Resources Industry Training Council (RITC) Industry Workforce Development Plan Mining Industry

Resources Industry Training Council (RITC) Industry Workforce Development Plan Mining Industry Plan Details: Plan Title: Issue Details: Issue 1, 2015 Approval Authority: Submission Authority: Resources Industry Training Council (RITC) Industry Workforce Development Plan Mining Industry The Chamber of Minerals and Energy of Western Australia (Inc)/RITC Industry Advisory Board The Chamber of Minerals and Energy of Western Australia (Inc)/Resources Industry Training Council Approval: Approval Authority: Ms Sanchia Tolomei (Chair, RITC Industry Advisory Board) Chair of Training Council Board of Management Signature: Date: 31 July 2015 Endorsement: Department of Training and Workforce Development Signature: Date: 31 July 2015 Page 1 of 76

FOREWORD The Resources Industry Training Council (RITC) is a state government funded partnership between the Chamber of Minerals and Energy of Western Australia Inc (CME) and the Australian Petroleum Production and Exploration Association (APPEA). Members of these peak organisations account for over 95 per cent of mineral and energy production in Western Australia and over 98 per cent of national oil and gas production. The RITC is funded by the Department of Training and Workforce Development (DTWD) to provide strategic information and advice on vocational education and training and workforce development needs of industry in Western Australia. For its stakeholders, the RITC aims to create a forum where industry leaders, skills development organisations, and other key interest groups and interested enterprises can collaborate to address workforce development issues as they affect industry in Western Australia. Industry coverage of the RITC is diverse, comprising mining and mining exploration, oil and gas exploration, extraction and production, and a group of industries that can best be described as comprising process manufacturing. This last group is particularly varied in its composition and includes industries from paint and cement manufacture, to rubber and plastics manufacture, to metallic and non-metallic mineral production, to laboratory operations. Over the last decade Western Australia has benefited from unprecedented growth in activity in the resources sector, with mining being a major contributor to the Australian economy through export earnings and capital investment. Recent years have seen a moderation of activity in the mining industry as it continues to transition from construction to production. Faced with high operating costs and significantly lower commodity prices the sector is now operating in a cost constrained environment with producers focusing on organisational restructuring and downsizing operations, managing costs, production efficiencies and production management to remain globally competitive against increasing competition from overseas suppliers. This rationalization is seeing major companies turning towards innovation, technological advancements, automation and data analytics to address these issues across the value chain to maintain a competitive edge. Similarly, in light of the recent halving of the price of oil, the oil and gas sector is faced with added pressure to contain costs and boost productivity as construction winds down and the shift towards production gathers pace. The oil and gas sector is not a large direct employer. According to a recent report from Accenture 1, the industry employed about 34,200 people nationally in 2014 and this is expected to decline to around 30,500 by 2020. The industry, however, is known to have a large employment multiplier. The US Bureau of Economic Analysis 2 has estimated the oil and gas extraction sector employment multiplier to be 6.9 meaning for every job created in the oil and gas extraction industry, a further 6.9 jobs are created in the wider economy. 1 Accenture, Ready or Not? Creating a world-leading oil and gas industry in Australia, May 2015 2 http://www.contentfirst.com/multiplier.shtml, accessed 2 August 2015 Page 2 of 76

Despite the current margin constrained environment, industry wide efficiency measures and softening in employment conditions, the resources industry continues to be a major contributor to growth in Western Australia with $179.3 billion resource projects under construction or committed and a further $118.4 billion under consideration in the state. Domestically, our manufacturing sector continues to experience a period of substantial transition and change. Government policy has moved away from an industry protectionist stance to one based on supporting manufacturing industries where Australia has a strong competitive advantage such as advanced manufacturing. This direction, signaled in the Australian Government s recently released Industry Innovation and Competitiveness Agenda, presents many challenges to the manufacturing sector and will require a concerted effort to ensure the manufacturing labour force has the necessary skills based and innovative capability to grow and sustain its competitive advantage. The need to develop and maintain a productive workforce in the current climate emphasizes a continued need to focus on workforce planning to ensure the future health and sustainability of the RITC industries in Western Australia. In a new competitive world driven by innovation, technological advancements, automation and digital information it is imperative we develop and access high quality skills and capabilities to meet the demands of our changing industries. The shift to operations will bring about sustainable jobs for highly skilled workers in the state, particularly in professional and higher level VET based occupations and it is vital we better tailor education and training to increase opportunities for a diversified participation of all in employment and skills development, particularly in regional Western Australia and in turn remain internationally competitive amidst a growing economy 3. To retain its competitive advantage, workforce planning must be a collaborated effort between education providers, industry and government with greater alignment between the national scientific research agenda, specifically the development of science, technology, engineering and mathematics (STEM) skills and areas of strength in the Australian economy. Recent commonwealth and state reforms support these aims. This workforce development plan aims to, in an accessible way, inform those interested in Western Australia s mining, oil and gas and process manufacturing industries of the current and projected activity levels in those industries and highlight factors that will have an impact on workforce development in future years. Ms Sanchia Tolomei Chair of the Resources Industry Training Council Industry Advisory Board 3 CEDA, Australia s Future Workforce, June 2015 Page 3 of 76

