Article courtesy of The Australian.
When Rio Tinto’s board recently met in Montreal, there were half a dozen top officials from the Quebec government as well as senior ministers from Ottawa. the Canadian capital, along for a session.
Their presence was the latest example of a constant and increasing dialogue between the miner and all levels of Canadian government – whether that’s the bureaucrats or both side of politics.
And the message Team Canada delivered to the very top of Rio? “What can we do to help?”
At another meeting in the past month between BHP’s chief executive Mike Henry and several Canadian officials, this time in Saskatoon, the message was the same. And according to those who were at the meeting, the BHP boss said he intended to keep Queensland on his no-go zone for new investment – even after this month’s change of government.
The contrast was significant, BHP has committed more than $US10bn ($15bn) building out the Jensen potash project in Saskatchewan. At the same time Rio Tinto is spending $US1.1bn to expand its aluminium smelter north of Montreal using cutting-edge low-carbon technology. That investment promises to extend the life of the plant, which is becoming strategically important and includes up to $US113m of financial support and tax breaks from the Quebec government.
While energy-intensive, the plant is a major supplier of aluminium to US carmakers that is not Russian or Chinese. The Canadians are proud of this point. Many Australian politicians would struggle to name the four operational aluminium smelters here.
BHP was blindsided two years ago when the then-Palaszczuk government rushed through substantial hikes to the state’s coal royalty scheme with no warning or consultation. Queensland’s new LNP government has said there will be no change in royalty rates in the next four years, which has drawn anger from the usually cool-headed Henry.
The BHP boss has previously said it’s not so much the size of the royalty hike that irks him but the way the decision was made, which is going to damage the state because it will affect long-term investment.
Others have said Australia is falling behind in relative rankings and apart from net zero targets, they note the lack of long-term planning.
And while it’s a stretch to describe Australia as hostile to mining – its biggest export industry – the states and Canberra do need to be aware global miners have choices about where and how capital is allocated. The same job, same pay rules that apply to contractors could hit BHP more than Rio Tinto or Fortescue, and will add to the mining industry’s conviction to commit to the upfront costs of automation at their Australian sites. This comes at the expense of high-paid jobs at remote sites.
It’s not the stuff of science fiction: a large slice of Rio Tinto’s Pilbara mine and iron ore transport networks are already operated from a low-rise warehouse near Perth Airport.
More work is being done on automation. Rio is bending over backwards to switch its Boyne smelter in Queensland to renewable power. This involves rebuilding a power grid and the investment case needs to stack up financially as well as technically.
Other issues miners have seized on include multi-employer bargaining which they argue is a weight on productivity. Then there’s the slow pace of securing permits and approvals – even for brownfield mine expansions.
Gas project approvals have simply stalled, with a focus on imports. Elsewhere there’s confusion around state and federal regulation of greenhouse gas emissions. Access to skilled labour is another issue, with state governments crowding out the market by running too many big-ticket infrastructure projects at once.
Legislation blitz
This week there were 45 bills passed in parliament, including more than 30 rushed through on Thursday to meet the deadline of the last sitting week.
Among the new laws is a compulsory code of conduct directed at the supermarkets. There’s the contentious social media ban for those under 16. There are RBA amendments that include the power to force banks to lend to certain areas of the economy. Other changes include rules boosting the power of tenants over developers in build-to-rent projects and a deeper ACCC review process when considering mergers.
In September Anthony Albanese said in a speech to the BCA annual dinner that he understood that secure jobs and fair wages depended on thriving businesses. Still, business needs the right settings to thrive. At a productivity round table hosted by The Weekend Australian and the BCA, Wesfarmers chief executive Rob Scott said his plea to both sides of politics going into an election year was simply “do no more harm”.
“We can talk about what the opportunities are, but we should also be mindful that there is more damage we can create with more red tape, more unnecessary taxes and so forth,” Scott said. “The number one ask would be: ‘Please, let’s do less damage, less red tape and less regulation’.”
One mining boss this week said even if the Prime Minister and some of his senior ministers are making positive noises in meetings, “this isn’t filtering down to the bureaucracy”.
Australia has been falling behind in the race for global capital – at least that’s the view from inside the boardrooms. Canada has shown it means business and this has seen it become a powerhouse in cars, oil and gas production and mining. It has become so good in manufacturing, Trump has threatened a 25 per cent tariff. In Australia a senior mining executive with hundreds of millions to spend can’t even get a meeting with the relevant minister.
Donald Trump’s America is going to have another go at being a destination for foreign capital – even with tariffs in place. And make no mistake, the Argentinian economy is still a basket case, but there has been a marked shift under free-market warrior Javier Milei in finding a way forward.
It’s working. In the past year both Rio Tinto and BHP have flagged major developments there in lithium and copper, respectively, which will involve billions in spending.
Glencore chief executive Gary Nagle recently told The Weekend Australian he has met with Queensland’s new premier David Crisafulli and while he is disappointed the coal royalty will stay in place, at least the new government signalled that its wants the state to get back on track as a destination for investment.
In NSW Glencore has been trying for three years to get approval to extend the life of a high-quality thermal coal mine for exports. And more than anything, time is a killer of the internal rate of return when it comes to assessing a project.
Another mining executive tells The Weekend Australian the big misunderstanding among politicians about business is that there’s “no pot of gold” that sits inside the company. After taxes are paid, profit is either sent back to shareholders, and this includes millions of ordinary Australians through super funds, or is set aside to invest in future growth.
Governments should be focused on getting a bigger slice of the investment bucket by removing barriers, the executive says.
“The thing that gives you confidence to do that is when governments say ‘we want you to do business. We want to make it easier for you – and less red tape’.”
