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JOINT STANDING COMMITTEE ON FOREIGN AFFAIRS, DEFENCE AND TRADE
08/12/2010
Australia's relationship with the countries of Africa

CHAIR —I welcome you to this afternoon’s proceedings. It is good that you were able to attend; I understand there were a few transport difficulties in Melbourne. Thank you for your attendance. We have received a submission from the Australian Uranium Association, which members of the committee have been provided. We prefer all evidence to be given in public, but if there is any matter that you believe should be discussed in private you may make such a request and we will consider it at that time. We do not require evidence to be given on oath, but there hearings are legal proceedings of the parliament and witnesses should be truthful to the best of their knowledge and ability. I invite you to make some opening comments and then we will go to questions.

Mr Angwin —I thank the committee for its indulgence in rescheduling and re-rescheduling my appearance.

CHAIR —We are used to that sort of thing.

Mr Angwin —Your secretariat has been very helpful today; I thank them for that. The main purpose of the association’s appearance before the committee is to brief it on the activities of Australian uranium companies, members of the association, in Africa. We note the broad terms of reference that direct the committee’s work—that is, to ‘inquire into and report on Australia’s relationship with Africa’ with emphasis on exploring a number of specified dimensions of that relationship, both now and in the future. We assume the report of the committee might indicate how Australia could build relationships with countries in Africa to our mutual benefit. While we do not have expert insights to offer to the committee, we hope that our submission can make some contribution to the committee’s knowledge and understanding and inform its conclusions and recommendations.

Five members of the Australian Uranium Association have operations in Africa: Extract Resources, which is developing a project in Namibia; Paladin Energy, which operates a mine in Namibia and is currently commissioning a mine in Malawi; Deep Yellow, which is engaged in exploration and development activities in Namibia; Crosslands Resources, which is currently seeking an exploration licence in Burkina Faso; and Uranex, which is engaged in exploration in Tanzania. From Namibia, Paladin exports uranium to the USA, Taiwan and Japan. There are other Australian uranium businesses operating in Africa, but they are not members of the association. Rio Tinto, which has a major interest in Energy Resources of Australia, also has a major interest in the Rossing mine in Namibia. Rossing exports to the USA, Europe, Japan and South Korea.

14:19:35

While Africa has had a long engagement with the uranium industry, the Australian engagement with Africa’s uranium is more recent. We expect this engagement to deepen and possibly to broaden. It will deepen in the sense that companies already with operations in Africa will continue them and will expand them. Paladin is already on that path and Extract is optimistic that it will become a miner in Namibia. The other companies are less advanced but continue to explore their potential. It is certainly true to say that the existence of mining operations foreshadows a lengthy Australian engagement in Africa. The engagement could broaden in the sense that more Australian uranium companies might begin operations in Africa. The engagement could broaden in other ways as well; it was just harder to forecast what they might be.

Australian uranium companies play an active role in the communities in which they operate in Africa, including both sharing information about their projects with those communities and undertaking community assistance programs, social infrastructure projects, employment and education initiatives and community health initiatives. In other words, Australian companies operate in much the same way in Africa as they do in Australia—that is, to standards of good practice that they seek to improve continuously.

Members of the association operate according to an industry charter that sets out broad commitments for business operations. They also follow principles of uranium stewardship that commit them to the safe and responsible management of their product. Members of the AUA operating offshore, including in Africa, are committed to applying the association’s code of practice wherever they operate in the world. The code sets standards of operational practice in areas related to the specific properties of uranium as well as to standards in other areas of resource industry practice. The code builds on the International Council on Mining and Metals’ Sustainable Development Framework and the Minerals Council of Australia’s Enduring Value and adopts the Uranium Council’s high level framework for engagement with Indigenous communities.