Table of Contents FOREWORD 2 OVERVIEW 6 Issuing Authority 6 Aim 6 Objectives 6 SECTION 1 EXECUTIVE SUMMARY 7 1.1 Introduction 7 1.2 Industry Sectors and Training Package Coverage 7 1.3 The Mining Sector in 2014/15 8 1.3.1 Greater Flexibility in Skilling 10 1.4 Workforce Development Drivers 10 1.5 Fast Facts 12 1.6 Summary of Issues Table 12 SECTION 2 METHODOLOGY 15 SECTION 3 INDUSTRY PROFILE 16 3.1 Overview of the Mining Industry 16 3.1.1 Mining Industry Analysis 16 3.1.2 Industry Trends 18 3.1.2.1 Exploration 18 3.1.2.2 Cost of Doing Business 20 3.2 Labour and Skill Demand 21 3.2.1 Identify the Workforce Demands 21 3.3 Regional Impact 27 3.3.1 Commuter Workforce 28 3.4 Regulatory Requirements 28 3.5 Gender/Age Participation 29 3.5.1 Gender 29 3.5.2 Workforce Age Profile 31 3.6 Under-represented Groups Participation 31 3.7 Major Challenges and Barriers 34 3.7.1 Productivity 34 3.7.2 Cost of Doing Business 33 3.7.3 Lack of Industry Confidence in the Quality of Vocational Training 34 3.7.4 Relevance of Qualifications and Funding Paradigm Disadvantage 35 3.8 New and Emerging Skills 35 3.9 Occupations in Demand (ANZSCO Code) 36 3.10 Workforce Development Opportunities 43 3.11 VET Training Data by Qualification 43 3.11.1 Pre-Employment 43 3.11.2 Apprenticeships and Traineeships 45 3.11.3 VETiS 48 3.12 Higher Education Pathways 49 3.12.1 Engineering and Geosciences 49 3.12.2 Other Professionals 50 Page 4 of 76

3.13 Mining Industry Issues 50 SECTION 4 INDUSTRY ISSUES AND STRATEGIES 55 SECTION 5 RECOMMENDED PRIORITY ACTION PLAN 62 SECTION 6 PLAN ADMINISTRATION 67 Plan Contact 67 Review Requirements and Issue History 67 Distribution List 67 Consultation for this Issue 67 Communications Plan Summary 67 Validation of this Plan 68 SECTION 7 LIST OF TABLES 69 SECTION 8 GLOSSARY 71 Acronyms 71 SECTION 9 APPENDIX 74 Appendix 1: Key RITC Industry Areas Projected Economic and Activity Conditions (Australia) 74 Page 5 of 76

OVERVIEW Issuing Authority This plan is issued under contract between the Department of Training and Workforce Development and the Training Council in accordance with the requirements of Schedule 2 of the Service Agreement and is maintained by the Training Council. Aim The aim of the plan is to outline industry workforce development trends, strategies and actions that provide high-level advice to the Department to inform future strategic directions and Skilling WA A Workforce Development Plan for Western Australia. Objectives The objectives of this plan are to provide the Department with: a b c A profile of the mining industry in Western Australia; High-level state and national industry data and forward projections in regards to: I. Economic trends and impacts on workforce planning; II. III. IV. Current and future labour market modeling consistent with information provided for the development of the State Priority Occupation List (SPOL); Regional variations that may affect workforce planning; Training and education including vocational education and training delivered to school students (formerly VETiS); and V. Industry critical aspects that may impact on future planning. Identification of issues that impact on state workforce planning and that inform and are linked to Skilling WA strategies. These objectives are established so that effective development of workforce planning in regions and at state level can occur. Page 6 of 76

SECTION 1 EXECUTIVE SUMMARY 1.1 Introduction The Resources Industry Training Council (RITC) covers a diverse range of industries ranging from mining and oil and gas production through to plastics and rubber manufacturing and laboratory operations. While these industries are experiencing different economic fortunes, they all share similar issues in terms of ensuring access to a suitably skilled workforce which is necessary for their continued sustainability. Recent years have seen the mining industry transfer from a decade of immense growth to its cyclical transition from construction to production. The industry is now entering a period of rationalisation driven by low commodity prices and relatively high operating costs. This is manifesting itself in companies focusing on efficiencies through cost control and increasing productivity. Similarly, the recently halved global price of oil has created a cost constrained environment for the oil and gas sector as it makes the transition from construction to production with a key focus on export growth. In the transition, both sectors are seeing changes in employment levels and the skills mix. At the same time, while parts of the RITC industry coverage from the more mature basic chemical and chemical product manufacturing sectors, polymer product and rubber manufacturing sector and non-metallic mineral product manufacturing sectors are bearing the effects of more normalised economic conditions, some niche areas of the downstream process manufacturing industry are experiencing growth and providing innovative solutions in global supply chains. 1.2 Industry Sectors and Training Package Coverage Resources Industry Training Council (RITC) Industry Sectors (a) Mining (b) Oil and Gas (c) Downstream Process Manufacturing Training Packages (a) MSA07 Manufacturing (b) MSL09 Laboratory Operations (c) PMA08 Chemical, Hydrocarbons and Refining (d) PMB07 Plastics, Rubber and Cable Making (e) PMC10 Manufactured Mineral Products (f) RII Resources and Infrastructure To contextualize the RITC industry and training package coverage in Western Australia, Appendix 1 provides an overview of the projected economic and activity conditions for key areas of the RITC industry coverage and outlines the stark contrast between different industry sectors comprising the RITC industry coverage. Page 7 of 76

