Bargain Isaac Plains coal mine returns with 150 jobs

A MORANBAH coal mine bought for $1 earlier this year will soon provide job opportunities for 150 local workers.

Isaac Regional Council Mayor Anne Baker said she met with Isaac Plains coal mine owner Stanmore Coal on Tuesday when they announced a scheduled opening in February 2016.

While she would not say if the mine had totally ruled out all elements of a fly-in, fly-out workforce, she was given “absolute confidence local people will be able to apply and work there”.

“It’s going to be open to everyone,” Cr Baker said.

“They never mentioned FIFO. There are 150 positions and everyone is welcome to apply.”

The mayor hailed the project, 6km east of Moranbah, as a boost for industry, local workers and the community.

Moranbah Bakery owner Steve Hanvey said if local workers really were prioritised for the jobs the project would be a “beaut thing for the town”.

“My partner was doing deliveries the other day and at the petrol station she saw five families packed up to leave town,” Mr Hanvey said.

“We need support and we’ve had a lot of doom and gloom for a long time.

“I have all 10 of my fingers crossed and my arms crossed that these jobs will go ahead and there will be more to come.”

The Moranbah resident of 24 years said it wouldn’t just be the workers who benefited but the whole community.

The mine was open-cut and Cr Baker said “real time air quality monitoring” would be in place for Moranbah residents.

Stanmore Coal bought Isaac Plains Mine from Vale and Sumitomo in July for $1, more than a year after about 300 jobs were lost when production halted in 2014.

After a program of exploration and refurbishment, Stanmore Coal will begin mining activities following government approvals.

http://www.dailymercury.com.au/news/bargain-coal-mine-returns-with-150-jobs/2875881/

Investors should approach mining town’s ‘recovery’ with caution

Investors are being warned to proceed with care after a new report claimed the property market in one of Australia’s most prominent mining towns had turned a corner.

Mackay’s real estate market is showing signs of recovery following its dramatic downturn, according to a recent report from the Real Estate Institute of Queensland (REIQ), but investors are being advised to treat the news with caution.

Real estate agents are fielding an increasing number of enquiries from local buyers, according to the report, leading to speculation by the REIQ that the market has reached a turning point.

Mackay has suffered greatly since the downturn in commodity-related exports.

Only in June the area was named by CoreLogic RP Data’s Pain and Gain report as the biggest loss-making real estate market in the country, with 45.5 per cent of sales resulting in a loss.

The current median house price in Mackay is $340,000 – a 15 per cent decline over the past 12 months – according to CoreLogic RP Data.

But the REIQ report argues that record-low interest rates, combined with cheap housing stock, is driving a new wave of first home buyer activity in the area.

Peter McFarlane, REIQ zone chairman for the Mackay district, argues that this represents the first signs of a turnaround for the region.

“There has been a distinct improvement in the Mackay property market in 2015,” Mr McFarlane said.

“More first home buyers are taking advantage of the low interest rates and the affordable property prices to realise their dream of owning their own home,” he said.

Future price growth in the region is likely to be more sustainable as the market adapts and becomes driven by local owners rather than interstate investors, according to Mr McFarlane.

“Mackay has been re-established as a true local buyers’ market in the post-global financial crisis era of adjustment and renewed gradual growth,” he said.

“As a result, market conditions have stabilised and confidence is increasing in the local property market and the broader local economy.”

He explained that moves to diversify Mackay’s local economy had led to a renewed optimism over the area’s prospects.

“Local government initiatives to broaden diversification of industry and facilitate development in the region have put Mackay on an economic development growth path in 2015, leading to a general feeling of optimism throughout the region.

“As outlined in the latest REIQ report, this positivity has now been reflected by the increased level of local buyers interested in investing in the property market,” he said.

But Ben Kingsley, CEO of Empower Wealth Advisory, cautioned investors to hold back on any entry into the Mackay market for the time being, stating that mining towns across the country have yet to see the worst of the downturn.

“In regards to mining towns, I would still be cautious before jumping in. I don’t think we’ve seen the bottom yet – we’re still seeing finalisations of capital expenditure and still some finishing off of expansions of some of the mines,” he said.

“So I suspect we’re going to see less rental demand than we’ve seen. That will obviously mean that as these construction jobs further decline, we’ll still see a bit of vacancy and so there will be very little appetite or demand, which will affect prices.”

