State of the Industry

Analysis of 2018/19 Work Authority Activity, Sarah Andrew, Conundrum Holdings

When looking to invest in a quarry or expand our existing sites, it is necessary to carry out a risk assessment of the market we operate within. Three metrics which can be used include the materials sold; the reserves held, and the applications or variations occurring in the industry are all used. This article outlines, in good faith, the last very specific aspect of such a risk assessment made possible by the data from GeoVic.

Available Metrics

Materials sold can be reliably sourced from the Department of Jobs, Precincts and Regions – all Victorian quarries must provide this data annually in accordance with the MR(SD)A in the form of an Annual Return. This has been the case for the sector since 1921, and in its current format since 1996. It however only provides an overview of the whole state, not specific regions.

Reserves held and approved are not readily available however it may be in the future given this data will need to be reported on future Annual Returns. It potentially could be estimated by the government given all applicants had to identify their site’s total reserves at some point and every year should have completed their Annual Returns, however this information is not linked internally. The Extractive Resources in Victoria: Demand and Supply Study 2015 – 2050 was the first concerted effort since the 1970s to collate this information.

It was however hampered by the inclusion of reserves not yet approved and was limited when articulating the link between products a local market requires and the available rock types which overall lead to a false sense of security.

Applications for new quarries, variations, notifications and cancellations occurring in the industry is another measure commonly used. It can consider the quantity and type of application, and the intervening time between when an application was initially received by the department and when its permission to commence operations was granted. At times, the time taken to process specific steps is considered, particularly when considering statutory time frames.

The article focuses on the last metric.

Work Authority Activity

Application approval speed – There appears to be a trend for applications to either be approved extremely quickly (within a month) or very slowly (greater than 2 years). This is shown on the graph above where the bottom blue and orange segments are applications with a start date within a month of the Work Authority being first granted. The application start date is generally the date that the Work Authority number was issued, or paperwork first received by ERR both of which occur prior to the planning process. It is understood that this date in recent years hasn’t been consistently entered.

The end point was the date the Work Authority was granted. As such dates of less than one month require review.

Annual Approval Rate – According to the data considered between 1 July 2013 until 1 July 2019, 77 new Extractive Industry Work Authorities were granted (excluding four sites which have subsequently closed). This sets an average approval rate of 12.8 new Extractive Industry Work Authorities granted every year across Victoria.

Expired or Cancelled Work Authorities – Considering the same time period, GeoVic identifies 100 Extractive Industry Work Authorities were cancelled, giving an annual average of 16.7 Work Authority cancellations per year. This does not consider those sites which still hold their Work Authority status whilst final rehabilitation occurs.

Resource Availability – At a glance, there appears to be a steady increase in hard rock applications from 2/yr to 5/yr, until the current year. Looking closely at the details of the new sites from the 2018/19 financial year shows Code of Practice sites (i.e. limited resource), wind farms (i.e. project specific work) and Work Authorities immediately adjected to another active licence in control of the same owner (i.e. essentially an extension). This leaves only one new hard rock Work Authority approved which did not fall into any of these categories and can serve its regional market.

The graph below includes cumulated rehabilitation bond as an indicator of the size of the greenfield approvals that year.

Commencement Date – Although an application has been approved, the Work Authority holder does not always immediately start. To get a high-level understanding of the activity, applications approved in the 2018/19 period were identified on Google Earth. This mapping, although at times about a year old, gives a quick appreciation of progress.

Many of those Work Authorities granted in recent years have not commenced operations. This may be as the planning permit obligations are unachievable or not commercial, the market opportunity has passed, the applicant has obligations to meet prior to commencing, or the applicant is preparing financially for the next phase of capital investment. It would be an interesting study on the part of the government to talk to these specific operators to understand why they have not commenced.

Outstanding Applications – When considering the Monthly report at the end of the 2018/19 financial year, there are 49 greenfield applications which have not been finalised.

Of these, Work Plans for 13 greenfield sites have been endorsed but not granted a Work Authority. These were endorsed between 2000 and 2019 with a midpoint of 2014.

There are an additional 36 greenfield applications which had not been endorsed. These include a number which would be impossible. For instance, there are applications which have been superseded by another application over the same land, or have been sterilised with freeways constructed over them, lifestyle homes built on them, or in areas of significant landscape.

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