50% of mines to close by 2040

Half of Australia's mines will be exhausted within 7-18 years, with 20 expected to close within the next five years

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A report released late last year suggests that half of Australia's non-bulk commodities mines will be exhausted within the next 7 to 18 years. Non-bulk commodities include gold, copper, zinc and lead, and exclude iron ore and coal.

Based on current rates of production, reserves and resources and in the absence of new discoveries and mine extensions, the Centre for Exploration Targeting (CET), estimates that the sustainability of the Australian non-bulk mining industry is in trouble, thanks mainly to falling exploration.

The mines include the Century zinc mine, previously owned by Oz Minerals (ASX: OZL), Regis Resources' (ASX: RRL) Moolart Well, Saracen Minerals' (ASX: SAR) Carosue Dam and Alacer Gold Corp's (ASX: AQG) Higginsville gold mine.

CET is a partnership between the University of Western Australia, Curtin University of Technology the Western Australian government and Industry. CET reports that Australia's share of global exploration has virtually halved from its peak of 21% in 2002 and now stands at around 12%, while that of Canada has increased from 14% to 18% over the same period.

Exploration expenditure is vital to find new deposits and extend the life of existing mines, but data from the Australian Bureau of Statistics (ABS) indicate that expenditure has fallen for all states and for all commodities, and continues to trend down. CET also identifies another concern, which is the significant fall in drilling, particularly for new deposits. As CET says "if you don't drill, you won't discover".

A reduced rate of discovery may result in Australia's resources becoming depleted, and the mining industry unsustainable in the long run with potentially serious economic consequences.

CET has also suggested that Australian based resource companies now devote about half their funds to exploring abroad, and junior miners are increasingly finding it difficult to raise capital. With those junior explorers accounting for over half of all exploration expenditure in Australia, failure to raise funds means less exploration, less drilling and a fall in the number of new mines. That is already noticeable, particularly with the number of medium and large discoveries falling in the last few years.

The introduction of the Minerals Resource Rent Tax (MRRT) has also been blamed for making investment in exploration within Australia unattractive.

Foolish takeaway

MinEx Consulting estimates that 20 of Australia's major mines could close within the next 5 years, unless they slow production, or extend the mine life by finding new resources or expand existing reserves. That means more capital needs to be spent on exploration and drilling, but the current trend is falling expenditure, which raises serious concerns over the future of the Australian mining industry.

In the market for high yielding ASX shares? Get three "Rock-Solid Dividend Stocks" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Saracen.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »