resource sector projects and companies do not collaborate, even when there is private and public marginal benefit from doing so. This can cause higher costs for individual projects and companies, as well as higher costs to the public purse from provision on non-shared infrastructure such as water, roads, rail and power – often leading to delayed or aborted investments. To address this, Council proposes to appoint, using external funds, an independent infrastructure coordinator to help improve, without hindering competition, coordination relating to infrastructure use and investment.

Encourage publicly funded temporary co-investment support for MIM Mount Isa and many other resource-dependent communities are experiencing a global downturn in commodity prices and, therefore, investment. Given constraints on capital availability, these short term conditions can have significant long term implications. For example, hurdle rates for capital for a new investment completed on a project finance basis may not be met in the short term, thus jeopardising the long run, wider economic benefits of a project should it otherwise proceed. This is particularly relevant where localities are dependent on single major investments, this being Mount Isa Mines in Mount Isa’s case.

Accordingly and following recent conditional funding support from the Queensland Government for Mount Isa Mines, the Council proposes to lead endorsement for the State and Federal governments to be pre-disposed toward efficient co-investment support over the next three years for Mount Isa Mines.

Tennant Creek to Townsville Economic Development Corridor– Council to work with other governments to establish and lead this Recent analysis of the strategic options relating to the proposed Mount Isa to Tennant Creek Rail Corridor made it clear that the prospects of successful delivery of this rail link would be www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

profoundly enhanced by designating the region from Tennant Creek right through to Townsville as a distinct economic corridor. This would call for the design of a program of reforms and initiatives to ensure the corridor maximises its potential. Accordingly, the Council proposes to call for and lead the establishment of a designated body to promote the development of the Tennant Creek to Townsville economic development corridor.

Mount Isa to Wallumbilla gas pipeline — Council to facilitate private investment to bring northern gas to the east coast Currently, Australia’s gas supply is provided via a large pipe network mostly in the southeastern part of Australia, with Mount Isa at the northern (receiving) end of the existing network. The addition of a new pipeline running from Mount Isa to Wallumbilla would connect the larger north and north-western Australian gas reserves to the east coast. The Council could play an important leadership role in Jemena’s proposal to extend the pipeline to Wallumbilla, and for any other associated side developments that may arise, by assisting with the development approvals processes and consultation with other Councils and stakeholders.

The extension of the pipeline to Wallumbilla would enhance the benefits to Mount Isa of the Northern Gas Pipeline, such as through greater competition (resulting in cheaper gas), a reduction in the existing reliance on Moomba to connect to the eastern gas network, improved reliability of the gas network, and to support exploration and development of currently untapped gas reserves including in the Northern Territory. 44

Council to lead the 2019 Developing Northern Australia Forum in Mount Isa The Mount Isa City Council is motivated and positioned to provide high quality leadership across stakeholders involved in the development of Northern Australia. The annual conference is being held in Cairns in 2017, and will cover a range of issues including the Gateway to Asia and around food, agribusiness, tourism, resources and energy and health care. By providing leadership around the forum in a subsequent year, there will be the opportunity for the Council to engage with members of the political and business community, with the view of continuing to build on the current prominence of Mount Isa in the northern Australia agenda.

Partnering It is unquestionable that the success of this Economic Development Strategy will depend on the level of business endeavour and effective public spending in Mount Isa. The Council wants business to succeed. Accordingly, the Council has determined that it will partner diligently and collaboratively with existing and new partners to deliver initiatives that drive the economy and meet the various objectives of this economic development strategy.

44 Jemena, 2017. ‘Northern gas pipeline: Business briefings and open office’.

https://jemena.com.au/documents/pipeline/negi/presentations/jemena-ngp-business-briefingsand-open-office-moun www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

MIM-Council Joint Mount Isa Development Committee The Mount Isa Mine is central to the Mount Isa economy. It directly generates one-third of the jobs in Mount Isa and, indirectly, most of the remainder. It thus has an extraordinary level of responsibility beyond that of a normal investor or business. Its decisions relating to operations, investment and corporate social responsibility have a direct and immediate impact on the city of Mount Isa. However, information sharing with the Council has often been inconsistent and opaque, which has hindered the ability of the Council (and other levels of government) to make the best decisions in the interests of the community. Consistent with models elsewhere in the World, Council proposes to partner with Mount Isa Mines to jointly establish a standing MIM-Council Joint Mount Isa Development Committee to ensure information and programming is coordinated as effectively as possible.

