MADISON, Nov 29 (Central Asia Newswire). Accustomed to mining in the deserts of their continent’s harsh outback, it seems that Australian firms are making something of a cottage industry out of investing in similar operations in the deserts ofCentral Asia.
Tasked with providing trade and development resources to Australian firms, the Australian Trade Commission (AusTrade) was reorganized in May 2011 and shifted its traditional focus from other developed economies to developing markets.
Central Asia was one of the regions singled out for that focus by Trade Minister Craig Emerson in his May statement on Austrade’s reformation. Emerson argued that “frontier markets” such as those of Central Asia are “where the big growth potential lies for Australian businesses.”
This comes in the wake of a 2010 move by Australia to send exploratory missions to the Kazakh extraction sector for the first time in more than a decade, in addition to Australia’s moves at the Organization for Security and Cooperation in Europe (OSCE) summit last year seeking to expand mining connections between Australia and the region.
Over the last year, multiple large-scale investments in the various Central Asian mining sectors have been announced by Australian firms. Fortis Mining invested a quarter billion dollars in potash salt mines in Kazakhstan in February, with the intention of supplying the Chinese market.
The ironically named Australian mining firm Red October is exploring investment in a Kazakh copper mine, which also is situated for export to China. Santos, Australia’s third largest oil firm, has announced plans to invest further in Tajik oil and gas fields, supplementing its funding of exploratory drilling in Tajikistan and other energy investments in Kyrgyzstan, situated in the Fergana Valley.
In the past month alone, two Australian firms signed big deals in Central Asia. Australian miner View Resources signed a deal to take 90 percent of holdings in two coal deposits in southern Kyrgyzstan, while Ausenco Minerals and Metals won a $45 million service contract for Kazakh state-owned miner Kazakhmys.
Mining and extraction account for some ten percent of the Australian economy, which is a very high proportion for a developed nation. By comparison, the figure for the United States is less than one percent. As important as Australia’s mining sector is to the economy domestically, it is a critical component of the Australian international economy, comprising nearly 60 percent of Australian exports.
A large portion of these material exports go to China, whose massive manufacturing sector hungers for raw materials, exerting a gravitational pull throughout the region’s resource exporters.
Central Asia also relies heavily on the export of raw materials to China, and so the relationship between the landlocked region and Australia’s mining firms is a natural fit, especially because of the overlap in types of material being extracted in the two areas.
Kazakhstan and Australia are the world’s first and third largest producers of uranium, of particular importance to China in the wake of its plans to expand its nuclear energy sector to some 40 gigawatts over the next decade.
Access to the Chinese market is a critical component of Australian strategy in Central Asian mining, with the value of mines being closely tied to their proximity to the all-important rail lines carrying extracted materials into China.
In addition, Australian firms see those rail lines as a two-way connection. Red October’s managing director Ross Smith said that one advantage of their proposed copper mine project is that it “is very close to China where much of the equipment is likely to be sourced at lower cost.”
Chinese state-owned companies have invested tens of billions of dollars in the Australian mining sector over the last decade, including a massive $22 billion spree of stock purchasing in 2009.
Such investment has interwoven the three economies of Australia, China, and Central Asia into an ecosystem of material extraction, with Australian firms providing technical skills and capital, Chinese enterprises supplying capital and a gargantuan market, and Central Asia granting access to the raw materials.