Capital expenditure on mining

IBISWorld forecasts capital expenditure on mining to drop by 2.6% in 2024-25, to $0.76 billion. Commodity prices are expected to fall and normalise, including oil, iron ore and gold, causing capital expenditure on mining to decline in the current year. However, continued global demand for energy is likely to dampen this drop to some extent.

Capital expenditure on mining has been extremely volatile over the past decade. Mining investment peaked for the decade in 2014-15, but has since decreased following declining local demand for coal and volatility in the world price of crude oil. These factors reduced the financial return on mining projects, leading to lower investment. In addition, the breakup of the state-owned coal corporation Solid Energy New Zealand Limited, previously the largest player in the coal mining industry, led to a pause in development works. This contributed to sharp falls in expenditure on mining over the two years through 2016-17. Solid Energy's mines have since been acquired by several private operators, but in many cases now operate at lower rates of production. Restrictions on new offshore oil and gas exploration, which were introduced in November 2018, have also constrained mining capital expenditure over the past five years.

A partial recovery in coal and oil prices over the two years through 2018-19 led to growth in capital expenditure on mining in 2018-19. The delay of the government's announced ban on new mining developments on conservation land also provided greater confidence to mining firms. Over a third of New Zealand is classified as conservation land by the Department of Conservation (Te Papa Atawhai). This ban was originally announced during the newly elected Labour government's Speech to the Throne in November 2017. While the proposed ban has been on hold, mining applications increased in an attempt to begin operations before the ban is implemented. However, these applications are yet to significantly increase the output of most mined resources. Overall, IBISWorld forecasts capital expenditure on mining to fall at a compound annual rate of 3.5% over the five years through 2024-25.