The construction boom within the resources industry that took place in the last decade was always going to slow down.

Transcription

1 Good morning Ladies and Gentlemen, welcome to Kalgoorlie and the 2015 Diggers and Dealers Mining Forum. It is a privilege and a great pleasure to assume the role as Chairman of the Diggers and Dealers from Barry Eldridge and I would like to officially acknowledge the contribution that Barry made while he was chairman. For my first speech as Chairman of Diggers and Dealers I want to cover a range of issues that I consider our industry does need to address or have addressed by others including the State and federal Government. To say that the last 12 months have been turbulent for the mining industry would be an understatement. The construction boom within the resources industry that took place in the last decade was always going to slow down. What no one could foresee however was the slump in commodity prices, especially given that the most affected commodities are the ones that contribute the most to Australia s export earnings; iron-ore, coal and LNG. We know that the mining industry has always been a cyclical industry. We also know that commodity prices can vary dramatically, sometimes over a very short period of time. What is unusual this time is that the majority of the commodities have bottomed at the same time, hence the comment made by many people in the industry, that we have never seen it this bad. 1

2 But mining is a very resilient industry and has responded the way one would expect, and the way that any normal business would; by focussing on costs and maximising efficiencies to remain viable. Unfortunately this has led to the loss of thousands of jobs, with devastating effects on the people made redundant and their families. But even more than that, the effect of the reduction of national economic contribution from the resources industry has been devastating on the economy of the whole nation. Following the events of the last 12 months, it has become obvious how much Western Australia and Australia rely on the mineral royalties to balance their budgets. Recently the WA state government, in an attempt to better balance their books, have threatened to increase the gold royalty. After consideration and a high degree of education by the industry, the Western Australian Government decided not to increase the gold royalty and of course the industry welcomes this decision but what we really need is the Government to categorically state that the royalty will not be revisited in the foreseeable future. Regardless of the outcome, I believe that these discussions have caused and will continue to cause serious damage to Australia s reputation as a country in which to invest. Why don t Governments understand that to continually generate uncertainty that makes investors and financiers restless, is detrimental to an industry that already operates in the high risk category of business? Amazingly on 23 rd June this year at the AMEC Conference in Perth, the Western Australian Mines and Petroleum Minister, Bill Marmion declared that he was against increasing royalties and would oppose any increase, but could not speak for the rest of the Government and as such could not rule out an increase in the future. What kind of message does that send people assessing whether to invest in our industry! 2

3 We can t just focus on the impact of Government actions. It is interesting that environmental activists against the mining industry appear to be more skilled than us in the clever use of marketing and social media to win the support of the Australian community in driving a perception that our industry is not responsible. Our industry needs to spend some time in educating the broader community in the positive contribution; economically, socially and environmentally that we deliver as an industry. We tend to promote our contribution individually as corporates but not as an industry. Organised groups such as the environmentalists will always be more effective operating together than we are acting individually. We did prove we can be effective if we act collectively when we successfully educated the Australian people how ill-conceived the Mining Resource Tax was. This triumph of marketing over reality by extreme groups is having a big influence on our policy makers and we must realign their thinking so that the reality of policy impact on our industry is understood. Not that long ago, when the industry was flourishing and making a huge contribution to the national economy, Wayne Swan and Julia Gillard continuously depicted our industry as brash, self-interested and blamed the industry for the so-called two speed economy. Instead of addressing the slower sectors of the economy, they decided that they would punish the successful mining companies by imposing a Resource Super Profit Tax. What a distraction that was! Recently Mr Richard Di Natale, a few hours after being elected leader of the Greens, suggested that the best way for the Federal Government to increase their revenue is to abolish the fuel rebate to the mining companies. What rebate? 3

4 Being from a farming background he should know better than most that miners and farmers do not get a fuel rebate; they are simply exempt from a tax that applies to on-road vehicles for the building, usage and damage to public roads. As non-users of public roads, why should we subsidise people who use them? We pay to construct and maintain our own roads and the heavy equipment that use public roads to deliver equipment and consumables to minesites, pay the taxes as these contractors pay full fuel prices. An illogical and punitive tax of 38c for each litre of diesel used at mine sites would make many of the current mining operations non-viable. Any fair minded Australian, perhaps even the Greens, would admit that you should not impose a tax on people or companies if it does not apply to them. The events of the last 12 months have highlighted the need to have a vibrant and successful mining industry. To be successful we need to attract investments and to do that we need to be competitive. The government needs to support us to remain competitive by giving the investment community what they look for: certainty and fewer obstacles to development, by cutting down the bureaucratic red tape. We struggle and will continue to struggle to compete on costs, but we have always been able to offer companies and investors minimum or no sovereign risk, and this has underpinned Australia s economic development. 4