The purpose of the code is to provide for the continuous improvement in the operational performance of the industry, with a review to revising the code as operational performance changes. The code commits AUA members to continuous improvement in their operations, to the safe and secure management of hazardous materials, to mine closure and rehabilitation best practices, to radiation control best practices, to adherence to regulatory obligations and to the provision of information about uranium to stakeholders. The association annually surveys members’ performance under the code. There have been two such surveys, with the result that the second one has recently been published. The second survey specifically requests information from AUA members operating overseas. The responses indicate that they meet or exceed the operating requirements of the host nation and have regard to and comply with AUA standards and other standards models—for example, the World Nuclear Association standards. Of course, I should add that self-assessment surveys have some limitations, though we believe that ours is a reasonable guide to how performance is changing and provides a reasonable basis on which we can consider changes to the code.

There are four essential points I would like to make to the committee. Investment and operation by Australian uranium companies in some countries in Africa are very substantial in the host country economy and there are growth possibilities. Australian uranium company investment appears to be welcomed by the African countries in which it occurs. The Australian uranium companies operating in Africa are fully aware of the obligations to operate to high standards, are committed to doing so and are doing so. The standards to which they work are those that apply to them and to their peers in Australia. We believe the highest standards of operation to which members of the association aspire and the experience which Australian uranium companies have in building relationships with local communities and stakeholders have much to contribute by way of example to the development of the resource industry in Africa. In saying that, I do not wish to imply that countries in Africa are not capable of building their own economic legislative, environmental and civil society capability—notwithstanding the challenges that entails.

Australian companies are in the position of being foreign direct investors in Africa. We in Australia know that there are benefits from foreign direct investors and that there are benefits for host countries from foreign investment. That is why we welcome foreign investment in Australia. With that in mind, members of the association believe that there is scope for enhancing and developing Australia’s relations with countries in Africa on the basis of the economic opportunities available through foreign direct investment in uranium development. Thank you.

CHAIR —Thank you.

Senator IAN MACDONALD —Mr Angwin, do the African countries have a similar set of restrictions and rules or are the rules particular to each country?

Mr Angwin —Restrictions and rules applying to the uranium industry?

Senator IAN MACDONALD —To the mining of uranium. In Australia we have restrictions where you can mine uranium only in certain places and not in others.

Mr Angwin —I am not sure, for example, that African countries have an act like the Environment Protection and Biodiversity Conservation Act, for example, which sets out conditions which govern uranium mining approvals in Australia. Namibia, for example, has quite an extensive framework of legislation governing not only the resources industry but the uranium industry. It has a minerals act; it has a minerals policy; it has a minerals development fund; it has an atomic energy radiation protection act, which does the job which many of Australia’s state regulators do; and it has an environmental management act; it has a labour act. So it has got a framework of laws and regulations governing the resources industry in Namibia and the uranium industry in Namibia. Whilst I am not expert enough to tell you that they are the same as Australia’s, it appears on the face of it to be a well-developed set of laws. I cannot help you too much on the other countries, but on Namibia there appears to be a useful and quite extensive set of laws and regulations governing our industry.

Senator IAN MACDONALD —I should say, Mr Chairman, I think that my wife has a small parcel of shares in Deep Yellow. I did not realise they were in Africa, but just by way of disclosure. Do you know if uranium miners, including Australian ones, are restricted from selling to India, for example, because they are not part of the non-proliferation treaty?

Mr Angwin —My understanding with regard to India, and I might have to check this, is that some companies operating in Africa do export to India, but none of the members of the Australian Uranium Association export to India.

Senator IAN MACDONALD —Is that because Australia does not allow them and they follow Australian rules, or is it just that they have not been able to get the right price and the right markets—

Mr Angwin —There is currently only one Australian uranium company mining in Africa, putting aside Rossing, which is Rio Tinto. It does not export to India. Neither does Rio Tinto’s Rossing mine.

Senator IAN MACDONALD —But do you know whether that is because they abide by Australian law, being partly Australian companies, or just the fact they have not got any salesmen in India at the moment?

