ANZ insight

ISSUE 2, OCTOBER 2012

A REPORT BY ANZ AND PORT JACKSON PARTNERS
Quality Matters:
A Progress Report on Australias Natural
Resources Export Opportunity
ANZ INSIGHT 2 / OCTOBER 2012 1 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
ANZ insight is a series of client reports developed by ANZ. The aim of the series is
to support a conversation about opportunity and the increasingly interconnected
nature of business and economic activity in the Asia Pacific region.
The series reflects the importance ANZ attaches to building dialogue among the
business community and a diverse range of stakeholders to assist the development
ofeconomic relationships and growth in the region.
The series has been developed from ANZs outward-looking orientation as Australias
and New Zealands international bank. This allows us to make a unique contribution
with our clients to the discussion of issues relating to the Australian, New Zealand
and Asia Pacific economies.
Quality Matters: A Progress Report on Australias Natural Resources Export
Opportunity is the second report in the ANZ insight series. It provides a short update
on Australias progress in capturing the commodity opportunity that has been
created by Asias growth. It follows the release in 2011 of the first ANZ insight
report, Earth, Fire, Wind and Water: Economic Opportunities and the Australian
Commodities Cycle.
The report is based on analysis by Port Jackson Partners and ANZs observations of
Australias project development terrain, with a particular lens on the risks involved.
While the long-term opportunity for the resources sector remains, this update report
provides a framework to examine how a focus on project quality can help ensure
Australias highest potential projects receive the focus needed to maximise their
chances of success in the current environment.
Michael Smith
Chief Executive Officer
ANZ
FOREWORD
ANZ INSIGHT / ISSUE 2, OCTOBER 2012 3 2 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
CONTENTS
5 1.0 EXECUTIVE SUMMARY
7 2.0 THE RESOURCES SECTOR RESPONDS
9 3.0 THE COLD REALITY: A GLOBAL FLIGHT TO QUALITY
11 4.0 ASSESSING THE PROJECT PIPELINE AND POSSIBLE IMPLICATIONS
13 5.0 IMPLICATIONS FOR SUPPORT SECTORS AND POLICYMAKERS
5 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
KEY THEMES:
ANZs 2011 report Earth, Fire, Wind and Water set out four potential growth
scenarios (a Base Case, Do Nothing Case, Low Case and High Case
1
) for the
commodity boom which were highly dependant on how Australia responded
to the opportunity.
Australia has made a good start but now faces significant and growing challenges
in maximising that opportunity.
There is a global flight to quality in resources and energy projects, and the scale
and viability of projects are being reassessed.
A realistic view will see many current projects fall by the wayside and a focus
onproject quality is needed to ensure that the highest potential projects receive
theprioritisation and focus to maximise their chances of success.
The first ANZ insight report in 2011, Earth, Fire, Wind and Water: Economic Opportunities
and the Australian Commodities Cycle, explored the extraordinary commodity
export opportunity facing Australia as a result of the shift of economic growth from
the developed to the developing world, much of which is occurring on Australias
doorstep in China, India and South East Asia.
The report highlighted that the initial phase of the commodity super cycle based
on rising prices would move into a new phase of supply-side growth based on mega
projects and new technologies. The Base Case estimated that if Australia expanded
capacity rapidly enough, commodity exports could reach A$480 billion
in real terms by 2030 creating 750,000 jobs.
To support the Base Case, policies to expand the supply side skilled labour, growth
financing, technology and available land and measures to facilitate project
development would help capture growth and minimise pressures on existing
economic activity. In turn, commodity exporters and their service providers would
need to rapidly develop new investment, project management and marketing
skill-sets. High quality resources on their own would not be enough.
The report also observed that Australia faced intense global competition for its share
of the growth opportunity and that at times the road ahead would be volatile, with
short-term uncertainties potentially undermining the momentum required to fully
exploit the opportunities facing Australia.
One year on, Quality Matters: A Progress Report on Australias Natural Resources
Export Opportunity concludes that Australia has made a good start in realising
this opportunity with higher volumes and increases in market share in some
commodities. Despite this progress, Australia now faces growing challenges in fully
exploiting the opportunity.
