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Standing Committee on Industry, Innovation, Science and Resources
31/07/2018
How the mining sector can support businesses in regional economies

WAGNER, Mr Drew, Executive Director, Northern Territory Division, Minerals Council of Australia

Committee met at 09:29

ACTING CHAIR ( Mr Gosling ): I declare open this public hearing of the House Standing Committee on Industry, Innovation, Science and Resources for its inquiry into how the mining sector can support businesses in regional economies. I want to start by welcoming to Darwin the secretariat staff and thanking them for their work, and also Hansard. I thank my parliamentary colleague Brian for making the trip up from Tasmania for the inquiry today. Thank you.

I call the representative of the Minerals Council of Australia NT to give evidence. Welcome to the hearing, and thank you for giving evidence today. The committee very much appreciates your participation in this inquiry. Although the committee does not require you to give evidence under oath, you should understand that this hearing is a formal proceeding of the Commonwealth parliament, so giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I remind you that the hearing is public and is being recorded by Hansard. The hearing is also being broadcast live. Do you wish to make an opening statement before the committee proceeds to ask questions? If so, I ask that you limit your statement to about five minutes before we proceed to questions and discussions. Thank you very much for coming.

Mr Wagner : Thank you. Yes, I will take the opportunity to make a short opening statement. The Minerals Council of Australia Northern Territory Division very much welcomes the opportunity to appear before the committee today and to discuss how mining in the Northern Territory can further support regional and economic development. However, I'd like to start by acknowledging the traditional owners of the land upon which we meet here today, the Larakia people, and their elders past, present and future. I'd also like to thank the Northern Territory government for housing us in this magnificent building this morning for today's hearing.

This inquiry is very timely because a number of opportunities are currently presenting themselves for the development and expansion of the Northern Territory mining sector and therefore opportunities for the greater Northern Territory economy. More investment in this sector means growing rural and regional economies across the Territory, it means jobs, it means development and it means flow-on business growth for the sector's service industries across all areas and suppliers of the chain.

At present there are only nine operational mines in the Northern Territory, but even with this the mining sector represents nearly 14 per cent of gross state product already. It is the second largest direct permanent employer in the Northern Territory and contributed over $350 million to the NT economy in royalties alone in 2017, with many times that, of course, spent on goods and services. This is just the start. There are currently over a dozen minerals projects in the Territory defined as what we call 'between here and the horizon'. These either have gained their local and federal approvals, are currently finalising them or are looking to their final investment decisions and construction before moving into operations—that is, over the next 18 to 36 months. Beyond those dozen, there are well over 50 highly prospective ore bodies currently being defined for future development. These are areas of potential and areas of expansion but also areas we must ensure that we can service holistically as a community and as an economy. If all these projects were to go ahead tomorrow, the Territory would be in no place at all to service the needs of these individual opportunities, let alone the industry-wide requirements.

All the large operations across the Territory have been in situ for over a generation, and there are many long-term businesses and service relationships that have been developed during this time. Glencore's McArthur River Mine, for example, spent $370 million in 2017 alone on goods and services across nearly 500 suppliers, many of which are, of course, Territory based—a region that by definition is classed as a regional development area.

The larger and more pressing opportunity, however, is the preparedness of service providers, businesses and suppliers to be ready for the next wave of investment and development as those projects come to market and the operations materialise. That is where we need to understand the work packets required to take stock of the local serviceability of these and work with others such as the industry skills council to ensure that the appropriate local training is being provided to meet as many needs as possible and to ensure this investment truly stays local.

There are very few jurisdictions in Australia with such opportunities ahead of them. A strong NT minerals sector will ultimately lead to a strong NT economy. In some areas, a mine investment may also be the catalyst that spurs on a further chain of development. In other areas, it is the cornerstone customer for any businesses to move forward. A mine development may bring infrastructure and logistics chain improvements in some more remote areas, which could then mean, for example: how many more decks of cattle can be pulled out of that area? How much more agricultural production or output can be produced? How many more tourism opportunities may be enjoyed? How much more capacity for telecommunications, water, power et cetera, are going into areas where they may not otherwise have been available or have been weak in their opportunities and command? It is then that we will truly see the mining sector not just supporting but spurring businesses in some of these most remote areas of the country.