1.3 The Mining Sector in 2014/15 According to the May quarter 2015 ABS employment data, the mining sector employed 96,200 people, well below the peak of over 120,000 recorded in August 2012. This change reflects cessation of the construction phase of many major projects. It also reflects the impacts of lower commodity prices as mining companies in particular restructure their operations to find efficiencies and better control costs. This trend is expected to continue. Already, the restructuring and rationalising of processes, efficiencies and cost is seeing a workforce shift to higher skill roles particularly in professional occupations. As companies turn towards innovation, technology, automation and big data they increasingly rely on changing worker skills and capabilities to remain internationally competitive. A recent report 4 presented a case study which details findings similar to those in project work completed by RITC in 2012-13 examining the impact of automation on skills in the resources sector. Our changing workforce and skill needs reflect a changing industry and in order for both to evolve it is vital we have an education and training system capable of developing a productive workforce and increasing employment and skills development opportunities for diversified participation. In turn, although the labour market for critical occupational groups has softened particularly in the second half of 2014-15, a continued focus on workforce planning is needed to ensure a sustainable mining industry in Western Australia. This planning must address attraction of skilled workers and high quality skills development, particularly in regional Western Australia. The Western Australian mining sector has been a key contributor to the Australian economy, underpinned by a considerable increase in the production of key mineral commodities over the last twelve months. Iron ore remained the state s most valuable commodity in 2014 with exports reaching 697 million tonnes (25 per cent annual increase), accounting for $65 billion or 75 per cent of total mineral sales that year. In the same year gold accounted for 10 per cent of sales ($8.7 billion) with alumina being third most valuable reaching $4.6 billion, an 11 per cent increase on the previous year 5. Revenue from royalties is estimated to total $4.44 billion in 2014-15 and is estimated to be $3.67 billion in 2015-16, contributing 14 per cent to total state revenue 6. Likewise, a pipeline of projects in the committed and planned stages of development remain that will continue to bring economic benefit to Western Australia. While lower commodity prices are having an impact on future industry investment decisions, as at March 2015, there was $179 billion worth of resources projects either committed or under construction. Potential projects and those at an early stage of planning accounted for a further $118 billion as shown in the following table. A bias towards oil and gas projects is apparent. 4 CEDA, Australia s Future Workforce, June 2015 Page 8 of 76

Table 1: Investment in Major Projects (as at March 2015) Source: Department of Mines and Petroleum MAJOR PROJECTS Commodity Committed/Under Construction CAPEX MILLIONS Planned/Possible Gold 117 3,430 Iron Ore 13,946 15,658 Nickel 471 3,350 Other Minerals and Infrastructure 12,234 20,277 Sub-Total 26,768 42,715 Crude Oil and Condensate 583 1,114 Gas 2,971 117 LNG 148,403 73,820 Pipelines and Infrastructure 140 635 Other 300 Sub-Total 131,244 61,631 Total Forecast Investment 159,752 108,349 In the last 12 months the price of iron ore fell from an average of $US122.80 per tonne in 2013-14 to the currently fluctuating $US50 per tonne. The graph below shows the volatility in iron ore price since 2011 and its continued decline since 2014. Graph 1: Iron Ore Price Source: The Australian Financial Review, AFR Weekend, 4 May 2015 Page 9 of 76

Falling commodity prices are turning a sharp focus on productivity and other efficiencies in the mining sector. As companies turn towards innovation, technology, automation and big data they increasingly rely on changing worker skills and capabilities to remain internationally competitive. 1.3.1 Greater Flexibility in Skilling Critical to this is flexibility in the training system. In a cost constrained environment, greater flexibility in skilling is being sought by employers with an emphasis on skill sets rather than qualifications for many surface mining roles. This trend was examined in the RITC s skill sets project 7 and is likely to accelerate in the short to medium term. In June 2015, the National Centre for Vocational Education Research has released a report 8 which explores how building better links between education and work can help provide a more coherent approach to vocational development. The report finds redesigning training qualifications using vocational streams as a structuring guide and the identified shared capabilities as the basis for the curriculum could provide workers with stronger work-related capabilities, enabling them to adapt more quickly to changing labour market circumstances and help reduce persistent skills mismatch. 1.4 Workforce Development Drivers According to the latest CME resource sector outlook, although changes in commodity prices have seen fewer people employed in the resources sector, the transition from construction to operation is seeing an expected decrease in the construction based workforce. CME anticipates this decline to be around 17,300 below 2014 levels in 2020. The operational workforce is expected to peak at 4,300 above 2014 levels in 2019, before declining to 3,500 above 2014 levels in 2020. Overall, the outlook expects the labour workforce to decline to 87,000 by 2025 but remain more than double pre-expansion levels in 2004 with the shift attributed to the sectors increasing transition to an operational phase and an ongoing focus on productivity 9. This volatility, combined with increases in global supply for many commodities (notably iron ore) is placing pressure on resources companies to control costs in order to remain internationally competitive. Indeed, productivity and the cost of doing business in Australia and Western Australia are key concerns of resources companies. In terms of business risks for the mining and metals sectors in 2015/16, Ernst and Young 10 view the following as significant: The Switch to Growth Ernst and Young believe the time has come for companies to consider decisions to invest for future growth with the sector primarily being pre-occupied with the switch from growth to consolidation and capital returns. The seeds of cyclical recovery are being planted in terms of capital reductions, mine closures, cost savings and productivity improvements. 7 Bowman, Skill Sets Project, 2013 8 National Centre for Vocational Education Research, Linking qualifications and the labour market through capabilities and vocational streams, June 2015 9 CME/Deloitte Access Economics, 2015-2025 Western Australian Resources Sector Outlook, November 2014 10 Ernst and Young, Business risks facing mining and metals 2015/16 Moving from the back seat to the driver s seat, 2015 Page 10 of 76

