WA’s economic woes could be coming to an end, setting the scene for a recovery in property prices. Andrew Bromley, mortgage adviser at Smartline, writes about the projects likely to drive the next wave of mortgage lending
The past 12 to 24 months have been challenging to say the least in Australia’s west. A flat property market, stagnant wage growth and tight lender policies have contributed to the situation WA brokers find themselves in. However, green shoots are appearing and, as they say, the worm is finally turning.
A significant factor in the (albeit slow) turnaround is the optimism surrounding a resurgent mining sector. During the mining boom of the early 2000s, West Australians thought the good times would never end. Property prices were up, jobs growth was high, and the party was ongoing. Of course, with boom comes bust, and since its heady times the WA economy has been stuck in the mire of a budget deficit and a generally weakened outlook.
In the last year, however, there have been a number of promising announcements regarding new and revised mining operations. Job vacancies have increased, and suddenly there is more talk of opportunities both in the north of the state and areas closer to Perth.
The famous ‘superpit’ in Kalgoorlie is seeing its first expansion in operations in almost 10 years. This is significant after last year’s setbacks when there were two wall slips within 12 hours in May. These slips resulted in reduced production and a number of redundancies for the Kalgoorlie Consolidated Gold Mine, which recently celebrated 30 years of production.
With boom comes bust, and since its heady times the WA economy has been stuck in the mire of a budget deficit and a generally weakened outlook
Gold Road Resources in Gruyere is another vital gold-mining project in WA, which is expected to see a $621m investment. The first ore was mined in January of this year, and once underway the Gruyere mine will produce 300,000 ounces of gold per annum over the course of its life span.
The Blackham Resources expansion and St Barbara Gwalia extension will bring a further increase of 490,000 ounces of gold per year. With gold prices remaining high, this is excellent news for the industry and WA’s economy in general.
Iron ore has long been a driving force in the WA mining space, and there is plenty to be upbeat about. The BHP South Flank project has seen a $3.4bn investment in the expansion of the mining giant’s operations in the area. This will include an 80 million-tonnes-per-year crushing and screening plant, with production anticipated to begin in 2021. A massive job program will result in one contractor, Monadelphous, filling 400 positions with construction works alone.
Rio Tinto is also gearing up operations, with a focus on its Robe River projects. An investment of in excess of $1.5bn will see production sustained in both its Robe Valley and West Angeles mine sites, and the first ore is expected in 2021.
FMG is ramping up works with an estimated $1.7bn investment in its Eliwana rail and mine project in the Pilbara. Mount Gibson Iron has also restarted the Koolan Island operation after a seawall failure in 2014. After the main pit was flooded, an evaluation of the site took over two years to complete. The good news is that there are more than 21 million tonnes of high-grade iron reserves.
With the upturn in mining, so comes the opportunity for finance brokers in the west to take advantage. Wage and employment growth, increased household cash flow and a more positive economic outlook will no doubt combine with higher house values to impact the broking sector.
Mortgage adviser, Smartline