The resulting economic diversification—mining, agriculture, tourism and so on—drives ultimate economic sustainability for the region, for the community and for the economy as a whole. However, what we need for these investment opportunities to be realised is a focus on competitiveness and certainty. The NT is certainly rich in resources but also faces many challenges—small population, remoteness and, of course, our skills deficiencies. We need policy consistency focused on international competitiveness that allows our sector to develop these wonderful resources using Australia's world-class met sector. With the right focus, we can get these projects going. And with more projects going, we can kick start these regional economies like we've seen happen elsewhere in Australia.

Again, I'd like to thank the committee today for the opportunity to speak to you. We as a community thank you for coming to the Territory. It is always fantastic to see representatives of these committees come here; it's not very often. I'll be more than happy to take any questions from the committee as you see fit. Thank you very much.

ACTING CHAIR: Thanks for acknowledging country—I was remiss not to do that at the start—and thank you for appearing this morning.

Mr Wagner : It was purely industry helping government.

ACTING CHAIR: Thank you for also acknowledging our hosts here, the Northern Territory government. Part of the purpose of this inquiry is to look at how local smaller businesses in the supply chain can get a fair go with some of the bigger companies. There has been a feeling in some parts of our country that perhaps we haven't been optimising the benefit to local communities from the larger mining companies and the multinationals. Can you, as a start point, put the Northern Territory industry in perspective as compared to perhaps other jurisdictions in Australia.

Mr Wagner : I suppose it comes down to opportunity versus size and capacity. I can't comment on other jurisdictions but one of the issues that we've identified in recent times is the capacity of industry, not just through skills but also training, to meet the requirements and make the service opportunities of many of our developments that we've got in the supply chain at this stage or our developments coming over the horizon. One of the areas that we've been particularly proactive in is also recognising what those work packets are and breaking them down into individual bites or individual quite succinct chunks. There was a case study done not too long ago, for instance, as to whether or not there was a company in the Northern Territory that could repaint the building that we're currently sitting in. It was actually determined at that stage that there probably wasn't, within a normal timeframe, a single company that would be a able to do so. We need to understand then the capacity of how we can bring multiple smaller entities together under a conglomerate or under an umbrella to do the job. And that's exactly what we've been doing in our sector. We identified some of those packets, identified what the training and skills were that we would need for these jobs tomorrow; therefore, what training do we need to have invoked yesterday so we can move forward and have most of those opportunities serviceable by NT opportunities or at least local businesses as well?

ACTING CHAIR: And I note that some other industry heads such as the Master Builders are doing a similar thing when it comes to smaller packages of work, to make sure that Territory businesses are more competitive or get some larger chunk of the work when it comes to some of those big Defence contracts, for example. So it's good and important work.

Mr BRIAN MITCHELL: You mentioned that you want to work with the industry skills council. What specifically is the Minerals Council doing there in terms of getting the Territory jobs ready?

Mr Wagner : Probably the best way to do it is to give you an example of a project control group we have the moment. I mentioned those dozens or 14 projects earlier on that we've got under development at this stage. There are about five of those that are particularly advanced within two or three hundred kilometres of Alice Springs, so very much central Australian in focus. If all five of those projects were to say, 'Yes, we're going to go ahead in the next six months,' there's no way that that region holistically would be prepared to either service provide or have the staffing or training available to be able to service those five groups. So we are part of what's called a five-mines project control group, which is actually a combined group from representatives of Prime Minister and Cabinet; the Department of the Chief Minister here; the Industry Capability Network, which is obviously very important in identifying those work packets—but then the Industry Skills Advisory Council is determining where the shortfalls are in the training requirements that we'll need to make those opportunities tomorrow. That's why I mentioned that group. If all these projects go ahead, what do we need next week, the week after or the year after? Therefore, we can start working today on what those training packages are they need to meet those service packages moving forward.