Productivity Improvement The massive investment phase has seen productivity fall to its lowest in more than 30 years as companies recruited inexperienced staff and managers. Access to Capital Lower commodity prices are influencing investor behavior making it difficult for junior and mid-tier mining companies to access capital for project development. Social Licence to Operate Lower commodity prices are having an impact on investment decisions which, in turn, are having an impact on regional communities and developing regions. Social media and environmental lobby groups are creating negative sentiment which is influencing public opinion on the sector. Price and Currency Volatility Lower commodity price impacts have been partially offset by a lower Australian dollar. Capital Project Costs Project cost overruns are a legacy issue which is being made worse by difficulties in attracting investment capital. Access to Energy Securing sustainable, cost-effective and reliable energy is critical. Innovation Significant productivity gains can be realised through a fundamental rethink of how things are being done and a willingness and capability to innovate. These business risks all have a link to workforce development. Please see a list below of workforce development drivers impacting the mining industry in Western Australia, which will be explored in more depth in Section 3. a b c d e Productivity skill sets Automation and its skill impacts Flexibility and quality in the training system Sustainability through diversity Costs of doing business and regulatory matters. Page 11 of 76

1.5 Fast Facts In 2013/14 mining accounted for 30 per cent ($79.5 billion) of Gross State Product (GSP) 11. As at May 2015, mining (including Oil and Gas) constituted 6.9 per cent (96,200) of the Western Australian labour force. According to the ABS May 2015 labour force data, the mining sector employs almost 1 per cent of Australia s labour force 12. The 2025 workforce is forecast to be double the pre-expansion levels of 2004 and settle around 87,000 largely due to the sector s transition from construction to operations 13. The Western Australian mining industry has 16 mineral projects at the committed stage with a total estimated capital expenditure above $114 billion 14. Increasing use of automated technology in mining projects across Western Australia will have implications for industry s skill requirements According to the Department of Mines and Petroleum, mining and oil and gas royalty payments totaled $5.8 billion in 2014 of which iron ore accounted for $5.2 billion, a growth of 20 per cent compared with 2014 15. According to the 2015-16 State Budget, despite recent falls for a number of key commodities, revenue from royalties will be $4.44 billion in 2014-15 and estimated to be $3.67 billion in 2015-16, contributing 14 per cent to total state revenue. Across the Western Australian resources sector the cost competitiveness of projects has decreased across a range of commodities due to lower commodity prices and relatively high costs of doing business. According to the ABS May quarter 2015 figures the resources sector workforce comprises 27 per cent professionals with just over a quarter of these being women. Managers total 9 per cent of which 21 per cent are women. Technicians and trades workers make up 24 per cent of the workforce and machinery operators and drivers total 27 per cent with a small representation of women in these occupations, both around 8 per cent and 6 per cent respectively. With the exception of managers, these are the most common occupational categories across the sector. While being a relatively small direct employer, the resources sector supports many other areas of Western Australian industry. It has been estimated the resources sector employment multiplier may be as high as 4, meaning for every job created in the resources sector a further 4 are created in the wider economy. 11 Department of State Development, Western Australia Economic Profile, July 2015 12 ABS, Labour Force (6291.0.55.003), Quarterly, May 2015 13 CME/Deloitte Access Economics, 2015-2025 Western Australian Resources Sector Outlook, November 2014 14 BREE, Resources and Energy Major Projects, April 2015 15 Department of Mines and Petroleum, Royalty Receipts 2014 Page 12 of 76

Around 70 per cent of resources sector fly-in/fly-out (FIFO) workers are sourced from the Perth/Peel region. A further 3 per cent of the FIFO workforce is expected to come from these regions by 2020. By the same year the proportion of the resources sector undertaking FIFO will be approximately 63 per cent, up from about 60 per cent in 2014 16. The latest CME workforce survey indicates 67 per cent of the resources sector workforce is 34 to 64 years old or older, with the majority of the FIFO workforce in the 34 to 54 age group. Many of the residential metro workers are in the younger age group of 25 to 44 years old 17. According to the survey, 86 per cent of the workforce is in a relationship with around 65 per cent having children and around 55 per cent of the workforce has worked in their roles for over 5 years. 73 per cent of people surveyed have a partner who is working. 74 per cent of FIFO workers surveyed reported they would not continue in their role if their arrangement changed to residential. According to the CME 2013 diversity survey, 19 per cent of the Western Australian resources sector workforce is female and 4.2 per cent are Aboriginal. By 2020 the share of women and Aboriginal people in the resources sector workforce is forecast to increase by 1.5% and 2.3% respectively 18. An ageing working population and retirement of baby boomers presents a potential loss of experience and corporate knowledge to the sector. According to a study conducted by the NCVER on behalf of CME, member companies of CME spent around $470 million on training activities during 2011/12 representing approximately 5.3 per cent of payroll. According to the same study, apprentices and trainees comprised about 5 per cent of CME member company workforces. 16 CME/Deloitte Access Economics, 2015-2025 Western Australian Resources Sector Outlook, November 2014 17 CME, Workforce Survey, 2015 18 CME/Deloitte Access Economics, ibid Page 13 of 76