The International Mining Museum 2023 In six years’ time, Mount Isa will celebrate one hundred years of mining in the World’s largest minerals province and in one of the longest running and largest mines. Mount Isa has a small visitor facility, Outback at Isa, which displays some of Mount Isa’s mining history. However, the centenary of mining in Mount Isa represents a landmark opportunity to consider the creation of a global scale international museum of mining. Such an institution would highlight the role of mining globally, and in Mount Isa, and build Mount Isa’s reputation as a tourist destination. Council proposes to form a committee with key representatives to explore and progress this concept, including the potential market, funding, museum scope, local and international partnerships, and design, before progressing further, all with a view to inaugurating a global-scale international museum of mining by 2023.

Partner with JCU and TAFE institutions on Mount Isa METS (Mining School) expertise development program In November 2016, the industry-led, government-funded strategic organisation called METS Ignited released an industry-led plan for the Australian mining equipment, technology and services (METS) sector. Its aim is to strengthen the Australian METS sector and help invigorate Australia’s position as a global hub for mining innovation. The Queensland Government has recognised this objective and is the only State Government to partner with the METS Ignited. Consistent with this objective, and given Mount Isa’s outstanding prominence in mining and long history in innovation, the Council would be well placed to partner with the James Cook University who have an existing campus in Mount Isa as well as the VETS sector to announce a leading Mount Isa METS expertise development program.

Japanese agricultural investment attraction In March 2017, the Queensland Government signed a memorandum of understanding with Japan’s Ministry of Agriculture, Forestry and Fisheries to boost agriculture and aquaculture projects in North Queensland. Council proposes to make a dedicated effort to capitalise on this new framework to attract Japanese investment into Mount Isa. The Council proposes to partner with Trade and Investment Queensland and the Department of Agriculture and Fisheries to identify and progress specific greenfield opportunities. (Separately, the Council

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

is also aware of Japanese interest in new investment in solar and geothermal power generation and will investigate this opportunity further.)

North West Minerals Province Resource database A centralised database on minerals and mining tenements in the North West Minerals Province would assist junior miners, exploration companies and new market entrants to access the opportunities available in the Province. This would directly benefit Mount Isa through the acceleration of project discovery and development. Part of the objective of this would be to make it easier for governments and companies to track which tenements of land have been released for exploration, the holder of those exploration and/or production leases and possibly to keep track of the exploration programs that have been committed to as a part of those leases.45 It would also provide the history and geology of the tenements, perhaps in partnership with the Department of Natural Resources and Mines and Geosciences Australia.

Council to create an Overlander Way Central Transit Point and Program The Council could work with partners to further expand on the Overlander Way, one of Queensland’s “Strategic Drives” and enhance Mount Isa’s role as a “Central Transit Point”.

There are many natural and historical attributes in and around Mount Isa that are not being fully exploited from a tourism perspective. An expanded program could include an allencompassing product including with maps, booking facilities, hotel options, suggested itineraries and packages, and position Mount Isa as a Central Transit Point, especially for the caravanning sector of the tourism market. While the Council would take the lead in its development, it would need to partner with other local councils and gather expert advice including from Tourism Queensland on tailoring the product to market requirements of various market segments.

Tennant Creek to Mount Isa cross-border commission The Mount Isa City Council has a highly receptive audience in the Northern Territory in relation to its agenda to promote investment in Northern Australia, and to support diversification within and across industries. The Council could benefit from collaborating with Tennant Creek in the Northern Territory to progress its joint interests. Jointly, the crossborder commission would focus on de-risking investment in the region. It would work collaboratively to promote the agenda to develop the region including coordinated investment in road and rail transport and other infrastructure, for joint activities to diversify their economies.

