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‘The national interest’: vast WA minerals resources left untouched by global companies

Posted by gmarkets on 5 October, 2007

Unlike onshore minerals, where the state has absolute responsibility, Canberra is responsible for managing offshore oil and gas resources, though its powers were delegated to State Governments, wrote Nigel Wilson in The Australian (16/7/2007, p.32).

Vast minerals deposits in WA: As far as can be ascertained, the WA Government was not taking a similar stance against holders of vast minerals deposits by demanding they use them or lose them. For most of this decade Chinese and Russian companies have been seeking access to vast bauxite deposits in the far north of the state, particularly in the Mitchell Plateau. But no, the resources were effectively held by BHP Billiton, Alcoa, and Rio Tinto, none of which has a current development plan.

Govt follows industry advice: Under the various agreement laws that cover bauxite in WA – the regime also covers iron ore – holders of tenements over resources are required to regularly submit proposals for development to government. This procedure allows government to assess the companies’ intentions and to ensure proper commercial judgments are made. But in fact, in the main, government accepted the view of tenement holders as to the “commercial viability” of development. Government does not test this view publicly and does not require companies to give up tenements if others are prepared to move to development.

‘Use it or lose it’ approach: Indeed, it has been hard to see how “use it or lose it” could be applied without causing substantial damage to Australia’s international reputation as a sound place in which to invest in the resources sector. Over the past half century, when Australia’s resource developments have taken off, the unutilised reserves have come to be part of the “bank” for major resource companies. That means stock markets assess resource companies on the volume of unexploited resources they hold against their annual production – or “cover”. This has come to be the accepted approach in Australia, where State and Federal governments took the view that they should not intervene in commercial decisions.

Multinationals control resources: The result, of course, is that development of the nation’s resources met the commercial time frames of global companies that are stewards of the resources on our behalf. National interest and national economic benefit, such as regional jobs and business creation opportunities, are subsumed to the commercial interests of global giants. Given the once in a lifetime opportunity provided by the commodities boom, it was not surprising a lot of questions were being asked.

The Cazaly case: This issue may soon be taken out of the hands of government. The courts in WA were working through the Cazaly case, where an opportunist company took advantage of Rio Tinto and pegged a tenement on the Shovelanna iron ore deposit on which Rio had done little for 30 years. Junior explorer Cazaly Resources snared Shovelanna in 2005 after Rio inadvertently let its licence expire, but the tenement was handed back to Rio after former resources minister John Bowler used his discretion under the state’s Mining Act. It was widely believed Bowler was overruled by Premier Carpenter, who accepted the advice of the Department of Industry and Resources that it would be detrimental to investment in the state if Rio were to lose its Shovelanna tenements. Watch this space, Wilson added.

The Australian, 16/7/2007, p. 32

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