12 September 2014
Sarah-Jane Tasker
The Australian
As the iron ore price fell further to hover at five-year lows, Ms Rinehart warned that with the pressure on and likely to continue, now was the time to address bureaucratic burdens.
She argued that Australian mining was up against international competitors that did not have the same environment of heavy government-imposed red tape, approvals and compliance costs.
“Each one of these adds costs and makes it harder to compete successfully, risking Australian jobs and revenue,” Ms Rinehart told The Australian.
“The government needs to better recognise this and world conditions, including various falling commodity prices and the contraction in jobs in Australia’s mining and related industries — and urgently cut bureaucratic burdens.”
Hancock Prospecting, which Ms Rinehart chairs, paid tax of about $610 million last financial year, exceeding its previous year’s bill of $560m.
Ms Rinehart said governments needed to do their best, particularly in challenging times for export industries competing against other lower-cost nations, to reduce more of the additional costs they imposed.
“These just add pressure and risk for struggling companies and projects, and deter further investment,” she said.
“Falling commodity prices are not only forecast to continue but the government also needs to recognise the extra pressure new projects in low-cost Africa will bring should minerals from Guinea and/ or other African countries be exported as planned.”
The price of iron ore has continued its decline, losing 40 per cent for the year, and now sits at about $US82.20 a tonne.
Roy Hill Holdings chief Barry Fitzgerald said while people kept asking him about the price of the steelmaking commodity, he didn’t think too much about it.
“The reality is that the focus we have is to build the project and then to get it into operation,” he said. “Until we are producing iron ore, I have other priorities that are much more important to me to think about, such as delivering the project on time, safely and underbudget, commissioning it and ramping it up.”
Roy Hill is on track to start exports in September next year and is more than 50 per cent complete. The project is highlighted in the market as a low-cost producer, which will be comparable to BHP Billiton’s operations on costs.
Deutsche Bank’s Hong Kong-based analyst, James Kan, has argued more production needs to be removed from the market before demand and supply of iron ore moved towards equilibrium.
Mr Kan said the Metallurgical Mines’ Association of China recently told the 2014 China iron ore industry summit that ore production cost had decreased 5 to 10 per cent year on year, meaning the iron ore price had more room to fall than expected.
“Iron ore is in oversupply both globally and in China. However, we have not seen raw ore production declines yet,” he said.
Mr Fitzgerald said there was no doubt high-cost producers globally would go out of production; the question was when.
“I think when people make those assessments there are some large generalisations,” he said.
“The economic issues will drive it, but it is on an individual by individual mine basis, and what the ownerships are, and where each of those mines fit into the owners’ value chains. Some of them have different drivers if they are part of an integrated steel work.”
RBC Capital Markets analysts have outlined the impact of a continued low iron ore price on Australia’s producers.
BHP Billiton, the world’s largest miner, fares the best, while among the juniors BC Iron and Mount Gibson are supported by robust balance sheets. But a flat $US70 a tonne iron ore price would erode both junior companies’ cash buffers.
Courtesy of The Australian