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Gillard misses golden opportunity

Thursday, September 06, 2012
Julia Gillard missed a golden opportunity to regain some mining industry love by pushing her education barrow at the opening of the AMEC convention in Perth.

The fallout from Prime Minister Julia Gillard’s opening address to the Association of Mining and Exploration Companies (AMEC) convention in Perth was fairly blunt during the week.

 


After the address delegates of the convention gathered around the room in clusters, dissecting what they had heard.

The general consensus to arise from the discussions was that the Prime Minister had missed an ideal opportunity to engage with the sector’s junior companies; the ones that feel most isolated by the policies of recently successive Labor governments.

Instead Gillard devoted much of her oration, a fair chunk of the bits towards the end, which are the ones people do tend to remember, to the government’s new education policy.

As good as a policy that may be or may not be is a matter for other realms – perhaps educational ones, and not when addressing what surely was a reasonably hostile crowd to begin with.

“It’s great to be back talking with the mining industry,” Gillard said.

“I’m here because AMEC’s member companies are the explorers, the discoverers; if it’s there you’ll find it; if you find it you’ll dig it up.

“You are tough and you are resourceful.

“I meet with you here today in a very genuine spirit of shared respect and shared concern.”

For the first half of her speech Gillard did just that; she acknowledged the current uncertainty of the market, which she said stemmed from depressed conditions in Europe and the US and from the softening growth being experienced by our biggest customer, China as it prepares for its new leadership and rebalances its economy.

“These factors are being reflected in commodity prices with coal and iron ore coming off their highs; and some of the stuff close to your hearts and hands, like zinc, nickel, and mineral sands suffering setbacks as well,” she said.

“I also know that investment decisions are becoming more complex as projects become more complex; but, let’s be clear reports of the Mining Boom’s death have been exaggerated.

“This is a boom with three distinct phases – a prices boom, which is now passing. An investment boom, still to reach its peak…and a production boom, as all that effort comes to fruition in the years and decades ahead.”

Unfortunately, Gillard didn’t acknowledge the boom that has passed; the one of most concern for the industry players in the room, the exploration boom.

That is the phase the junior sector mainly operates in – exploration. That means they missed the prices boom because they weren’t producing.

Now, they’re missing the investment boom as that has dried up for companies out on the ground looking for the country’s ‘next big discovery’.

The production boom in decades to come? They’ll see that if they get help conducting the exploration necessary to discover the mines of the future to encourage investment to lead to production.

There is a great big, unnecessary wedge that remains well and truly planted between the government and the mining industry and while it remains the two parties will never be able to enter into any substantial dialogue.

It started with the mooted introduction of the Resource Super Profits Tax and the ensuing punch up that was led by a few high-profile industry heavyweights.

It is a great shame and, to both the government’s and the industry’s, detriment that the ongoing battle of words the Prime Minister and her deputy and treasurer Wayne Swan are having with Gina Rinehart, Clive Palmer and Andrew ‘Twiggy’ Forrest has been allowed to continue.

Forrest, it has to be said, holds a great deal of respect amongst his peers, having built his own train set in a yard full of bigger bullies trying to thwart his attempts, to develop his Fortescue Metals Group (ASX:FMG) into a successful iron ore producing operation.

 


Rinehart and Palmer may appear to receive the same industry support on ground level, however at most industry gatherings their names are often included in whispered sentences that end with the phrase, “I wish they would just shut up!”

Gina and Clive cause much consternation amongst the rank and file of the industry who consider their weekly comments, which gain such valuable media real estate, to be just as damaging to their cause as they deem the Minerals Resource Rent Tax or Carbon Tax to be.

The whole argument has descended into being more about characters and personalities than the formulation of good policy for the industry, and ultimately, the nation.

The government would be well-advised to take the big personalities and big players, including BHP Billiton (ASX:BHP), Rio Tinto (ASX:RIO), and Xstrata out of the negotiating picture and bring in the juniors for a chat.

With some 650-odd such companies listed on the Australian Securities Exchange they certainly outweigh these others in numbers and totalled up probably contribute a lot more to the economy through their employment of industry-related small businesses.

As he introduced the Prime Minister to the convention AMEC chief executive officer Simon Bennison opened the door for some mining industry-related dialogue.

 


“The Australian exploration and mining sector will not be sustainable without new exploration success,” Bennison said.

“A University of Western Australia report highlights that based on current known reserves and resources about half of Australia’s non-bulk commodity mines will be depleted in a period of around 17 to 18 years.

“This is a staggeringly short time frame – governments of all levels must put more resources behind greenfields exploration.”

Bennison went on to explain that Australia’s share of exploration expenditure, on an international basis, has declined from 21 per cent to 12 per cent over the past 15 years, while other countries, such as Canada have increased from 14 to 18 per cent.

“Compounded with this is the fact that we are going through a very difficult period for junior exploration companies to raise equity finance,” he said.

“Governments – both state and federal – should prepare for lower revenues, unless new discoveries are made to replace Australia’s aging mines.”

Bennison revisited the federal Labor Party’s promise prior to the 2007 federal election to introduce a flow-through shares scheme that would encourage greenfields exploration.

“Unfortunately it was a pledge it failed to honour,” he said.

“As it stands today, around half of the money raised for exploration on the Australian Securities Exchange is being directed to jurisdictions outside of Australia to find and build mines in direct competition to our Australian industry.

“It is time for politicians to understand the current trends and the dire straits of greenfield exploration and address the issue immediately.

“The efforts by state governments to promote and support exploration development strategies should be extended to the federal arena.”