1 In the ANZ insight 2011 report Earth, Wind, Fire and Water: Economic Opportunities and the Australia Commodities Cycle
the Base Case was compared with three other scenarios the Do Nothing Case, the LowCase and the High Case.
- Under the Do Nothlng Case, export revenues would be ~A$234 bllllon ln 2030 ln real 20l0 dollar terms. The 8ase Case
represents a cumulative increase of A$2.6 trillion in revenue over 20 years compared to the Do Nothing Case.
- |n the LowCase Australla ls not capltallslng on the potentlal newpro[ects that could go ahead. The export revenue
in 2030 would be A$390 billion under this lowscenario. This scenario would lead to cumulative export revenues of
around A$1.6 trillion, which would be A$985 billion lower than under the Base Case, or worse.
- |n the Hlgh Case, export revenue would be A$566 bllllon ln 2030. Under thls scenarlo, cumulatlve export revenue could
be almost A$3.14 trillion, or A$800 billion higher than the Base Case over the 20 years to 2030.
1.0 EXECUTIVE SUMMARY
ANZ INSIGHT / ISSUE 2, OCTOBER 2012 7 6 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
KEY THEMES:
950 mining and infrastructure projects have been identified as planned for
execution across Australia over the next decade.
Project activity will peak in 2015, with the number of projects 77% higher and the
level of investment 34% greater than in 2011.
If all projects were to go ahead, the pipeline represents extraordinary near-term
growth.
Large numbers of projects have been put on drawing boards since the magnitude
of the resources super-cycle emerged over the past decade. ANZ has identified
approximately 950 mining and infrastructure projects planned for execution across
Australia over the next decade, with 40% committed or underway and the remainder
classified as proposed.
The mining and infrastructure investment for such a pipeline would require
A$1.9 trillion in cumulative capital and operating expenditure (A$0.8 trillion and
A$1.1 trillion respectively) for the period 2012-20. The majority of that capital
and operating expenditure would be needed in the next three years (Exhibit 2.1).
Nearly 70% of the projects by number and 75% of the quantum of capital are for
export-linked mining and mining-related projects, with power and infrastructure projects
making up the remaining 30% of projects and 25% of total proposed investment.
Approximately 70% by number and 85% of total investment will take place
inWestern Australia, Queensland and New South Wales predominantly across
thePilbara region, Central Queensland and Mackay, and the Hunter Valley and
New South Wales Central Coast.
The workforce required to build all 950 projects would equate to 5% of the entire
Austalian labour force (Exhibit 2.1). The required employment for identified new
projects in Western Australia alone is equivalent to 15% of that States labour supply.
If all projects were to go ahead, the pipeline represents extraordinary near-term
growth. Project activity peaks in 2015 with the number of projects 77% higher and
the level of investment 34% higher than in 2011. Queensland and New South Wales
account for most of the increase in proposed projects although New South Wales
has a higher percentage of smaller projects, with the result that Queensland and
Western Australia will still account for 60% of investment flows.
Resources projects in key commodities will drive this growth. For example, there are
50 thermal and 40 coking coal projects, 40 oil and gas projects and 35 iron ore projects
proposed to be brought on line by 2015. Renewable energy projects such aswind
farms are also on the rise with 50 projects being proposed, mostly in South Australia.
2.0 THE RESOURCES SECTOR RESPONDS
As the project outlook deteriorates and the cost, completion and relative return risks
rise, there is a global flight to quality, and resources and energy projects are being
reassessed. Much of the increase in project risk is a function of the shortage of inputs,
particularly skilled labour, which has contributed to sudden and unexpected project
cost escalation.
Under these clrcumstances, lnvestors have the motlve and opportunlty to be hlghly
selective about the projects they choose to pursue. The track record of project
proponents, the mix of particular commodities involved and the relative attractiveness
of projects globally all bear on risk.
While most first-generation projects will be built, many projects plotted out on
drawing boards in recent years will not come to fruition in the foreseeable future.