Mr Angwin —It may be that they just do not have contracts with India. Just to take up a point, with respect, Senator: it is not so much Australian law which prevents exports to India as Australian policy which prevents exports to India. By way of further explanation, there are many countries in the world currently developing their nuclear relationships with India—including the United States and France.

Senator IAN MACDONALD —But not Australia.

Mr Angwin —But not Australia. Under the terms of the Nuclear Suppliers Group, of which Australia is a member, my understanding is that Australian government policy does not stand in the way of other countries developing their nuclear relationships with India.

Senator IAN MACDONALD —This is slightly wider than your brief perhaps is, but are you aware of any African countries looking seriously at carbon-free energy by constructing their own uranium power plants on the continent?

Mr Angwin 14:29:32 —In fact, quite a lot. The development of nuclear energy is now on the agenda for many countries throughout the world, including in Africa. Whilst one might suspect that the timeline and growth path of an African nuclear power industry might be somewhat behind, say, China, it is certainly true that a number of countries in Africa have an interest in developing nuclear power. Only one African country currently has nuclear power, and that is South Africa.

Senator IAN MACDONALD —A lot of these countries would be well in advance of Australia, for example, in preparations for nuclear energy.

Mr Angwin —I think I would be prepared to say—

Senator IAN MACDONALD —Everybody would be.

Mr Angwin —They are preparing to consider it; whereas, of course we all know, that is not currently the policy of the Australian government.

CHAIR —Do they have any other nuclear facilities in any of these other countries—for example, research reactors or similar?

Mr Angwin —I am not aware of any.

CHAIR —So they are not as advanced as Australia in—

Mr Angwin —I am not aware that any of them has—

Mr RUDDOCK —They may not have any factional—

Ms PARKE —Thank you, Mr Angwin, for your submission and your evidence today. I note your statement regarding the high standards required of your association members operating in Africa. Do you believe it would be of benefit for all Australian mining companies to be encouraged to adopt high standards of corporate social responsibility as a way of branding or differentiating Australian companies from companies from other countries?

Mr Angwin —Speaking from the experience of the members of the association, one of the things that they say is one of the great benefit of their membership of the association is that they sign up to our code of practice, which commits them to operating according to those standards wherever they are in the world. They tell me that that commitment and obligation give reassurance to their stakeholders both in Australia and elsewhere in the world. I cannot speak for other Australian companies operating overseas, but I certainly think the experience of members of the association is that a commitment to Australian standards of practice in the area in which we work has been of benefit to our members and of reassurance to the host countries and the host communities in which they operate.

CHAIR —On that issue, you said that the association conducts surveys.

Mr Angwin —Yes.

CHAIR —I say with respect that surveys are questionnaires that provide you with information and you have drawn conclusions from them. What about independent audits? Yesterday BHP Billiton said that they have an audit of their corporate social responsibility but it is actually done independently. What is the situation in that respect?

Mr Angwin —As I said, our survey is a self-assessment survey and we recognise the limitations of that.

CHAIR —I am not criticising the fact that you do it; it is just—

Mr Angwin —The question of whether we might adopt a different approach to the performance of our members in accordance with their reports under the code is certainly something that is on our mind. We have not done that yet, and I am not sure that I am in a position to say that we are going to do that next year. The reason I say that is that we have conducted two surveys and we would like to be satisfied first that we have got that survey process in good shape and that the survey process does what it is supposed to do, which is to identify areas of strengths and weakness and enable us to feed that information back to our members so that they know where to focus and also so that we can raise the standards in our code as performance improves. The issue that you have raised with me is one which we have thought about but we have not done so yet.