1.6 Summary of Issues Table Issue Recommended Priority Action(s) Skilling Strategy WA Lead Agency Due Date Quality in the training system Skill Sets Application of VET in Schools to RITC industries Ensuring training system has the capacity to respond to mining industry skill needs Diversity in the workforce High risk work audit, industry education piece and verification of competence processes. Second stage project to pilot an approach to the implementation of skill sets in a regional context. Liaise with relevant careers advisors, industry and relevant industry organisations to identify opportunities for the implementation of VET in Schools pathways across RITC industries, specifically mining. Working with providers and Manufacturing Skills Australia to ensure state wide capacity and capability in delivering the new MEM training package industrial electrician qualification. Develop strategies in collaboration with CME to improve the representation of women and Aboriginal Australians in the mining industry. Goal 4 RITC March 2016 Goal 4 RITC 2015/16 Goal 4 4.1.2 RITC December 2015 Goal 5 RITC June 2016 Goal 1 RITC/CME June 2016 Page 14 of 76

SECTION 2 METHODOLOGY The Resources Industry Training Council subscribes to an evidenced based planning approach and uses robust and verifiable primary and secondary data sources in developing the Industry Workforce Development Plan. Primary Data Sources RITC social media The RITC uses this mechanism to provide information and assistance to industry and training providers operating in the mining, oil and gas and downstream process manufacturing industries in Western Australia. These social media channels include: o Twitter: https://twitter.com/ritcwa o Facebook: https://www.facebook.com/ritcwa o Blog: http://ritcwa.blogspot.com.au/ o LinkedIn company page and group Industry network meetings. The RITC collaborates with relevant Industry Skills Councils around various events, seminars and consultations in Western Australia. Individual enterprise consultations Independent validations as needed RITC-commissioned research projects, available via our website: www.ritcwa.com.au Third-party industry and economic research reports Secondary Data Sources Australian Bureau of Statistics (ABS) Bureau of Resources and Energy Economics (BREE) now Department of Industry National Centre for Vocational Education and Research (NCVER) CME Diversity Survey 2013 CME Workforce Survey 2015 IBISWorld Market Research Wide range of industry reports Page 15 of 76

SECTION 3 INDUSTRY PROFILE 3.1 Overview of the Mining Industry 3.1.1 Mining Industry Analysis The Western Australian resources sector is diverse and complex, covering exploration, processing, downstream value adding and refining of over 50 different types of mineral and energy resources. Over the past decade, the Western Australian resources sector has been the most significant contributor to state growth. The value of Western Australia s mineral and petroleum sector in 2014 reached just over $114 billion. Iron ore, LNG and gold were the dominant contributors, with iron ore accounting for 57 per cent of value, LNG 13.7 per cent and gold 7.6 per cent. Royalties from the resource sector to WA increased 18 per cent from the calendar year to reach $5.78 billion in 2014. Revenue from royalties are now calculated to be $4.44 billion in 2014-15 and are estimated to be $3.67 billion in 2015-16, contributing 14 per cent to total state revenue 19. According to ABS labour force data, mining industry employment in Western Australia peaked at 122,500 in August 2012. Since this time, it has declined to 96,200 in May 2015, a fall of 26,300 or 21.5 per cent. Compared with August 2014 ABS figures, employment in the sector has grown by 400 jobs. A structural shift in the industry has been amplified in 2013 and 2014 as investment led growth transitions to export-led growth. This shift will see changes to the size and composition of the mining industry workforce. It is expected this transition will see further reductions in direct workforce numbers and a general shift to higher skill roles. Despite the current headwinds faced by the mining sector, industry invested a further $46 billion in new capital expenditure in 2014 reflecting a 1 per cent fall compared to 2013. Currently there are almost $180 billion in committed projects and a further $118 billion of projects under consideration at the feasibility stage as at March 2015 20. Iron ore expansion projects continue to dominate the mining sector, with the two biggest iron ore miners in the state, BHP Billiton and Rio Tinto currently executing expansions that will see tonnages significantly increased. In October, BHP announced plans to increase production by 65 million tonnes per year to 290 million tonnes. Rio Tinto is implementing an expansion strategy that will see it reach annual production of around 360 million tonnes per annum. Western Australian currently accounts for more than 97 per cent of Australian iron ore production and this dominant position is projected to continue. A similar dominant position is apparent in gold production, with Western Australia accounting for almost 70 per cent of Australia s gold production. According to the Department of Mines and Petroleum (DMP), Western Australia produced gold valued at $8.7 billion in 2014. DMP s latest Mineral and Petroleum Industry 2014 Review highlights the importance of gold and iron ore to the state s economy. Iron ore accounted for 75 per cent of the mineral sector s total sales in 2014. When combined with the gold sector s contribution of 10 per cent, the two minerals accounted for 85 per cent of total mineral sales in the year. 19 2014-15 State Budget 20 DMP, Mining and Petroleum Investment Update, March 2015 Page 16 of 76