In part, this is due to the reality that there simply would not be sufficient available
capital or labour to complete them. Indeed, this report suggests that of the 950
projects identified as currently underway or proposed in Australia, up to two-
thlrds may not proceed ln the planned tlme frame. Under these condltlons, capltal
expenditure between 2013-20 would fall from A$759 billion to A$450 billion, while
the required construction and operational labour along the supply chain would drop
from 310,000 roles to 160,000 roles.
The project pipelines in New South Wales, Victoria, South Australia, Tasmania and
the Northern Territory are most fragile, while projects in Western Australia and
Queensland are generally more robust.
Although the long-term approach to reducing supply side constraints and improving
productivity remain a priority, attention is needed to ensure that Australias highest
potential projects receive focus to maximise their chances of success. This includes
sensible project prioritisation and strategic targeting of infrastructure towards the
best projects.
To be successful during the coming flight to quality, project proponents will need
to meet a more rigorous combination of financial, commercial and risk hurdles.
Thechallenge for investors and policy-makers is to ensure that scarce resources and
infrastructure are not dispersed over an unrealistically-broad portfolio of potential
projects. In this sense, the flight to quality should be expected and even encouraged,
so that Australia manages its response optimally given available capital and labour.
These conclusions should be kept in perspective. The scale of the commodities
demand outlook outlined in Earth, Fire, Wind and Water was so extraordinary that
everything would have to go right for Australia to fully deliver on the opportunity.
Current concerns about the limited duration of the resources boom do not reflect
the scale and longevity of the opportunity that is being driven by Asias growth.
Australia needs to remain focused on the long-term fundamentals of the growing
markets in our region.
This will involve difficult choices in order to improve global competitiveness.
Australia has before it a significant and perhaps unparalleled opportunity which
should provide impetus for ongoing national discussion about policy actions
that could provide substantial long-term benefits to Australias economy and
national prosperity.
ANZ INSIGHT / ISSUE 2, OCTOBER 2012 9 8 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
Exhibit 2.1
TIMING OF INVESTMENT AND LABOUR REQUIREMENTS FOR IDENTIFIED PROJECTS
Notes: 1. Total capital demand includes operating expenditure and capital expenditure.
2. Supply chain labour excludes business services associated with the broader industry supply chain.
Sources: Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), Access Economics, Wood MacKenzie,
Company Websites, ANZ analysis.
2016 2015 2014 2013 2011
250
154
96
221
117
104 106
68
174
234
154
80
253
168
85
42
189
147
2012
300
250
200
150
100
50
0
2020
115
58
173
2019
124
61
185
2018
126
62
188
2017
143
63
206
2012
172
38
210
5 6
360
300
240
180
120
60
0
2020
178
2019
176
182
2018
172
23
195
2017
167
49
216
2016
148
102
250
2015
117
195
312
2014
232
94
326
2013
73
220
293
2011
55
247
192
173
Total capital demand
A$ billion
Supply chain labour for total projects proceeding
Thousands of new roles
Committed / Construction
Pre final investment decision
Construction
Operation
KEY THEMES:
Across major commodities, the capital needed to install an additional tonne of
productive capacity in Australia has risen by at least 50% over the past five years.
Australian costs are rising more quickly than the global average.
While projects with high capital intensities which are prone to delay have little
prospect of survival in this environment, the most efficient Australian projects
willcontinue to be attractive under almost all scenarios.
Overlaying the rosy outlook associated with Australias project pipeline is the reality
that rapid and unprecedented demand growth has placed the entire global resources
industry under great pressure.
Costs have risen across the board, driven by scarcity of key inputs as well as priorities
that rate speed of development above project efficiencies. In some commodities,
these cost pressures are amplified by the need to extract higher volumes from ore
bodies of lower grade. Across major commodities, the capital investment needed
toinstall an additional tonne of productive capacity in Australia has risen by at least
50% over thepast five years. In copper, where growth increasingly relies on lower
grade ores, this increase is much higher.
At the same time, as global demand softens, commodity prices are easing, with prices
of key commodities such as copper and coal now 15-30% below 12-month highs and
25-50% below their five-year highs.