45 The 2017 Federal Government budget included an initiative to boost gas supplies, working with

the states to develop a ‘use it or lose it policy’ on gas deposit leases. Resource companies will have to surrender gas leases they fail to use. Such a model could be examined for transfer to the North West Minerals Province. www.mountisa.qld.gov.au

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Diversifying While the Mount Isa economy will always be driven by mining and associated economic activity, the Council views increased diversification of the economy, both within and outside of mining, as a way of building greater social and economic resilience. Moreover, the economic development strategy shows that there is considerable opportunity for investment in non-mining sectors.

Establish Mount Isa transport and logistics centre The Council’s proposed transport and logistics centre is a key part of the Council’s plan for economic diversification. The centre will take advantage of Mount Isa’s relatively abundant and low-cost land. The Council intends to ‘de-risk’ the centre by clearing the regulatory path for its development, such as through land ownership and approvals processes. It is anticipated that the centre will provide for increased connectivity and competition across transportation modes. The centre will be subject to a pre-feasibility study to understanding the drivers of and level of service demand and potential value for the potential industries in and around Mount Isa.

Help establish a Mount Isa campus of a North Queensland Flying School Mount Isa has substantial competitive advantages for pilot instruction. Mount Isa boasts a large airport tarmac, modern hangar and engineering facilities and dependable year-round weather. An expression of interest has been received from a flying school based in Townsville to significantly expand its operations in Mount Isa. This could potentially bring hundreds of training pilots, from Australia and overseas, to learn to fly in Mount Isa, which would increase demand for accommodation, airport services, engineering services, fuel and so on. Accordingly, the Council will cooperate with potential public and private partners, including TAFE, to try to drive new investment in this new sector of the local economy.

De-risk investment with an aquaculture feasibility study The Queensland Government confirmed in its 2016 Aquaculture Policy Statement that it supports the expansion of ecologically sustainable aquaculture in Queensland, including in fresh waters of north Queensland. The Queensland Government aquaculture policy allows for the creation of designated Aquaculture Development Areas, which are intended to help de-risk investment for new market entrants. Given the ongoing commitment to develop northern Australia and its infrastructure, Mount Isa may have a competitive advantage for the development of a successful aquaculture industry. Accordingly, and to test this assumption for possible aquaculture investors in Mount Isa, it is proposed that Council seek dedicated grant funding to test under what circumstances the development of an aquaculture industry in Mount Isa may be feasible.

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Northern Australia caravan and camper safety check An easy-to-achieve and relatively low cost strategy to attract caravan and campervan based tourism – the largest form of tourism in inland Australia – is to provide free safety checks. The investment, coupled with the Mount Isa “RV Park” could be part of regional promotions to attract vehicle tourism and to mitigate any concerns about road safety and isolation on the roads surrounding Mount Isa. Free caravan checks are currently offered in Brisbane, Toowoomba, Maryborough, Bundaberg, Rockhampton, Gladstone, and the Sunshine Coast.

This initiative may assist the Southern Savannah Way initiative.

Analyse Value of a new Mount Isa gas hub A single trading location, through the implementation of a new Wallumbilla-style gas exchange46, has the potential to increase gas market liquidity by allowing trading participants across different pipelines to more easily trade with each other. 47 Supply hubs have worked well in the United States and in Europe; improving trading liquidity, developing secondary markets, enabling third-party access to capacity and storage facilities, establishing forward price curves, and increasing information transparency to support efficient market outcomes.48 With additional gas to be supplied to Mount Isa and the Eastern gas market from the Northern Territory, as well as the existing pipeline to Moomba and the Jemena proposal for an extension to Wallumbilla, it would be worthwhile for the Council to investigate the business case for a ‘Wallumbilla-style’ gas exchange further.

Expanding Mount Isa has obvious strengths in the resources sector. Less well known is the importance of the services sector of the economy, as the analysis in this economic development strategy shows. As a companion strategic pathway to diversifying, the Council has put expanding its existing industries at the centre of its strategy. This particularly includes seeing new investment in Mount Isa Mines, the development of major new resource and gas projects, as well as expanding the services sector, not least because such a huge expanse of Australia’s north depends on it.