Mr FITZGIBBON —By way of preamble, and building on something that Senator Macdonald said, I have heard it said on a couple of occasions during this long inquiry that Africa has a wonderful opportunity to completely leap over the fossil fuel phase in terms of energy generation, and that is true. Many people think of renewable forms of energy when they make those comments but, given the lack of advancement in the baseload generation from renewables, one would think that nuclear energy for Africa is the more than likely course of events. Mining is both a great positive and a curse for Africa, like any continent. My view is that it is overwhelmingly a net positive. But, when it comes to uranium, you have those emotive attachments such as concerns about radioactive waste, and even nuclear proliferation has been put to us throughout the course of the inquiry—that is, the mining of uranium in Africa could lead to nuclear proliferation. Do you agree that your industry will have to do a little more to cause the broader community to feel at ease with the idea of mining uranium in Africa? Do you think the code of conduct and the auditing is going to get you there? Would you like to comment on the nuclear proliferation suggestion made by some other witnesses?

Mr Angwin —That is a big piece of work you have left me with, Mr Fitzgibbon, in the couple of minutes I have. I will take up the proliferation question first. I am not in a position to give you an overall picture of the security situation in Africa or to comment on security or proliferation risk in Africa. As I said, only South Africa has nuclear power so, currently, in respect of the proliferation risk associated with nuclear power technology in Africa, there is very little proliferation risk. Of course, as I am sure you know, South Africa voluntarily abandoned its nuclear weapons program many years ago now. Only three countries have not signed the nuclear nonproliferation treaty, and none of them is in Africa. I think most of the countries in Africa have also signed the additional protocol to the nonproliferation treaty. In other words, the countries in Africa are in good standing with regard to their nonproliferation credentials. I do not think any suggestion has been made of any African failures with regard to adherence to their treaty obligations. Certainly I am not aware of any action the International Atomic Energy Agency feels it has to take in relation to African countries.

If African countries wanted to embrace nuclear power there is no reason, based upon their standing under the nuclear nonproliferation treaty, why they should not. Their existing treaty obligations commit them to all the safeguard arrangements of any nuclear power country and, if they did embrace nuclear power, they would be in the same kind of relationship with the agency that any country with nuclear power is, and the role of the IAEA in Africa would be the same as it is elsewhere: safeguards, inspections, technological development assistance, training et cetera.

The agency has a wide range of programs that aim to bring about good practice in nuclear safeguarding and security. Let me draw your attention to one of those, which is the establishment recently of the Forum of Nuclear Regulatory Bodies in Africa. It was announced in December last year by the deputy director-general and head of the department of safety and nuclear security. On the face of it, at least, Mr Fitzgibbon, all the conditions and structures which govern nonproliferation are in place in Africa in a broad sense, in the same way they are elsewhere in the world. Uranium mining itself is not a significant proliferation risk, which is why the main part of the safeguards effort of the agency is at the backend of the nuclear fuel cycle; although, the agency is currently considering extending some safeguards to uranium mining. I do not think that anyone would ever say that proliferation has a zero risk, but Africa has in place all the conditions and the framework deemed necessary by the world community to govern nonproliferation.

On the other part of your question about the efforts that need to be made to persuade the general public about the uranium industry, I have to say that I think that is a never-ending story. I could give you a long explanation based on research about risk perception which will explain why nuclear power is out there by itself in risk perception. I can explain to you the research about world view which determines whether you or I or other members of the committee or the community generally has a particular point of view about uranium. But all of those things amount to the fact that fostering and enhancing the reputation of the uranium industry will remain a continuous and continuing piece of work. What counts most is the good operational performance of our industry, which accounts for the deep consideration we give to our operational performance. What counts is that we build trust amongst our stakeholders, many of whom are local communities, that the uranium companies in the industry in effect share control and hence the choice of their communities in regard to uranium development. Most of all we should never breach trust, because once we breach trust that is very hard to get it back again. So what counts, I think, is our behaviour, and that is why we place so much emphasis on our operational performance and on our relationship with our stakeholders.