Australia is not alone in facing these challenges. Many project proponents across the
globe are being squeezed between increasing costs and current price declines. In
Brazil, capital costs at the Minas Rio iron ore project have increased at least four times
and the project is now expected to cost more than double original estimates, while the
capital intensity of the Salobo copper project has doubled since 2007. In Mozambique,
reported costs for phase one of the Moatize coking coal project increased by 50%
between 2009-11. In Colombia, the capital intensity of expanding the Cerrejon
thermal coal mine will be four times as high as the original greenfield project.
Australian projects are particularly exposed by this trend. On average, Australian costs
are rising more quickly than the global average. Some projects will remain resilient
despite cost increases. In iron ore for example, Australias best projects in the Pilbara
are antlclpated to retaln a US$l3/tonne advantage over 8razlllan competltors ln the
medium term (until 2020). For projects outside the Pilbara, the picture is less positive.
Australian projects also vary according to their exposure to approval and permitting
risk, and the delays that quickly erode project economics. Expansions of existing
projects are less exposed to these risks than greenfield projects. New projects in
specific sectors, including coal seam methane, are particularly at risk from these delays.
These potential impacts will sharply differentiate the attractiveness of Australian
projects, particularly as prices fall in the near term. Projects with high capital
intensities that are prone to delays start from behind in the face of weaker prices.
However, the most efficient Australian projects will continue to be attractive under
almost all scenarios based on excellent relative cost positions.
Under these clrcumstances, lnvestors wlll have the motlve and opportunlty to be
highly selective. The flight to quality is sensible. Australia needs robust projects that
are able to survive changed and challenging circumstances.
3.0 THE COLD REALITY: A GLOBAL FLIGHT TO QUALITY
ANZ INSIGHT / ISSUE 2, OCTOBER 2012 11 10 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
KEY THEMES:
Project proponents will need to meet a more rigorous combination of financial,
commercial and risk hurdles.
Indicative projects at risk include infrastructure, processing, non-renewable and
renewable projects.
Projects in Western Australia and Queensland are generally the most robust, and
the pipelines in New South Wales, Victoria, South Australia and the Northern Territory
are more fragile.
To be successful during the coming flight to quality, project proponents will need to
meet a more rigorous combination of financial, commercial and risk hurdles. In addition
to sound project economics, investors will demand:
A resource base of a size and quality comparable to other regional and global
resource projects such as AngloGold and Independence Groups Tropicana
Gold Project in Kalgoorlie, Western Australia.
An asset that can support multiple brownfield expansions once the initial
development is complete. For example, Woodsides Pluto Project or the Sino
Iron Project owned by Citic Pacific Mining and surrounding tenements both
in the North-West of Western Australia.
Quality and depth of management with a track record in developing and
operating similar assets.
Locations which benefit from relatively simpler logistics plans or have access
to infrastructure or infrastructure rights. For example, the right to use harbour
facilities as a loading terminal.
Partners with sufficient financial capacity to support the project development
and manage the completion and market risks.
Uslng thls template, ANZ has completed a hlgh-level assessment of the current
project pipeline, allocating projects a High, Medium and Low likelihood of attracting
financing
2
. Based on this assessment:
In an environment where only projects in the High and Medium categories
were financed, up to two-thirds of the current project pipeline would be
unllkely to proceed wlthln the expected tlmeframe. Under these condltlons,
capital expenditure between 2013-20 would fall from A$759 billion to A$450
billion, while the required construction and operational labour along the
supply chain would drop from 310,000 roles to 160,000 roles.
As a worst case scenario, where only the High category projects attract
financing, capital expenditure would fall further to A$325 billion, with
construction and operational labour falling further to 100,000 roles (Exhibit 4.1).
Both of these scenarios would see Australia on a trajectory well below the response
set out under the High Case in Earth, Fire, Wind and Water and unlikely to achieve
even the Base Case.
Under both scenarlos, lt would not [ust be the resources-related pro[ects that would
suffer: lower Federal and State Government revenues due to lower tax income would
also adversely impact economic infrastructure projects.
It is important to recognise that this assessment is not a prediction of likely outcomes,
rather it points to the sensitivity of the pipeline to both the economic conditions
Australia faces, and the commercial and policy responses of business and government.