5 People like to invest in countries when they know the rules and, more importantly, if they know that those rules will not change. The industry must be regulated, but not over regulated. It is important that each project is looked at individually and that the regulations applied to each project first and foremost pass the common sense test. One size fits all rules simply do not work, given how different the demographic conditions of each project are. Increasing the number of obstacles to development does not work either. I still remember Tony Burke, when he was Environment Minister, proudly announcing on television that his department had put 78 additional strict environmental conditions to the expansion at Roxby Downs. You guessed it, the expansion never went ahead. We have recently learned that Hancock Prospecting had to obtain more than 4000 approvals to develop the Roy Hill mine in the Pilbara approvals for an Iron Ore mine, in an iron ore region with dozens of operating Iron Ore mines in the area. This to me defies all logic. 5

6 If this is the message that we are sending to the rest of the world, how can we expect people to want to invest in Australia? And we need to attract investments. It has been widely reported that the amount of money invested in exploration in Australia has halved in the last year, and less exploration equates to fewer discoveries and less developments going forward. But it s not all gloom and doom. These are challenging times, but challenging times bring opportunities, and in the last six months we have seen a revival in acquisition and M&A activities. Some of these activities include: Metals X and Northern Star were fighting over the control of the Tanami Central Gold Project. Evolution s acquisition from LA Mancha of all of its Australian operations, as well as the acquisition of the Cowal Gold Mine from Barrick. Oceana s acquisition of the Waihi Gold Mine in New Zealand from Newmont. Troy Resources have successfully raised $35M for the development of the Karouni Project in Guyana. And of course, Independence and Sirius are in the process of a merger that will create a $2.5 - $3 billion dollar Australia diversified mining company. Importantly, in a sign of confidence in the industry, we are seeing companies being able to raise money through equity, something that was much more difficult to do 12 months ago. 6

7 When Joe Hockey concluded his budget speech, his final message was Australia, have a go. Well, there are between 700 and 800 mining companies listed on the stock exchange, and that s what most of them have been doing for years; having a go. Not all of them will be successful; in fact the majority of them will not be successful, given the difficulties in discovering a deposit, making sure it is large enough to be developed and then that the development is financially viable. But they all know that success is one drill hole away and that s why they continue to have a go. 45 of these companies are here today and over the next three days they will be presenting their case to you. Even though times are difficult for the industry, it is my expectation that we will leave here Wednesday afternoon buoyed with confirmation that companies are still delivering strong operational results and, having taken steps to align the business models to the economic circumstances, as business should, we still have a substantial industry in good shape and with a strong future. It is now my pleasure to formally open the 23 rd annual Diggers and Dealers Mining Forum and I trust that you will find the next three days informative and profitable in identifying new opportunities. 7

8 I would now like to introduce our key note speaker. Over the last few years, Diggers and Dealers has introduced a wide range of key note speakers who have impressed with their international experience and in depth analysis of the global economic environment. This year s speaker adds to that impressive group. Gene Sperling is a well-regarded economic analyst and advisor. He has been among the most influential advisors in one of the most influential global economies, the United States, having been a key economic advisor to two Presidents, Clinton and Obama. Gene Sperling served as Director of the National Economic Council and Assistant to President Obama for Economic Policy from January 2011 until March Upon his appointment as Director of the National Economic Council, he became the first person to have served two Presidents in that role, having been appointed by President Bill Clinton to the same role from 1997 to In the Obama Administration, Mr Sperling played a key role representing the White House in budget negotiations with Congress as well as in designing several of the President s economic initiatives. He also served as the White House point person on several of the President s top policy priorities. In January 2015 Mr Sperling was appointed an economic advisor to Pacific Investment Management Company (PIMCO), one of the largest global investment management firms that at the end of December 2014 had approximately US$1.68 trillion of assets under management which compares with the total Australian stock market that is valued at approximately A$1.7 trillion and the Australian superannuation market which is valued at A$1.4 trillion. He is well sought after generally by corporate America for his practical and insightful contributions and we are delighted that he has agreed to contribute to the 2015 Diggers and Dealers Forum. Would you please join me in welcoming Mr Gene Sperling? 8