Article – High costs hurting mine investment, says Gina Rinehart29 July 2014
29 July 2014
MINING magnate Gina Rinehart says the high cost of doing business in Australia is driving some multinational companies to pursue overseas projects that have the potential to further damage the country’s export revenue.
Mrs Rinehart, the chairwoman of the privately owned Hancock Prospecting and the nation’s richest person, lamented the decision by some companies to invest in lower-cost offshore projects that could drive down commodity prices and undercut Australian projects. “Sadly, too many multinational companies, even Australian companies, are focusing and preferring to invest in overseas countries with lower costs,” she told The Australian.
“For instance, Rio Tinto, which has been in Australia for decades, and made most of its revenue from Australia, is now arranging multi-billions of dollars of investment for a major resource project with substantial infrastructure in Guinea in Africa.
“When that’s operating, it will bring billions of tonnes of ore on to the market to compete against Australia, and push down commodity prices. Too few seem to recognise the impact this will have when we are competing with lower-cost countries and how it will hurt Australia for decades.”
Mrs Rinehart said Rio Tinto, Hancock’s partner in the giant Hope Downs iron ore project in Western Australia, should not be singled out, saying the nation must do more “to lower its costs and compete for investment”.
McKinsey & Co analysis released yesterday by the Business Council Australia ranked mining and energy as one of only three sectors of the economy where Australia enjoys an international competitive advantage.
However, the BCA warned the competitiveness of the nation’s resources sector had “declined over the last decade … soaring costs of inputs, relatively low labour productivity and regulatory delays have caused capital costs to blow out and projects to be delayed,” the council says in a landmark report, Building Australia’s comparative advantages, released yesterday.
Mrs Rinehart welcomed moves by the Abbott government to reduce “some costs and investment deterrents by eliminating the carbon tax and endeavouring to eliminate” the mineral resources rent tax. “These actions are so important and should be supported. Regrettably the critics are at it again, without any regard to the realities Australia faces, and the need to ensure sustainable jobs and revenue in the future.”
Mrs Rinehart was talking as Hancock marked the halfway mark of the construction phase of its $10 billion Roy Hill iron ore project in the Pilbara region of Western Australia. Roy Hill, about 270km south of Port Hedland, is currently the biggest construction project on mainland Australia, employing about 3800 people. When fully operational, it will employ 2000 and ship 55 million tonnes of ore a year, making it one of the biggest single iron ore mines in the country.
Mrs Rinehart said Roy Hill had never been a “get rich quick” project. “We started the journey with Roy Hill approximately 20 years ago with substantial obstacles blocking our project for years along the way, and we don’t ship (until the) last quarter next year. There is an enormous amount of risk in mining but the critics conveniently leave that out.”
She said Hancock and its Roy Hill partners, South Korea’s POSCO, Japan’s Marubeni and China Steel Corp, were committed to making it a low-cost operation that could compete with other projects. “One of the things Australia has to learn and appreciate is that for us to export, people aren’t going to buy products because they like Australians — forget it,” she said at the Roy Hill site on Friday night.
“They’re only going to buy the products if we remain commercially competitive, cost-competitive. And this is a really big challenge for Australia because we’ve got very high costs and we’ve really got to work hard on that if we want to sustain our future, and a good future.”
The BCA report recommends regulatory reform to remove delays and uncertainty for resources projects and reduce costs. “A national approach to assessing and approving major resource, energy, infrastructure and industrial projects should be established,” it says. “This would recognise the significance of these types of projects to national productivity growth.”
It calls for urgent changes to workplace agreements, particularly on greenfields sites, to help mining companies “control cost and timing risk for the full duration of major capital projects”.
Mrs Rinehart said mining’s contribution to the economy, employment and standards of living remained under-appreciated, particularly as a revenue generator when the nation faced rising debt levels. She warned its critics should think of a world without the end products created using natural resources and without the “huge tax receipts and royalties” paid by the sector.
“The Roy Hill investment has been and is great for local related industries, which in turn employ Australians and generate tax revenue in Australia,” she said. “Too often it’s forgotten that the mining industry cannot be separated from the related industries, as both thrive and fall on each other. I may get criticised for doing and saying this, but I am continuing to work and invest in Australia. I am keeping my operations here, unlike other companies.
“(As for) the critics of business, the mining industry and profits, I don’t see them pegging tenements as all Australians can, (putting) their hands up offering to work hard, take significant risks, and pay the salaries of the thousands of employees and those in related businesses I create jobs for in Australia, or pay for the thousands of other jobs the mining industry provides for.
“The mining industry can only do this if it continues to stay cost-competitive and make profits so it can invest and provide for the inevitable overruns.”
Courtesy of The Australian