Australian mining industry expected to recover swiftly

Government says higher world coal demand expected to boost prospects for the entire industry moving forward.

{reg}Global miner Xstrata gave a bullish outlook for Australia's mining sector this year, Reuters reported. The country is expected to achieve a swift recovery from the flooding last year and in early 2011, causing Australia's Queensland state to lose up to 30 million tons of coal production.

Coal is Australia's top export earner and the drop, equivalent to 15 percent of annual output, has curbed economic growth and exacerbated a worldwide shortfall of coal as miners struggle to restart flooded out mines.

"Pumping out these mines and returning to production has required enormous efforts and industry is to be commended on the speed at which it has resumed operations," Australian minister, Martin Ferguson, said in seminar of mining executives and policymakers.

Xstrata Chief Executive Mick Davis, who spoke at the seminar, voiced confidence in the medium- and long-term outlook for a range of commodities despite recent turmoil that sent key sector stalwarts like copper into tailspins.

Davis said a $20 billion spending program at Xstrata over the decade to expand existing operations and search far and wide for new lodes was intact.

"New supplies of commodities are increasingly coming from less developed mining geographies, such as the former CIS, Africa and Asia," Davis said.

Xstrata last month announced it will permanently close its Mt Isa copper smelter and Townsville refinery, both in Australia within five years and redirect its focus on selling copper concentrates instead.

Davis warned that world events and a wave of de-stocking of inventories of industrial raw materials in China was temporarily destabilising metals markets.

"The impact has been exacerbated by the events in Japan in March, recurring concerns about southern European debt and unrest in the Middle East," Davis said.

The RBA index of commodity prices rose 2.3 percent in May, from April to reach a fresh record high as rising contract prices for iron ore and coal augured well for export earnings.

That in turn is fuelling a massive expansion in mining investment, which should support growth for years to come. Data last week showed mining firms plan to spend A$51.3 billion for the year to June and a record A$83.3 billion for 2011/12 -- 6.4 percent of Australia's A$1.3 trillion in GDP.