CHAIR —We have heard over the years—I am thinking back a few years now—that there were plenty of uranium deposits around the world, quite a few that had not been realised or were not even being developed. Australia is one of the major exporters. What is the significance of Africa in terms of future world uranium supply? What is the current state of the market? If the companies are getting involved there must be opportunities. What is the extent of their resources and how do you see it playing out in the years to come?

Mr Angwin —I will have to check on the global figures on Africa’s supply of the world’s resources but I can say this: Australia is currently punching well below its weight. We have about 40 per cent of the world’s resources and about 20 per cent of the world’s supply, so we are punching well below our weight. In contrast, Namibia is punching well above its weight. It has a relatively small amount of the world’s resources but is producing and exporting well ahead of those resources.

CHAIR —Why is that?

Mr Angwin —I think partly because in the Australian case, for a variety of historical reasons which I am sure you are aware of—

CHAIR —Okay.

Mr Angwin —With Africa, essentially there are several mines which are relatively large producers and have reached those high levels of production, certainly in the case of Rossing that has been going on for quite some time and in the case of Langer Heinrich mine, which is Paladin’s mine in Namibia, during the course of this decade. So they have been able to develop those mines to access the resource potential which exists. Mining generally is quite welcome in Africa, as I am sure you already know from what has been put to you in this inquiry. With the growth in demand for nuclear power around the world, particularly in Asia, uranium is a mineral which is in much greater demand and will continue to be in much greater demand. Where there are receptive investment environment, as there are in Africa, and indeed as there is in Australia, then the development of those resources will grow, we think, quite rapidly, in order to serve the demands of a growing world nuclear power industry.

CHAIR —I presume that if you venture in Namibia then countries such as Canada would have had some drop in their exports. What other countries such as Canada are actually investing in uranium mining in a big way?

Mr Angwin —The four largest producers include Kazakhstan. Kazakhstan has recently become the world’s largest producer. One of the reasons for that is that, over the course of this decade, a number of projects in the pipeline stacked up and over the last few years they have come to fruition. Kazakhstan’s production has increased quite rapidly as a result of not the unblocking of the pipeline but the fact that a number of projects came together at the same time. Kazakhstan continues to be quite optimistic about its future and would probably like to remain the world’s No. 1 producer. Canada is the second largest producer and Australia is the third largest producer, with production having declined in the last year, mainly because of operational issues affecting Olympic Dam and weather issues affecting the Ranger Mine. Namibia is a small producer but has increased its production quite considerably over the course of the decade. I would be happy to provide some figures for the committee on the changes in production in those countries. There is also a little chart I produce about the extent to which they punch according to their weight.

Mr RUDDOCK —Did you tell us that all Australian uranium producers offshore are members of your association?

Mr Angwin —I wish I could but I cannot. There is the half a dozen that I mentioned, but there is quite a lot of—

Mr RUDDOCK —The half a dozen that you mentioned are not?

Mr Angwin —No—they are.

Mr RUDDOCK —I am interested in those that are not.

Mr Angwin —There are quite a lot. Do not hold me to the figures, but there are in excess of, I think, 40 Australian companies with a—

Mr RUDDOCK —There are five or six that are members and 40 that are not.

Mr Angwin —That is right.

Mr RUDDOCK —So there are 40 Australian producers that are not bound by this code?

Mr Angwin —Not producers. They would mostly be exploration companies.

Mr RUDDOCK —The countries in which you have operations include Tanzania, Malawi, Namibia and Burkina Faso. In the Transparency International listings, they are at the higher end?

Mr Angwin —At the higher end of corruption?

Mr RUDDOCK —No—at the higher end of those dealings.

Mr Angwin —I am sure you are right.

Mr RUDDOCK —It is obviously not an issue that you have focused on. I noticed that your submission appears to have been written largely because of some criticism by the Australian Conservation Foundation.

Mr Angwin —We certainly did want to respond to that when it was drawn to our attention. I have to—

Mr RUDDOCK —So, if somebody had written a submission critical of mining companies and your members had been involved in, for instance, transfer pricing, you would have addressed that issue?