46 In 2011, the Queensland Government’s Gas Market Review proposed the development of a

gas supply hub at Wallumbilla. It became a single trading location for wholesale gas in 2017 through what was known as the Optional Hub Services model. When the Wallumbilla GSH was being established many market participants that, once the current model is well established noted it, there might be scope to develop supply hubs in other regions.

47 Australian Energy Market Operator, 2016.’Gas supply hubs’.

https://www.aemo.com.au/Gas/Gas-Supply-Hubs 48 Gas Today, 2014. ‘Wallumbilla gas supply hub begins operations’.

http://gastoday.com.au/news/wallumbilla_gas_supply_hub_begins_operations/86566 www.mountisa.qld.gov.au

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Examine prospective pyrite production project It may be possible to facilitate a market response to the medium and longer term requirement for sulphuric acid at Phosphate Hill. The proposal involves sourcing and supplying pyrite to a new plant that would convert it to the sulphur dioxide required to make sulphuric acid. 49 The Council could collaborate with the Queensland Government to develop a pre-feasibility study into the economics of such a pyrite facility, which would replace the existing process at the copper smelter to supply the input for creating sulphuric acid. A study into the economics and feasibility of the proposed pyrite plant would establish for investors whether it might be viable to produce sulphuric acid for less than the cost of importing it. It may then lead to a solution for the dependence on the MIM copper smelter, thereby improving economic resilience.

Irrigated agriculture expansion initiatives An investment in irrigated agriculture in the Flinders and Gilbert Catchments would grow the economies of these regions near to Mount Isa, which would create a range of benefits in the future for Mount Isa. Better feed is key to the beef industry in northern Australia, and will depend on the release of high security water, reforms to land tenure to make pastoral land more flexible and secure and to invest in (most likely, on farm) storage of water. More cattle in areas with feed would translate into more transport demand through Mount Isa and more demand for inputs including fertiliser produced at Phosphate Hill. The Council will identify and examine options to develop irrigated agriculture on multiple fronts, including through engagement and partnerships with other councils, governmental departments, research institutions and private sector investors.

Gas exploration acceleration project The Mount Isa City Council could push for the acceleration of shale gas exploration. This would involve the extension of geological surveying and assessment, as the release of attractive land and arrangements for exploration in the more prospective locations with respect to Mount Isa and possibly fundamental research around shale gas in the Isa Superbasin. Although the immediate prospects for shale gas are limited as they are not yet economic, shale gas could become a larger part of the future story around gas supply in Australia over the next decade or so. It may be important to position Mount Isa to take advantage of technological progress and appropriate market conditions by completing the necessary research and exploration. The demand for new sources of energy is likely to intensify as conventional resources diminish in the more mature production hubs such as the Cooper Basin in central Australia, and other untapped conventional natural gas resources such as the Browse Basin will likely be exported to Asia.50

49 Pyrite is commonly found in silver and zinc bearing ore bodies and is sometimes a by-product

of mining. However, it is not known how much pyrite is unavoidably mined at present, and therefore whether sufficient pyrites are available from existing mining activity. Some mines may be able to supply additional fine-grained pyrite at additional cost, however the economics of this are not yet known.

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

Assess the idea of facilitation of a market led proposal to connect to the state electricity grid Mount Isa is isolated from the National Electricity Market (NEM) and is solely supplied by gas-fired generated electricity. The lack of a transmission connection to the east coast National Electricity Market is a constraint to the development of Mount Isa as a world class solar resources.51 Connectivity to the National Electricity Market would provide the adequate transmission capacity to connect solar resources to the NEM, such as from the other projects similar to the three innovative Genex projects in the pipeline for northern Queensland.52 In addition, it would be favourable for other regions of northern Queensland such as Cloncurry to reduce their dependence on power imported from central Queensland and the high electricity transmission charges associated.53 The Council could facilitate the development of a new market led proposal by a company such as Genex to understand the potential value to energy consumers of a pipeline to connect Mount Isa to the NEM. It would need to be orientated around market demand, as observed from the Copper String project that failed to find support.

