PERTH (miningweekly.com) – New analysis from business intelligence publisher IBISWorld predicts that Australia’s contract mining services and diamond and gemstone miners are in for a dismal 2016.
Revenue for contract miners during 2016 was expected to contract by 6.3%, to A$11.1-billion, while diamond and gemstone mines’ revenue would contract by 13.3% during the year, to A$380-million.
IBISWorld senior industry analyst Spencer Little noted that as commodity prices have fallen, many mining firms have ceased expansion and exploration projects, and instead shifted their focus to production.
“This has been to the detriment of contract miners in the industry, as many services that were previously contracted out have been brought back in-house,” added Little.
The latest fall in projected revenues for the mining services industry followed from a sharp 14% decline in revenue in 2014/15.
Meanwhile, Little pointed out that the diamond and gemstone mining industry’s performance had been volatile over the past five years, owing to fluctuating production volumes and prices.
A significant drop in revenue in 2013/14, and another expected fall in revenue in 2015/16 were expected to underpin the industry's poor performance over the period.
Australia was a major global producer of diamonds, but supply was outstripping local demand. As a result, the industry was heavily export-oriented and industry players depended on global demand for diamonds, Little noted.
However, 2013/14 figures from the Department of Industry, Innovation and Science showed that export volumes of Australian diamonds dropped from 12.2-million carats to 10.4-million carats.
“Industry operators also face strong competition from imports, which account for a large proportion of total domestic demand,” said Little.
The exit of Kimberley Diamonds, previously a major industry player, was expected to negatively affect the industry’s performance in 2015/16, after Kimberley Diamonds in July last year announced that it had ceased its local diamond mining operations at its Ellendale site and entered into voluntary administration.
This exit was expected to cause a major dip in diamond production volumes and contribute to a 13.3% decline in industry revenue in 2015/16.