Integra Underground Project

Cadence Economics, working in conjunction with Hansen Bailey estimated the net economic benefits of the Integra Underground Project (Modification 8). The mine development proposal by HV Coking Coal - a subsidiary of Glencore Australia Holdings - will continue underground mining operations through to 2023.

Last month, the Independent Planning Commission of NSW approved the Modification.

The Modification located north of Singleton in the Lower Hunter will generate significant and broad-based net benefits to the region and to New South Wales. The project is expected to generate:

  • significant benefits to workers and suppliers;
  • contribute to government revenue through royalties and company tax;
  • substantial economy-wide impacts; and,
  • relatively low environmental impacts.

Our analysis includes both cost benefit analysis and computable general equilibrium modelling to demonstrate the Modification's net economic benefits and the economy-wide impacts.

The CBA analysis outlines the net economic benefits to NSW and the local Hunter region. The analysis is based on the NSW government's economic assessment guidelines for mining projects.

At the state level, the Modification will confer a total net benefits to New South Wales of $205.5 million (in today's terms). Direct benefits account for $80.9 million of benefits and including $49.0 million in royalty payments. In addition, the project generates $124.6 million of indirect benefits to NSW-based suppliers and workers, or 60% of the total benefits generated. The analysis considers that as a foreign-owned company Glencore will repatriate the profits overseas, generating zero benefit to NSW. The Modification will generate minor environmental impacts of approximately $33,000, made up of the cost of greenhouse gas emissions apportioned to NSW.

At the local level our analysis shows that the Project will generate significant and broad-based benefits to the Lower Hunter region. The Project will generate $78.7 million in net benefit in the local region, which includes $51.4 million in worker benefits and $26.5 million of supplier benefits. The Modification will source a significant share of inputs from the local region, 95 per cent of the workforce and 37.5 per cent of its supplies.

The benefits to workers is driven by the large premium earnt by employees in the Integra Project. On average over the life of the Modification workers are expected to earn about $120,500 per annum, compared to a reservation wage of $67,200 (the NSW-wide average wage).

The analysis also includes systematic sensitivity analysis, where key modelling inputs (like coal prices, input costs, reservation wage) are changed. The analysis demonstrates that the net benefit to the state and to the local region are robust and remain strongly positive.

Finally, our assessment outlines the economy-wide impacts using a computable general equilibrium model. The Cadence Economics General Equilibrium Model (CEGEM) is a large scale, dynamic, multi-region, multi-sector model of the global economy, with an explicit representation of the economies of the Lower Hunter SA3 region and the rest of NSW. CEGEM is based on a substantial body of accepted microeconomic theory.

Over the life of the Modification the project will generate about $850 million in gross regional income (in today's terms) and an average of 110 FTE workers. At the state level the project will generate $1,200 million in gross regional income and 150 FTEs.

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