The vital economic contribution of the resources sector to the Western Australian economy is also reflected in royalty income received by the Western Australian government. Since 1983, a total of $34 billion has been paid to the government in royalties, with $10 billion of this being in the last 2 years alone 21. Recent falls for a number of key commodities are forecast to see significant declines in royalty revenue in coming years. These declines are expected to be only partially offset by higher production volumes and a lower $US/$A exchange rate. Revenue from royalties is now calculated to be $4.44 billion in 2014-15 and is estimated to be $3.67 billion in 2015-16, contributing 14 per cent to total state revenue 22. The performance of the gold industry depends heavily on the movements and interaction of global gold prices, relative exchange rates and demand. According to DMP, gold was the state s second most valuable mineral sector with total sales of $8.7 billion, representing 10 per cent of the mineral sector s total sales, reflecting a 3 per cent increase in the quantity sold from 6.6 million ounces in 2013 to 6.8 million ounces in 2014. Commodity price movements over 2013 and 2014 are shown in the table below. Table 2: Exchange Rates and Commodity Prices Source: DMP (all exchange rates and commodity prices listed have been rounded off) 2013 2014 % difference US$ v A$ 0.9675 0.9026-6.7% 2013 2014 % Difference Unit US$ A$ US$ A$ US$ A$ Oil bbl 107 111 99 109-7.9% -2.2% Iron Ore Fines China $/tonne 135 140 97 107-28.5% - 23.6% Iron Ore Fines Japan $/tonne 125 129 86 95-31.4% - 26.6% Alumina t 291 295 295 316 1.6% 6.9% - Gold oz 1,410 1,457 1,266 1,403 10.2% -3.7% Nickel t 15,022 15,502 16,869 18,668 12.3% 20.4% Cobalt t 27,311 28,370 31,242 34,664 14.4% 22.2% Ilmenite* t 212 147-30.5% Rutile t 1,590 1,090-31.4% Zircon t 1,240 1,191-3.9% TiO 2 t 2,658 2,867 7.9% Copper t 7,326 7,581 6,860 7,607-6.4% 0.3% Lead t 2,142 2,219 2,096 2,323-2.2% 4.7% Zinc t 1,910 1,979 2,162 2,399 13.2% 21.3% 21 CME, Western Australian Royalties, September 2014 22 2014-15 State Budget Page 17 of 76

The table below highlights the export values of key commodities. This emphasizes the significance of iron ore exports to the Australian economy, bringing in 76 per cent of total royalty receipts for Western Australia respectively, as shown in Figure 1 23. Figure 1: WA Royalty Receipts 2014 Source: DMP and WA Treasury Royalty Receipts 2014 and North West Shelf Grants $6.9 Billion North West Shelf Grants 15.7% Nickel 1.2% Alumina 1.0% Iron Ore 76% Other Commodities 8.3% Other 2.1% Diamonds 0.3% Heavy Mineral Sands 0.2% Petroleum 0.2% Other 3.3% Source: DMP and WA Treasury 3.1.2 Industry Trends 3.1.2.1 Exploration Exploration expenditure for minerals in Western Australia has fallen significantly, with many drilling companies anecdotally saying the conditions currently experienced are unparalleled in recent history. According to the Department of Industry and Science, iron ore exploration expenditure fell by 29 per cent in the March quarter 2015 on a year on year basis to a five year low of $82 million 24. With the exception of uranium exploration expenditure which rose by 91.5 per cent in the December quarter 25, iron ore exploration is not expected to rebound in the short term. As with iron ore, Australia s gold producers remain focused on reducing costs and improving production at existing sites. Although gold exploration rose by 3.4% in the December 2014 quarter, it fell 16% ($12.2 million) in the same quarter year on year 26. According to the June 2015 CME Quarterly Economic Brief, the price of gold was down 7.7% relative to April 2014 but was forecast to strengthen reaching an average of $US1,320 in 2017. IBISWorld anticipates gold prices to remain relatively high over the next five years. 23 DMP, Royalty Receipts 2014 24 Department of Industry and Science, Resources and Energy Quarterly, June 2015 25 CME/Deloitte Access Economics, 2015-2025 Western Australian Resources Sector Outlook, November 2014 26 CME, Quarterly Economic Brief, June 2015 Page 18 of 76

The persistent decline in exploration expenditure remains a concern and will potentially hamper efforts to support the next wave of resources investment. A recent report by Ernst & Young highlights how the decline in exploration expenditure can have flow on effects for the sector s future long term growth 27. Ernst and Young argue declines in exploration investment will have implications for global price stability, supply of strategic minerals, retention of and investment in skilled labour, economic stability in mineral dependent countries, and investment in sustainability and innovation 28. In a recent inquiry, the Productivity Commission examined the regulatory barriers faced by mineral and resource exploration companies and found many stakeholders were dissatisfied with the existing regulatory framework citing increasing costs, lengthy delays in gaining necessary approvals and increasing regulatory uncertainty. The Commission found the number, size and quality of resource discoveries in Australia has been declining over the longer term and as a result, the sector has been experiencing rising costs and lower productivity. Against this backdrop, the Western Australian and Australian Governments have introduced exploration incentive schemes. The Western Australian Government has announced a continuation of the $80 million Exploration Incentive Scheme, funded as part of the Royalties for Regions program. With only 20 per cent of Western Australia s land mass explored for prospectivity, there is significant potential for new finds given the right investment climate. According to a July 2015 media release by the Association of Mining and Exploration Companies (AMEC), for the resources industry to continue to prosper and grow, it is critical there is collaboration between government and industry to boost competitive geoscience and co-funded drilling programs and investment in research and technology to access new deposits and be more cost competitive (for exploration and production) 29. The following diagram points to a decline in greenfields exploration due largely to costs associated with this exploration and a focus by mining companies on extending their existing proved up reserves. 27 Ernst & Young, Business risks facing mining and metals 2014-2015 28 Ernst & Young, Business risks facing mining and metals 2014-2015 29 Association of Mining and Exploration Companies (AMEC), Media Release, July 2015 Page 19 of 76