Creation of an investor prospectus One of the pre-conditions for investment is to provide a low-risk environment where pertinent information to prospective investors is as up-to-date and extensive as possible. Although it has unknown payoffs, an investor prospectus is a low cost initiative aimed to promote investment and diversification. A good prospectus might be expected to cover topics such as the economic outlook and industries, regional economic strategy, the pipeline of capital development, planning precinct and infrastructure developments, incentives for investing including with respect to markets, industrial land, commercial space, the workforce and growth opportunities, as well as how to invest. 54

Positioning for the Future While this Strategy has a focus on concrete strategies and results over the next three years, the Council is also determined to keep one eye on the future. There are a number of opportunities to deliver value to Mount Isa that are likely to be more subtle in their impact, with diverse (and potentially difficult to quantify) benefits to the community over the longer term. The Council wants to make sure it is proactive in taking preliminary actions now to ensure these future opportunities are progressed as quickly and productively as possible.

51 The daily solar exposures in North West Queensland are up to 50 per cent higher than in

southern states. United Northern Queensland Regional Development Organisations, undated.

Growing Queensland’s Renewable Energy Electricity Sector, Submission No. 47.

52 Genex is an Australian-listed energy company focused on the production and storage of

renewable energy.

53 Ibid.

54 For instance, see Sunshine Coast Council, 2016. Investment prospectus 2016: Invest Sunshine

Coast Australia.http://cms.sunshinecoast.qld.gov.au/addfiles/documents/business/invest_prospectus _double_page.pdf www.mountisa.qld.gov.au

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Increase control and value for money in service delivery The Council seeks to increase its ability to shape government services that are delivered in Mount Isa, in a manner consistent with local needs. As a key logistics, service delivery and population base for northern Australia, the Council advocates for a greater presence of government departments in the region. In addition, the Council seeks to have an Office of Northern Australia based in Mount Isa so that inland northern Australia is a central part of the development and implementation of the northern Australia agenda.

Advocate for main roads funding for beef The Council will advocate for a review of main roads funding for beef roads, given the importance of roads to an efficient, safe and timely transportation network. As a part of future infrastructure investment to attract industry to this region, including the potential transportation centre at Mount Isa, it is necessary to review major freight routes in and around Mount Isa with respect to their safety and efficacy.

Act on the price of water if it is assessed to be too high Water is an important part of the cost base, both for households and industry, in Mount Isa. Bulk water in Mount Isa is supplied to all users by the Mount Isa Water Board, which is a statutory authority owned by the Queensland Government. There have been complaints for a number of years, from businesses and households, that the cost of bulk water supply in Mount Isa is too high, and that profits made by the Mount Isa Water Board are effectively a localised tax, essentially transferring wealth from the City to the State. Accordingly, to assess the validity of this argument and with a view to identifying savings for Mount Isa water consumers wherever possible, it is proposed that the Council initiate a study that examines the cost of bulk water supply in Mount Isa relative to comparable locations elsewhere and whether savings for Mount Isa business and consumers may be achievable.

Examine the competitiveness of Mount Isa airfare costs Given its remoteness, Mount Isa relies heavily on air passenger transport. The Council seeks to determine whether there are any ways in which it can bring about more competitive airfares for business and the travelling public as a part of increasing economic and social resilience. Both airlines and airports may be incentivised to increase flight prices above the efficient market level (and essentially result in lost consumer surplus). However, there is limited information available to understand the actual price effect of limited competition in this market. Economic oversight or regulation of airport pricing could be considered as a part of the solution to reducing airport charges.55 The mere consideration of declaring the asset or industry can be a powerful tool to make the industry players act in a more competitive way.