But Mackay may be in a better position than most once the recovery does commence, according to Mr Kingsley, owing to its attempts at economic diversification and location.

“It’s too early yet. I’d definitely say that Mackay as a township has got lifestyle appeal, it’s next to the Whitsundays, so from that point of view it has got a little bit more of a diversified economy. I suspect that you’ll start to see more focus on other agricultural assets as growth drivers for the township,” he said.

Even so, not enough signs exist of the Mackay market entering a clear recovery phase for any confident investment decisions to be made, Mr Kingsley advised.

“I wouldn’t be jumping in just yet. I’d probably give it another 18 months to two years before I’d really want to see the bottom [and] the signs of picking the bottom are near on impossible,” he added.

“I’d prefer to see some uplift [rather] than some bottoming out. That’s probably my tip for most of those mining towns. I don’t want to be the trailblazer. I’m happy for others to trailblaze and then once I know the foundations are good, then it’s time to start.”

It’s a sentiment echoed by Philippe Brach, CEO of Multifocus Properties and Finance.

He believes that any recovery in the region will be led by a resurgence in iron ore prices – a distant prospect at this point in time.

“As much as I’m convinced that Mackay will pick up again, I can’t see any points at this point in time. Mackay will start picking up when the iron ore prices start picking up […] until they start moving I think the whole mining town real estate [sector] will remain subdued for sure. So I’m not sure where the REIQ has come up with a recovery in Mackay, because there’s no fundamentals for that at this stage,” he said.

In January this year, Trinity Property Consultants and the REIQ predicted that the Mackay property market would bounce back in 2015, claiming the region was set to become the “engine room for the Queensland economy”.

Source: http://www.smartpropertyinvestment.com.au/news/14687-mining-towns-recovery-in-doubt

Don’t be fooled: mining towns can make great investments

I feel quite strongly that mining towns get an unfair rap in the media at times – people make flippant comments with irresponsible disregard of evidence.

During commodity price downturns like now, the uneducated often throw out the old “mining towns are bad investments” line. However, the evidence suggests that over the longer term some Queensland mining towns have performed significantly better than Brisbane.

While the property market of Queensland’s capital city is currently performing strongly, falling commodity prices have been the primary cause of property markets in traditional mining towns experiencing double-digit declines in value. The biggest pain has been felt in the central Queensland shire of Isaac, which consists of Moranbah and Dysart.

A typical house was worth $580,000 in December 2012 and has since declined in value to $237,500 over the two years (a decline of 36 per cent per annum). At the peak of the market in 2012, houses were rented for $1,350 per week. Today that same property would be rented for $320 per week.

Emerald median values have declined by an average of 15.3 per cent per annum over the last two years. Rental vacancy rates in Emerald are currently over eight per cent so rents have fallen from $700 per week (2012) to $270 per week.

The regional hub of Mackay provides a majority of goods and services to the coal face. In addition to a 33 per cent reduction in coal prices over the last two years, Mackay has built more properties than demand required. Median property values have declined by an average of three per cent per annum over the last two years. Rents have fallen from $500 per week to $380 per week.

In the far north west of the state, Mount Isa median values have remained unchanged. Mount Isa has a diverse range of minerals which it mines, whereas central Queensland is predominantly coal. Meanwhile, Brisbane median property values have increased by an average of 6.6 per cent per annum over the last two years.

In spite of Queensland’s recent mining town doldrums, the fact of the matter is that these markets have significantly outperformed Brisbane over the long term. Astute investors would be aware that property is a long-term asset class.

Over the 14 years since the turn of the century, which includes the recent downturn, Moranbah’s median property value has grown by an average of 14.8 per cent per annum compared to Brisbane’s 7.8 per cent. Emerald (10.9 per cent per annum), Mount Isa (8.5 per cent) and Mackay (8.5 per cent) have also performed better than the state’s capital city.

It wasn’t that long ago when the likes of Brisbane, Gold Coast and Sunshine Coast were having downturns of their own and the mining towns were setting record highs.

Investing in these locations is not for the faint-hearted. Timing is significantly more important when investing in locations where specific industries have such a significant impact on demand for housing. Often, the smart decision is to do the opposite to what the masses are doing. In the words of the world’s most famous investor, Warren Buffet: “The time to be fearful is when everyone else is greedy. The time to be greedy is when everyone else is fearful.”