2 This analysis is an assessment of quality based on currently available information and does not seek to predict likely
outcomes. Rather, the analysis provides a model for considering factors that impact the pipeline, and those that should
be considered and addressed in order to maximise the opportunity for Australia.
4.0 ASSESSING THE PROJECT PIPELINE AND POSSIBLE IMPLICATIONS
ANZ INSIGHT / ISSUE 2, OCTOBER 2012 13 12 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
KEY THEMES:
National benefits hinge on creating conditions that help ensure that Australias
highest potential projects receive prioritisation and focus.
Many Australian projects currently compete poorly with international rivals on
development and operating costs.
Other sectors must also prepare for the coming flight to quality, including domestic
and export service, support and supply companies.
While Australia faces difficult choices in order to remain globally competitive,
the nation has before it a large opportunity that could provide substantial
long-term benefits.
The potential for winners and losers from the flight to quality set out in Chapter 4 are
clear. The implications go well beyond the hopes of direct project proponents and
have the potential to impact the broader world of contending contractors, suppliers,
infrastructure planners and business partners on one hand, and local, State and
Commonwealth Governments on the other.
In these circumstances, Australia must continue to focus on the business and policy
settings that are needed to maximise the available opportunity. At this point in the
cycle, this should include a realistic assessment of the pipeline and the factors driving
a flight to quality to enable business and government to respond accordingly.
Some of the businesses for which this has implications are components of larger
companies while others are privately owned. Many are now emerging on the
Australian Securities Exchange providing infrastructure, logistics, transport,
engineering, labour supply, maintenance, consumables, computing and a host
ofother often-specialised inputs. These adjacent businesses must also prepare
for the coming flight to quality.
Winning firms will quickly recognise that:
Investors will increasingly look through their businesses to the quality
of the underlying resource projects they service.
Expansion plans should reflect realistic expectations of pipeline development
by sector and geography.
When project risks are rising, flexible labour and operational practices will
beat such a premium that companies must find ways to compete for the
labour and other resources they will need.
Equally, governments and policy-makers have an important role to play in maximising
the opportunity for Australia. In the current environment, the challenge is first to
protect and then to support the project pipelines in their jurisdictions. Long-term
growth in Asia means the opportunity available to Australia remains significant, but
national benefits hinge on creating conditions that help investors and proponents
deliver high-quality projects.
In the short term, a focus on project quality is welcome to ensure that Australias
highest-potential projects receive the prioritisation and focus that maximises their
chances of success. Capital, labour and time are in short supply there is little point
inallocating these where the projects involved have few genuine prospects.
5.0 IMPLICATIONS FOR SUPPORT SECTORS AND POLICYMAKERS
Exhibit 4.1
MINING AND INFRASTRUCTURE PROJECTS TO 2020
Committed
Proposed
High
326
175
151
High & Medium All projects
759
313
446
450
265
185
Mining
Infrastructure
Wind
High
326
280
43
3
High & Medium All projects
759
512
218
29
450
9
45
396
>5bn
1-5bn
<1bn
High
326
231
69
26
High & Medium All projects
759
367
230
162
450
66
116
268
Western
Australia
Queensland
New South
Wales
Other
High
326
198
107
6 15
High & Medium
15
450
278
122
35
All projects
759
367
177
104
111
Notes: 1. Share of investment is based on capital expenditure only (i.e. excludes ongoing operating capital).
2. High, Medium and Low refers to the likelihood of projects attracting finance.
Sources: ABARES, Access Economics, Wood MacKenzie, Company Websites, ANZ analysis.
State
Commitment
Project size
Sector
Anticipated capital expenditure by project category, 2012-20 (A$ billion)
Exhibit 4.2
PROJECT CATEGORISATION BY STATE ATTRACTIVENESS TO FINANCIERS
Notes: 1. Share of investment is based on capital expenditure only (i.e. excludes ongoing operating capital).
2. High, Medium and Low refers to the likelihood of projects attracting finance.
Sources: ABARES, Access Economics, Wood MacKenzie, Company Websites, ANZ analysis.