55 The usual way of dealing with suspected misuse of market power is to request the ACCC and

the NCC to consider recommending the industry for declaration (and therefore regulation) under Part IIIA of the Competition and Consumer Act 2010. The Council could request the Mount Isa airport be considered for declaration by the Transport Minister; however, the process for assessing the viability of a declaration could be extensive and costly with the costs higher than the estimated benefits. www.mountisa.qld.gov.au

Mount Isa Economic Development Strategy 2017–18 to 2019–20

Therefore, the Council intends to undertake an assessment of flight price drivers and examine options to put downward pressure on flight costs facing Mount Isa residents and businesses.

Natural environmental program Mount Isa and its surrounding region boast a substantial and attractive natural environment.

Although open-cut and underground mining has been taking place for a hundred years in close proximity to the city, the Mount Isa natural environment remains attractive and underpins a large economy and attractive lifestyle for its population of residents and visitors.

The Council acknowledges that there are studies regarding atmospheric lead levels being higher than the national average, but notes that these are still well within safe limits. The Council proposes to initiate a collaborative effort with other levels of government, and environment and community groups, to launch a natural environment promotion program to help project Mount Isa’s positive environmental features.

Establishing a Sister City in China Establishing a Sister City in China would provide an opportunity to engage Chinese people and investors, developing diplomatic, tourism and business ties between Mount Isa and its Sister City. It would be a useful avenue for building friendships, networks and business contacts, attracting investment, promoting tourism and inbound education, and assisting in market and trade development.

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6 The Implementation

The Council intends to maintain an internal implementation action plan to guide and track progress in delivering the initiatives outlined in this economic development strategy over the next three years. As the Strategy notes, in some cases the Council will be leading these initiatives, and in others the Council will be initiating or promoting them, or working in partnerships. Council will work assiduously to deliver the strategy whatever the implementation approach may be.

Council will pursue all of the initiatives as quickly as possible; ultimate priorities will be influenced by market conditions, investor interest, policy opportunity and resource availability.

Some initiatives will require ongoing effort while others will require one-off action.

It is expected that all initiatives will be underway within the first quarter of 2017-18. Council intends to report on the results of the implementation of the Strategy at the end of its threeyear life and to assess value and outcomes delivered.

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

B Production scenarios: low, medium and high

For silver-lead-zinc, the table below reflects the primary metal produced at each mine (such as zinc) which is produced in combination with lower amounts of other metal (such as silver).

It is important to note that Mount Isa also produces some gold, which is treated as endogenous in the CIE’s modelling.

A.1

Production by primary metal, by scenariokt Currently operating?

Remaining metal

Grade

Potential production

Start

Kt

%

Kt/year

Year

Copper Low scenario Mt Isa underground

Yes

1 911

2.3

163

Ongoing

Mt Isa open pit

Yes

1 783

1.4

78

2027

No

127

1.7

6

2028

Mt Gordon (measured and indicated resources)

No

920

1.4

40

2027

Mt Gordon (inferred resources)

No

1434

1.2

62

2049

Mt Oxide

No

178

1.6

8

2018

Yes

21 535

5

243

Ongoing

No

0

16

Yes

21 535

4

372

Ongoing

Lady Loretta— measured and indicated resources

No

2 098

16

116

2017–18

Lady Loretta — inferred resources

No

195

13

4

2034–35

Mount Isa underground Medium scenario — Low scenario plus

Silver-lead-zinc mining Low scenario Mount Isa — GF (Zinc) — measured and indicated Lady Loretta – measured and indicated resources

2017–18

Medium scenario Mount Isa — GF (Zinc) — measured and indicated

a Capricorn Copper has recently taken over the Mount Gordon copper mine, with concentrate production expected to resume in late 2017.

Its production is additional to the base case, which is based on 2014-15 data.

Note: The CIE has only included inferred resources for mines that are likely to be developed under the low and medium global price outlook, prior to 2050.

Source: The CIE.

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Mount Isa Economic Development Strategy 2017–18 to 2019–20

C Queensland basins: unconventional petroleum

B.1

Queensland basins — unconventional petroleum potential

Data source: The CIE.

www.mountisa.qld.gov.au

46

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THE CENTRE FOR INTERNATIONAL ECONOMICS

www.TheCIE.com.au

www.TheCIE.com.au