A sophisticated property investor who purchased in Moranbah in late 2004 would have paid $150,000 for a three-bedroom house. Even with the recent downturn, the current value of $237,500 still represents 4.7 per cent average annual growth over the last 10 years, which is only slightly below Brisbane’s 5.0 per cent.

An investor who did purchase in Moranbah in 2004 and sold at the market peak of $580,000 in late 2012 would have made a massive 18.4 per cent average annual growth over those eight years. That’s roughly three times better than what anyone could have achieved in any capital city. Let me spell it out for you. A $15,000 deposit (10 per cent) paid on a Moranbah property in 2004 would have become $430,000 equity over eight years. Extraordinary!

On sheer numbers alone, one could argue a very good case that now is a good time to buy in Moranbah. An investor could pick the best property of the litter with no real competition, pay only $240,000, and rent it out for $320 per week. That 7.2 per cent rental yield is far superior to anything that any capital will offer.

Propertyology’s research suggests that an upswing in coal-related locations is on the horizon. Lower labour costs and the lower Australian dollar have improved the viability for mining giants such as BHP and Rio Tinto.

There are multiple new mining projects in the approval pipeline throughout Queensland and the Hunter Valley. The untapped Galilee Basin is the biggest coal province in the world. Propertyology’s research has calculated five large mines with combined project values of $53 billion having potential for up to 31,500 new jobs if they all proceed. Emerald, Mackay and Brisbane will be the biggest beneficiaries.

By Simon Pressley

http://www.rebonline.com.au/blog/9083-don-t-be-fooled-mining-towns-can-make-great-investments

Mackay Mining town ‘recovering’

Despite continuing reports that mining town property markets are declining, a number of stakeholders are claiming Queensland’s Mackay has turned a corner and is experiencing a “surge”.

On the back of a report by the Real Estate Institute of Queensland (REIQ), issued on 9 March 2015, Total Property Group has claimed that confidence is returning to the mining town market. Total Property Group managing director Adrian Parsons said this was reflected in rising interest in the group’s new master-planned estate, Somerset Park, located in Andergrove, Mackay.

The group cited various sections of the REIQ’s December Quarter 2014 Queensland Market Monitor report to illustrate that “Mackay has moved past the bottom of the housing market cycle towards recovery”.

“The report states Mackay has turned a corner since the beginning of 2015 on the back of improved local confidence, with multiple applications received for rental listings and multiple offers on sales,” Total Property Group said in a statement.

REIQ zone chairman for the Mackay district Peter McFarlane added that he had seen a distinct improvement in the local market in 2015. He attributed the positive progress to increased confidence in employment, record-low interest rates and improved housing affordability.

“We have the lowest interest rates Australia has ever seen and the housing affordability of three to four years ago,” he said.

“Employment in the Bowen Basin mining sector is more secure as it moves from the construction phase to production phase, and we are seeing coal production increasing.

“We are now exporting more coal off the coast of Mackay, and overall there is a growing level of confidence in the region.”

Mr McFarlane said these factors have led to more activity in the sales arena and a boost to the rental market.

“We are seeing first home buyers purchasing existing houses in the $350,000 to $400,000 bracket and the sellers of those homes upgrading to other properties and creating a secondary buying market in the $500,000-plus bracket.”

Mr McFarlane said even though rental vacancy rates were at 10.3 per cent in December, he expects “they will be significantly down at the end of the first quarter of 2015”.

Somerset Park developer Jim Relph of Trinity Property Consultants said Mackay would continue to benefit from the mining sector.

“Mining employment is secure in the Bowen Basin and major mining developments in the Galilee Basin have received the support of new Queensland premier Annastacia Palaszczuk.

“The Queensland Labor government announced an agreement with Adani and GVK Hancock regarding a proposal for expansion of the Abbot Point Coal Terminal – an important step towards putting necessary infrastructure for these mines in place,” the premier said.

“Queensland Resources Council data shows a spike in coal exports in 2014, reaffirming the importance of the coal industry to Mackay’s strong economic future.

“Mackay is also gateway to the Whitsundays, offering a desirable lifestyle and beautiful coastal and rainforest hinterland environments.”

Low price, oversupply is coal’s double whammy

AN INDUSTRY analyst has blamed factors in addition to a low coal price for the closure of Isaac Plains Coal Mine.

CQUniversity senior lecturer in management and organisational behaviour Paul Weight said there were two reasons for yesterday’s announcement.