Categorisation of project pipeline: proportion of anticipated capital expenditure, 2012-20 (percent)
High
Medium
Low
Queensland
100
61
8
31
Western
Australia
100
54
22
24
Australia
100
43
16
41
61
22
17
Northern
Territory
100
NewSouth
Wales
86
9
5
100
South
Australia
58
28
14
100
Tasmania
100
100
Victoria
76
10
14
100
0 0
These scenarios have distinct impacts by geography and commodity sector with
specific impacts by company and by State. For example, ina scenario where only the
High and Medium category projects are financed, ANZestimates that more than 60%
of the baseline project capital expenditure would be required in Western Australia
and Queensland, while less than 45% would be required in New South Wales, Victoria,
Tasmania and South Australia. Economic infrastructure and renewable energy
projects appear most at risk under these downside scenarios (Exhibit 4.2).
ANZ INSIGHT / ISSUE 2, OCTOBER 2012 15 14 QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
ACKNOWLEDGMENTS
This report was produced by ANZ in collaboration with Port Jackson Partners.
ANZ would like to acknowledge the contributions of the following people:
(ANZ) Jonathan Au-Yeung, Ryan Barrett, David Byrne, Aaron Ross, Antony Strong;
(Port Jackson Partners) Grant Mitchell and Angus Taylor.
The illustrations in this report are the work of Robert Hanson.
FOR MORE INORMATION
The ANZ insight series is managed by ANZ Corporate Communications.
For further information contact: corpcomms@anz.com
This note of realism should be welcome: Australia has high-quality projects inthe
pipeline that have the potential to be robust under all predictable circumstances
these projects deserve support and focus.
The same applies to public sector thinking that is, quality matters. It is not in the
long-term interests of Australia or its individual States to support projects with little
chance of success simply because they happen to be located in one jurisdiction
oranother.
In this context, it is worth looking at Australias response from the ground up and
focussing discussion on the longer-term choices the nation needs to maketo remain
globally competitive. Policy-makers need to decide how far and howfast to drive
reform to unlock the potential for ongoing resource-linked growth.
At present, many Australian projects compete poorly with international rivals
on both development and operating costs. There are clear reasons why this is
the case and they are by no means irrevocable. Australia can recover its project
competitiveness with corrective actions implemented quickly and systematically.
Areas for focus include:
Achieving ongoing and rapid productivity gains economy-wide, directly
influencing project costs in the mining sector, and limiting inflationary
andexchange rate pressures.
Acting to control key input costs. Low-cost energy remains vital, particularly
access to the gas supplies which are needed to underpin remote power and
processing plant operations. This also means facilitating labour mobility
and reorienting industrial relations regulations to prioritise productivity. An
obvious step is tourgently review site agreement-making in the large-scale
project construction sector.
Creating taxation and royalty regimes that are competitive on a State-versus-
State and international basis.
Actively attracting capital from bothdomestic sources and from offshore
particularly from Asia.
Increasing the focus on cost effective, timely infrastructure whether
supporting the resources sector or for other needs. This means prioritising
planning and approvals of infrastructure projects set to serve export
opportunities. For example bauxite and coal exports from expanded
Queensland ports. It also means ensuring infrastructure projects can
secure labour and capital at reasonable costs, and regulating infrastructure
appropriately to limit gold plating and rewarding ongoing increases in
output and productivity.
Becoming more pragmatic and opportunist, and less restrictive about access
to temporary but immediately available offshore labour, and to importing
low-cost pre-fabricated plant and equipment.
Ensuring State-versus-Commonwealth permit approval processes are
coordinated and streamlined.
Like a number of other countries, Australia faces a series of difficult choices in order
to remain globally competitive. However, Australia has before it a large opportunity
that would provide substantial long-term benefits. Policy-makers need to decide
how far and how fast to drive reform to unlock the potential for ongoing resource-
linked growth.
QUALITY MATTERS: A PROGRESS REPORT ON AUSTRALIAS NATURAL RESOURCES EXPORT OPPORTUNITY
Disclaimer: This publication contains general information only and is not a substitute for professional
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ANZ INSIGHT / ISSUE 2, OCTOBER 2012 16
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