Mr BRIAN MITCHELL: There are a whole bunch of different things in that chain that need to come together to make it work right. There's TAFE training. There are schools and education. What gaps are you already seeing that need filling to make sure that what happens needs to happen. What have you identified there?

Mr Wagner : Herein lies the difficulty too. There are different skill shortages nationally than what there are specifically in the Northern Territory. I'll comment on the Territory ones particularly. In the Northern Territory our two largest skill shortages are actually cradle and grave. They're surveying and rehabilitation. So we're actually also working on with industry skills guys and other working bodies as well as to what better way to retain connection to country than to fill those positions with traditional owners to look at what they're surveying or what the exploration opportunities are and, of course, what rehabilitation works are as well. For the NT industry as it stands right now, in the last 12 months we've had year-on-year increases in exploration activity for the first time since 2009-10. We're seeing movements and development over a number of these projects as well as those ore bodies being defined, but we're seeing other projects coming to the end of life and we're seeing other projects with ongoing rehabilitation as well. So it's very much that here the two shortages we have are surveying and rehabilitation.

Mr BRIAN MITCHELL: And I don't want to harp too much on this, but in Tasmania we've got very high youth unemployment. It's endemic across outer suburban areas and regional areas. I know the NT has got a very high level of youth unemployment which is coupled with a very high level of Indigenous youth unemployment. It must be very high. I know you've got programs in place that know that's occurring. What needs to happen to make sure it's addressed and addressed quickly to make sure that we can get these kids into what are generally well-paid jobs in the mining sector? What needs to happen that isn't happening already?

Mr Wagner : Every single one of our current operational activities across the Territory already has a degree of a youth development program. Our biggest difficulty, however, is our tyranny of distance. If I'm Energy Resources Australia or at McArthur River, I have a major town or a centre reasonably close to where my activity actually is. Obviously Groote Eylandt and Gove Operations have townships right on their doorstep. So many of them have traineeships. They've all got apprenticeships. They've all got developmental programs and projects they bring these guys through.

There are other projects—for example, our Newmont Tanami Operations, where the nearest community one way is 240 kilometres and the nearest community the other way is 260. They don't have the capacity to have very much local buy-in as far as that is concerned, but they still have obviously youth development programs. They still have employment opportunities, apprenticeships and things like that. They work often with a lot of the local development groups and employment agencies. Many of our projects, particularly the developers, work with developers with the industry capability networks as well to identify what those skills are, to identify what those jobs are and to move not just local employment through but holistically across the field, where we can actually gain employment in the sector.

Mr BRIAN MITCHELL: With the level of youth development that you're doing, what sort of drop off rates and churn are you seeing? Are you seeing a good progression of kids who are doing these programs going into employment? How many of them are falling off for whatever reason?

Mr Wagner : Unfortunately, I don't have the numbers on me, but it does very much come down to the individual site, individual opportunities and, ultimately, the individual. We've seen some areas where pre-employment programs have worked extraordinarily well. They've almost become pre-training pre-employment programs. Indeed, the Minerals Council has been nationally recognised with training awards for some of the work that we've done in that space. They've worked very well in some areas where we've had individuals who've taken the opportunity, seen the possibilities that were there and worked and run with it very well. For other areas it's almost succeeded in the face of failure. In other areas it's failed in the face of success. There's unfortunately not one individual aspect you can identify that would say, 'If we can fix this then all our problems will go away.' But it's also recognising the adaptability and the requirements of what the local population are to be able to employ, recognising sometimes the sensitivities, recognising sometimes the opportunities and, in some of our more remote areas where there are Indigenous populations, some of the issues of cultural significance. All of our sites deal with this on a daily basis, and that's why here in the Territory we're seeing multipliers of four, five or six times the national average, particularly with Indigenous employment, across these sites

Mr BRIAN MITCHELL: I was going to ask whether you have targets, quotas or just guidelines as to the level of Indigenous employment—and not just at the entry level but at management or executive level.Does the industry have that those sorts of parameters in the NT especially?