“One of them is certainly a drop in the coal price,” he said.

“The second one is an oversupply of coal.

“Australia isn’t the only country that produces coal. We have to compete with the coal coming out of Indonesia, South America, Siberia and more.

“If you are running a coal mine in Indonesia, for example, it costs a lot less than it does in Australia.”

Mr Weight said mining companies could have been managed better to prevent losses.

“One of the things mining houses can do better is to run their companies in a much more lean fashion,” he said, “whereby they always have an eye out on expenditure and cost.

“When companies are making a lot of money, many are bedding out and employ more people that they don’t really need.”

However, Mr Weight said there was no easy solution in economically challenging times.

“Most of the mining houses are international companies, with many mines,” he said.

“If a mine becomes uneconomical, they’ll just close it down and open it again when the coal price recovers.”

Mr Weight said there was a glut of coal in the market.

“China stockpiled coal during the financial crisis and is not buying as much now,” he said. “The value of coal is reducing. When coal cost $120 a tonne things were great, but at $85 or $90 a tonne it’s not viable.

“The bottom line is when the price of coal is less than what it costs to get it out of the ground, it’s not a viable project.”

 

Fears house prices will be hit hard

THE announcement Isaac Plains Mine in the Bowen Basin will close early next year has put property investors on edge.

Moranbah real estate agent Geoff Williams said consumer confidence in the town had dropped.

“There are a lot of investors here who are really hurting badly,” he said.

Current Moranbah house prices were similar to prices in 2004, Mr Williams said.

“The average house price is in the vicinity of $400,000 to $420,000.

“This is unusual for the last two years, but historically Moranbah house prices have always gone up and down.

“Prices were held up because there were some really good quality investments.”

News of the mine closure came just days after BMA announced it would be cutting more than 700 jobs in its Bowen Basin mines.

 

Flow-on effect in Mackay

CLOSURE of the Isaac Plains coal mine will have a flow-on effect on businesses in the Mackay region, the Resource Industry Network has warned.

General manager Julie Boyd said mining contractors would be the worst hit.

“In the current circumstances we are seeing a very low coal price,” she said.

“This has left many contractors in a difficult financial position.

“It certainly will have a flow-on effect in the region.”

Yesterday’s announcement to close the mine was a blow to Leighton Holdings.

The mining contractor was one year into a three-year contract at the site.

The company was unavailable for comment.

Brisbane-based firm Ausenco was responsible for the operation of the Coal Handling and Preparation Plant at the site.

An Ausenco spokeswoman said she did not expect the closure of the mine to have a material impact on the company.

“At this point we are still working through the details of the transition with Isaac Plains Coal Management,” she said.

“We will work closely with our employees to support people whose roles become redundant as a result of this change.”

http://www.dailymercury.com.au/news/low-price-oversupply-is-coals-double-whammy/2404891/

Towns treated like mushrooms

THE Central Highlands have been left in the dark by mining companies.

After BMA announced that 700 positions would be cut from its seven Bowen Basin mines, Moranbah families and businesses are clambering to recover and adjust to the devastating news.

Moranbah Traders Association president Trehan Stenton said mining companies were happy to be well served by the region in the boom times but the lack of transparency made recovering for job cuts difficult.

“BMA are not giving any information about the nature of the workforce that will be cut,” Mr Stenton said.

“Mining companies need to engage with the community to at least work on a plan for the future.”

Mr Stenton said the state and federal governments needed to unlock funding to help local businesses transition from a reliance on the mining sector to industries such as service and agriculture. “We need short-term help for the wider community,” he said.

Isaac Regional Council Mayor Anne Baker said the job cuts would devastate the region

“The majority of these job losses are coming from BMA’s residential mines in our region, which directly impacts our communities,” she said.

“With six BMA mines is Isaac, many of these job cuts will affect Isaac residents.”

Ms Baker said the cuts would significantly affect every aspect of the communities.

Moranbah, Clermont and Dysart are expected to the most economic damage, with the majority of mine workers under threat living in those towns.

Union representatives used the announcement to launch an attack on BHP Billiton.

Construction, Forestry, Mining and Energy Union general secretary Andrew Vickers said the union was also seeking information about the jobs targeted in the cuts.

“BHP is demonstrating a horrifying disregard for jobs and for the future of central Queensland,” Mr Vickers said.