Graph 2: Australian Greenfields v Brownfields Metres Drilled Source: Association of Mining and Exploration Companies (AMEC), Media Release, July 2015 3.1.2.2 Cost of Doing Business Western Australia s resources and process manufacturing sectors are trade exposed. Enterprises operating in these sectors are therefore directly competing against overseas producers that may have substantially different cost and regulatory regimes. Recent studies have pointed to a decline in Australia s cost competitiveness. A combination of decreasing ore grades locally and greater competition from overseas producers (notably Africa), has placed severe pressure on Western Australian producers. Clearly, local producers must remain cost competitive in order to be attractive from an investment perspective. With global resource companies substantially increasing their portfolio of reserves and potential projects, there are many competing priorities for international capital. This capital will flow to those projects that offer the best combination of risk and return and in this environment, it is imperative that the sector not be burdened by increasing input costs and regulatory settings that are often complex and costly. CME has recently completed research into the cost of doing business in Western Australia. This research pointed to a number of factors which have contributed to a higher cost base for local enterprises including: Page 20 of 76

Declines in multifactor and labour productivity; Imposed input costs (taxes and regulatory costs); Environmental costs; Increased labour costs; Energy costs; and Costs associated with approvals processes. Late in 2012, the Minerals Council of Australia (MCA) released its report, Opportunity at risk; Regaining our competitive edge in minerals resources 30, which highlighted Australia s cost position as declining leading to a loss of operating cost advantage for all but established Pilbara projects. This largely reflected the impact of falling commodity prices and high labour input costs. For bulk commodities such as iron ore, these labour costs can amount to around 50 per cent of a project s total construction cost, while for a base metal mine the figure ranges from between 35-50 per cent 31. In the current operating climate, these remarks remain relevant. A need to invest in operations to maintain competitiveness and profitability is forcing effort to be geared towards innovation, process advancement and productivity improvement. The focus on operations is seeing investment in new projects and equipment purchases declines sharply and a renewed focus being placed on investment in asset management and maintenance to improve productivity. Technological advancements and automation are fundamental to further productivity enhancements across the mining sector. Aligned with automation is data. The next innovation is forecast to come from a capability to analyse the huge amounts of data (big data) that automation delivers and to interpret this data to make process changes to realise further productivity gains. Rio Tinto is already making significant progress in this are through creation of a global data centre in Queensland. The recent MiningIQ report 32, noted productivity and/or efficiency gains were identified as one of the top 5 challenges the mining industry faced in 2014. MiningIQ survey respondents saw the top two mechanisms for realising productivity/efficiency gains as the use of technologically advanced products or services followed by the automation of equipment or processes. This finding is echoed in Ernst & Young s report 33 which sees productivity as one of the top ten risks facing mining in 2015/16. 3.2 Labour and Skill Demand 3.2.1 Identify the Workforce Demands The workforce demand story for Western Australia s mining industry is inextricably linked to the transition from construction to operations. Unsurprisingly, the acute skills shortages experienced by the resources sector reported in previous RITC mining sector industry workforce development plans have now eased considerably and the proportion of occupations in shortage is at its lowest level since 2007. As the mining industry transitions to production, the need for entry level roles is further reduced, with priorities being focused on greater technological solutions and remotely controlled and automated systems. 30 Minerals Council of Australia, Opportunity at risk; Regaining our competitive edge in minerals resources, 2012 31 MCA, Regaining our competitive edge, 2012 32 MiningIQ, Australian Mining Industry Report, 2014 33 Ernst and Young, ibid. Page 21 of 76

The impact of automation will present skills challenges with a shift in demand to high level specialist occupations for future greenfields projects as noted in the RITC automation report from 2013, the switching costs associated with full automation in a mining context can be prohibitive. Similarly, Ernst & Young a 2014 study saw the increasing use of automation, mechanisation and data analytics as a move towards a more sophisticated operating environment arguing the skills shortage risk has become more complex and is now a matter of balancing the needs of an advancing industry against the skills that exist and invest in those of the future to avoid becoming acute in the next cycle 34. Together with potential automation impacts, a 2014 MiningIQ report found improving the skill base of existing employees through skill set development one of top priority areas of company focus 35. Lower commodity prices, weaker demand growth and the suspension of some high-cost operations has seen the balancing of talent requirement as a lesser business risk, however, retaining and up-skilling of employees is a focus for many resources companies as forecast in a 2013 skills needs report by AWPA 36. This focus is also important from a productivity perspective. The 2011 Census of Population and Housing figure below shows that iron ore accounted for 29 per cent of employment across the mining industry in Western Australia 37. 34 Ernst & Young, Business risks facing mining and metals 2014-2015 35 MiningIQ, Australian Mining Industry Report, 2014 36 AWPA, Resources Sector Skills Needs, 2013 37 2011 Census of Population and Housing, accessed online through Tablebuilder Page 22 of 76