Mr Angwin —I dare say that I might have.

Mr RUDDOCK —Would you care to address it?

Mr Angwin —I cannot do so right now, Mr Ruddock, but, if you have particular concerns, I would certainly be happy to address them.

Mr RUDDOCK —It has been raised obliquely in other submissions that countries that are permitted to mine in the end do not get the revenues because of transfer pricing. I looked to see whether transfer pricing was mentioned in the code of conduct.

Mr Angwin —I would have to have a look at the—

Mr RUDDOCK —I have looked for transfer pricing and I cannot find any reference.

Mr Angwin —I was not saying that I would have to look at the code to see whether there was mention of transfer pricing but I would have to take some advice on the question.

Mr RUDDOCK —It has some good words, such as ‘transparent engagement’. What do you understand by that? That would mean that nobody would be involved in transfer pricing, because that would conflict with transparent engagement?

Mr Angwin —I think that the charter, which we have also given you a copy of and I think that is what you are referring to—

Mr RUDDOCK —Yes, that is what I was looking at.

Mr Angwin —commits the members of our association to good business practices in addition to the code of practice committing them to good operational practices.

Mr RUDDOCK —It deals with antitrust behaviour.

Mr Angwin —It does.

Mr RUDDOCK —I take it, on the issue of corruption and potential compromise, you would take the view that, because that is contrary to international law and Australian national law, that is covered?

Mr Angwin —I think I would say that corruption is contrary to good business practice, whether it is contrary to law or not, so I would be confident that members of my association saw it in that way too.

Mr RUDDOCK —Well, I would have been confident that organisations like the Australian Wheat Board and perhaps the Reserve Bank might have had some cognizance of those matters when they were dealing offshore, but sometimes, if you do not mention it in a code and you have no training programs to deal with it, it might be something that sort of slips under your radar, mightn’t it?

Mr Angwin —That is always possible, Senator Ruddock—Mr Ruddock, rather; I have promoted you to the Senate.

Mr RUDDOCK —I don’t regard it as a promotion!

Mr Angwin —There are some who do, Mr Ruddock.

CHAIR —He is not high enough up the index!

Mr Angwin —I take your point, and I guess—

Mr RUDDOCK —I am glad you have made a submission. I am glad you have a code of behaviour. I am glad that some of these issues are mentioned. But I am also very cognizant that, unless there is a change of attitude in Africa in relation to these broader issues, there are going to be difficulties in effective engagement. I do not want to be critical of those who come before us, because we are usually dealing with the people who are the best rather than the worst, but I think it is important that we are thinking about it, about how we are going to address it and about how we are going to effect change.

Mr Angwin —I will report back to my members that you have raised that issue with me, Mr Ruddock.

Mr RUDDOCK —It is pronounced ‘Ruddock’.

Mr Angwin —I’m not doing too well!

Mr FITZGIBBON —Yes, but you’re under a fierce attack!

Mr RUDDOCK —It is just that my colleagues’ questions are just too benign. I am just trying to lift the—

Mr Angwin —I did not realise that was fierce, Mr Fitzgibbon.

CHAIR —It is not the gold standard.

Mr Angwin —I do not think I would like to come under fierce attack from this committee!

CHAIR —Are there any other penetrating, difficult or benign questions?

Mr MURPHY —I think we will leave the last word to the front of the house.

Mr RUDDOCK —No, I have concluded my examination.

CHAIR —As there are no further questions, thank you, Mr Angwin, for your attendance this afternoon and for the submission. As we know, the mining sector, the resources sector, has been very important in this inquiry as we have gone through and heard evidence, so it has been good to hear from your association as well.

Mr Angwin —Thank you very much.

CHAIR —Thank you.

Mr RUDDOCK —We look forward to the supplementary submission.

Proceedings suspended from 2.53 pm to 3.01 pm