“BHP has profited enormously from central Queensland resources over many years, but they are showing their true colours as a ruthless multinational corporation.”

On Tuesday, BMA Asset President Lucas Dow said the “stubbornly” high Australian dollar and low coal price were drivers behind the review.

FIFO petition attracts 1300 signatures

A PETITION demanding an end to 100% fly-in, fly-out workers and forced camp accommodation has attracted more than 1300 signatures.

The petition, which was started by Moranbah resident Peter Finlay on March 12, closed yesterday afternoon.
Its goal was to end the discriminatory practice of mining companies employing a 100% compulsory FIFO workforces and forcing those workers to live in mining camps rather than letting them choose their place of residence.
The petition said the practice resulted in increased unemployment in affected mining communities since workers were selected from outside of the region rather than from locally-based, skilled miners.
It said the need for workers’ camps and FIFO was accepted, however, the forced accommodation of workers in camps and 100% compulsory FIFO was not.
It said well documented and disturbing difficulties that workers suffered due to being forced to live in camps included mental health issues, alcohol abuse and obesity. To read more, visit http://www.parliament.qld.gov.au.

Banks restrict loans in risky mining towns

Banks are reining in home lending to investors in resource sector hot spots, as lower spending by miners hits regional property markets and prompts banks to reassess their exposure.

Two of the country’s biggest banks, Commonwealth and ANZ, have in recent weeks curbed riskier lending in areas that rely on resource industries.

The moves follow sharp falls in rents in mining hubs, at a time when regulators have urged banks to maintain prudent credit standards in the $1.2 trillion mortgage market.

In changes that took effect on Monday, Commonwealth Bank will cap at 8 per cent the rental yield it factors in for new property investment loans in mining towns.

Explaining the policy to mortgage brokers, the bank said rental yields in some mining areas were ”not sustainable” and it was minimising the risk of borrowers defaulting.

It comes after ANZ added Queensland resources hub Gladstone and mining-exposed towns Chinchilla and Blackwater to a list of higher-risk postcodes.

Areas on the list – all in Queensland and Western Australia – face an 80 per cent cap on loan-to-valuation ratios for new loans to property investors, while rental yields are capped at 10 per cent when the bank is assessing eligibility for credit.

An ANZ spokesman, Stephen Ries, confirmed ANZ was applying ”an extra level of caution” to lending in some mining areas under a policy introduced earlier this year.

Towns that may be affected by the policy were heavily reliant on one mine, or had experienced strong growth in housing, he said.

”We are continuing to lend in these towns and since this policy was introduced in January the majority of applications have been approved,” he said.

ANZ and Commonwealth Bank’s moves to tighten credit criteria come as banks face pressure to limit higher-risk lending at a time of record-low borrowing costs.

Managing director of mortgage broker Homeloanexperts.com.au Otto Dargan said banks had become more conservative in mining areas after realising high rental yields received during the peak of the construction boom were not sustainable.

”During the construction phase, there’s a huge influx of workers so the yields go through the roof, but they can come back down sharply as construction spending declines,” Mr Dargan said. ”I think [the banks] have more exposure to mining towns than they would have liked.”

Among other big lenders, Westpac also has a policy of limiting low-deposit loans in ”single-industry towns”, including those that are dependent on mining.

National Australia Bank does not have a formal policy on the issue, applying the same scrutiny to borrowers in other areas.

While mining towns make up a small share of banks’ outstanding loans, Australian Bureau of Statistics’ figures published last week show the resources boom has caused mortgage lending to skyrocket in several resources hubs.

The area with the fastest-growing mortgage costs between 2006 and 2011 was the Shire of Ashburton, in the Pilbara region of Western Australia, where typical monthly repayments leapt by 278.6 per cent, to $954.

The next biggest increase was in Port Hedland, where repayments shot up by 140 per cent to $2600 a month over the same period.

Surging house prices and rents helped drive the rise in lending, but in recent months returns in many mining towns fell due to weaker demand for accommodation.

In the September quarter, rents in Port Hedland fell 10 per cent to $1300 a week and had plunged 35 per cent in annual terms, figures from the Real Estate Institute of Western Australia show.

In Gladstone – where several multibillion-dollar liquefied natural gas plants are being built – vacancy rates jumped from 0.9 per cent to 5.8 per cent in the year to September, Real Estate Institute of Queensland figures show.