THE commodities price slump offers opportunities in Western Australia for Singapore investors, especially in liquefied natural gas (LNG), Bill Marmion, the state's mines and petroleum minister, has said.
In an interview with The Business Times on Tuesday, he said that the lower prices of key commodities such as iron ore has hurt producers across the sector, and that the state's budget is expected to fall into an operating deficit this year and the next.
But the weak price environment has created a low entry-point to investors and has bolstered companies' cost efficiency, he said.
In 2014, the value of Western Australia's mineral and petroleum industry reached slightly over A$114 billion. Iron ore remained the state's highest-valued commodity, accounting for A$65 billion, 6 per cent lower than in 2013, despite the output having been higher by 25 per cent.
On Tuesday, spot iron ore prices traded at around US$60 per tonne, down from over US$100 a year ago.
Meanwhile, LNG was the state's bright spot last year, with the output up 10 per cent at 21 million tonnes, and sales value up 18 per cent at A$15.6 billion.
By 2020, Australia could emerge as the world's biggest LNG exporter, said Mr Marmion.
In 2013-2014, the mining industry had accounted for 30 per cent of Western Australia's gross state product.
Speaking at the Asia Mining Congress in Singapore on Tuesday, he had noted that Singapore, with its sights trained on becoming an LNG trading hub, was already one of Western Australia's largest trading partners.
Total trade between the two parties was valued at nearly A$10 billion in 2014, but Mr Marmion hopes more members of the Singapore Exchange would "escalate investment in our exploration of new-resources projects, mineral processing and industry infrastructure", because even as Singapore companies have international holdings worth hundreds of billions of dollars, investment in Western Australia resources is "under-represented".
The minister is in Singapore as part of his 10-day mission to woo Asian investors to Western Australia's mining and petroleum sector. He leaves the city-state on Wednesday evening for South Korea, and subsequently, China.
On Tuesday morning, he sought out Seah Moon Ming, the chief executive of Temasek Holdings' LNG unit, Pavilion Energy, to discuss potential LNG partnerships.
Pavilion Energy declined to comment on the discussion.
On the sidelines of Tuesday's conference, Mr Marmion advised Singapore investors keen on exploring resource assets in Western Australia to do proper evaluation and enter into joint ventures with local partners. Such partnerships will qualify investors for the Australian government's Exploration Incentive Scheme, which was set up in 2009 to encourage greenfields exploration.
Industry watchers at the Asia Mining Congress had a separate panel discussion on resource investments during the current bear market.
David Rohanna, managing partner and executive director of APIAG Holdings, who has decades of experience in the mining sector, said he sees "a lot of slack" across the mining sector, but recommends caution, especially in the copper market: "While a supply disruption can have significant effect on copper prices, I would urge caution and not run head-on into copper unless the fundamentals are there."
Geoff McNamara, investment director of private equity fund Pacific Road Capital, who has more than 20 years of experience in the resources sector, added that his fund now only looks at assets that it has studied for the past three to five years; and of that pool, it looks for the more prudent explorers, as well as for working-stage mining assets, in order to minimise risks, he said.