Figure 2: Total Mining Employment by Western Australia by Industry Sub-division Source: 2011 Census of Population and Housing WA Total Mining Employment by Industry Sub-division Mining, nfd Coal Mining Oil and Gas Extraction 1% 4% 1% 1% 6% 1% Non-Metallic Mineral Mining and Quarrying, nfd Construction Material Mining, nfd Gravel and Sand Quarrying Other Construction Material Mining 1% 1% 14% 13% 1% 3% 1% Other Non-Metallic Mineral Mining and Quarrying Exploration and Other Mining Support Services, nfd Exploration, nfd Petroleum Exploration Mineral Exploration Other Mining Support Services 6% Metal Ore Mining, nfd Iron Ore Mining 29% 15% Bauxite Mining Copper Ore Mining Gold Ore Mining Mineral Sand Mining Nickel Ore Mining Silver-Lead-Zinc Ore Mining Other Metal Ore Mining According to May ABS 2015 figures, in the last 12 months has seen a shift in the occupational make up of Western Australia s mining industry. Interestingly, the data shows the proportion of technicians and trades workers has fallen from 34 per cent to 24 per cent. In comparison, the share of machine operators and drivers has risen by 2 per cent to almost 27 per cent of the employed mining workforce reflecting new projects commencing and increased production. The figure overleaf represents the spread of employees across the different occupations for all mining employees. Page 23 of 76

Figure 3: Western Australian Mining Industry Workforce by Occupation Source: ABS May 2015 Mining Industry Workforce by 3.7% Occupation Managers 8.5% Professionals 26.8% 0.3% 26.5% Technicians and Trades Workers Community and Personal Service Workers Clerical and Administrative Workers Sales Workers 8.3% 1.7% 24.2% Machinery Operators And Drivers Labourers This falls in line with CME 2015-2025 Western Australian Resources Sector Outlook (November 2014) which reports that although the resources sector workforce has more than doubled since 2004, the numbers have declined over the past 12 months as the sector transitions to the operational phase. The 2025 workforce is expected to be approximately 87,000. While lower than the current number, it is still forecast to be double the pre-expansion levels of 2004. The process of transitioning from construction to production will have long lasting effect in the size and composition of the mining industry workforce. Although further reductions in the direct workforce numbers are expected, the shift to operations will bring about sustainable long-term jobs for higher skilled workers in the state, particularly in professional occupations. In association with Deloitte 38 and as part of an update to the National Workforce Development Strategy 39, the Australian Workforce and Productivity Agency (AWPA), developed models to gain insight into the skilled labour demands of a transitioning sector based on four different scenarios: 1. The Long Boom (sustained prosperity and a restructured economy) 2. Smart Recovery (uncertainty to 2015 with low growth and knowledge-based recovery) 3. Terms of Trade Shock (resource prices fall, a more balanced economy) 4. Ring of Fire (risky world multiple shocks) The benefit of this approach is the ability of policy makers and enterprises alike to commence additional workforce planning in different economic cycles. 38 http://www.awpa.gov.au/national-workforce-development-strategy/2012-workforce-development-strategy/scenariodevelopment/documents/scenarios-for-australia-to-2025.pdf 39 The RITC contributed to the consultation process for the National Workforce Development Strategy, RITC Submission, unpublished Page 24 of 76

Figure 4: Employment Composition by Industry, 2011 and 2025 by Scenario Source: AWPA Discussion Paper from Deloitte Access Economics Modeling The AWPA resources sector work 40 projects mining operations employment will increase each year between 2014 and 2018. Under AWPA s base case scenario (deemed to be the most likely scenario by AWPA), employment will increase from 236,690 in 2013 to 254,260 in 2018, an increase of 7.4 per cent. According to the report, Western Australia, Queensland and New South Wales accounted for just over 85 per cent of national mining industry employment in May 2013. Latest ABS labour force data (May 2015) shows little change in this overall picture which is not unexpected. As AWPA notes, from a regional perspective the impact of mining on employment is significant. Although nationally the sector employs a small portion of the workforce, for Western Australia the figure is close to 7 per cent and in some regions in Western Australia mining accounts for over 50 per cent of employment 41. 40 AWPA, Resources Sector Skills Needs Report, 2013 41 AWPA, Workforce Development Needs Discussion Paper, July 2012 Page 25 of 76

Dec-2011 Feb-2012 Apr-2012 Jun-2012 Aug-2012 Oct-2012 Dec-2012 Feb-2013 Apr-2013 Jun-2013 Aug-2013 Oct-2013 Dec-2013 Feb-2014 Apr-2014 Jun-2014 Aug-2014 Oct-2014 Dec-2014 To meet this demand, the RITC advocates for a three pillared approach which is championed by CME: Training Training, upskilling and redeployment of existing workforce Training as an entry pathway for new workers Diversify the workforce Women Aboriginal Australians Mature aged workers Migration Interstate International Temporary migration Permanent migration Workforce development and diversifying the workforce will be addressed further in Section 4 of this report. Mining has driven migration flows into WA and during the years of expansion in the state s sector, with overseas migration peaking in 2012 at 44,500 and interstate migration at 8,900. The following data shows a continued significant decline in migration as projects transition from construction to a less labour intensive operational phase, exacerbated by lower commodity prices, weaker demand growth and the suspension of some high-cost operations. Figure 5: Net Overseas and Interstate Migration in Western Australia Source: ABS, 3101.0 Australian Demographic Statistics, Table 2: Population Change, Components States and Territories Western Australia December 2014 Net Overseas and Interstate Migration WA 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0-2,000 Overseas Interstate During this time of growth, the work practice of Fly-in/Fly-out (FIFO) was another strategy utilized to meet skills demand particularly in remote and regional areas. As pointed out in CME s 2015-2025 Western Australian Resources Sector Outlook, accommodating the future workforce and meeting the sector s need for skilled labour will require both FIFO and local residential options. The percentage of Page 26 of 76