Mr Wagner : We don't have targets or quotas, because it's just the NT. It's what we do. It's who we are. Nationally, I believe we're running at low single digits as far as percentage of Indigenous employment is concerned. For instance, I think here the average is something between 17 and 18 per cent. Indeed, we've got sites that are approaching well more than that as well. As you said, it is through the entire gamut of the roles within the operation itself, because that's just who we are.

Mr BRIAN MITCHELL: You mentioned before and it struck me as interesting that mining can open up an area where previously there was nothing. The road goes through with a bit of power and then, even if the mining moves on, that infrastructure can stay, which can then lead to tourism and other things. Has anybody done any mapping or modelling has been done about what added value that can bring? The mining company pays for a lot of that infrastructure. Then, obviously, tourism or other investment comes off it. Has anybody modelled what value that has?

Mr Wagner : Unfortunately, as much as I'd like to be able to say, 'Yes, there has been, and here's a discrete example,' it's kind of how long a piece of string is. We took a stance at the Minerals Council NT division a number of years ago no longer to advocate specifically on behalf of individual projects but more holistically on developing the economy. If I were to go out on the Plenty Highway, the highway heading towards the east just north of Alice Springs, I would see it's got very strong mineralisation. There's not a lot of development out there at this point in time. There are, for instance, a number of projects out on the Plenty Highway that we could look at in the future if they were commercially viable on their own. They would look at moving towards development. If that project were to go ahead, as I mentioned earlier, how many more decks of cattle could we bring out of that region? If there were to be water available in that area, for instance, are there further agricultural production opportunities? If we have potential for a Northern Territory fertiliser production system with some of the other projects, would that add to that agricultural output of that area of the Plenty Highway?

Mr BRIAN MITCHELL: You raise it in anecdotal form, but I'd love to see some figures—somebody coming up and saying, 'If this does go ahead, here is the economic benefit, and that can sustain a 20,000-head reserve.'

Mr Wagner : I think, unfortunately, that's a slightly broader remit than what the Minerals Council are looking at specifically.

Mr BRIAN MITCHELL: You guys have got money in your pockets. You can fund some think tank to do that!

Mr Wagner : We are seeing that come to fruition now, a national example being the movement of what has been happening in recent days with the announcement of Chief Minister Gunner with Jabiru moving towards using that as a central service hub—using that as a tourism position. As the mining removes itself from the community and from the environment it's looking at that furtherment and betterment of the economy, and the opportunity, from the basis of what was originally developed as a mining services facility. Therefore, looking at the longevity of not just the community but the development of further opportunity for the economy as a whole on behalf of all Territorians.That's where we're seeing the benefit moving long-term.

Mr BRIAN MITCHELL: I remember growing up in WA when the land rights stuff was coming through and there was pretty ugly political discourse at the time about howit would mean the end of investment in minerals—and I note the wry smile. That, clearly hasn't happened. Can you give me a broad picture of how land rights has affected mining investment in Australia? Where is mining investment now with that synergy between Indigenous landholders and mining?

Mr Wagner : In the Territory it's a positive relationship. Some of these processes take time to move through the requirements, not just the legislative requirements but some of the sensitivities as well of operating across different landscapes, whether it be under native title or whether it be under the aboriginal land rights act that we've got here as well. In the last 18 months we've seen our first wholly owned and operated Indigenous bauxite mine start up over towards the Gove Peninsula. The Gumatj over there have now started their own mine as a training facility, which is fantastic.We see that many, if not all, of our operators, our juniors and our explorers have very strong relationships with their traditional owners. They're all looking at further business development opportunities and they are all looking at engagement opportunities. All the social issues that we've already spoken about this morning, they're putting plans and definitions in place to move forward with those.

The impost we've got moving forward with many of these processes is succinct, discrete and acknowledged policy and areas that allow for the attractiveness of investing in these processes. It's not the externalities of working with landowners and landholders, it's not the externalities of working with leaseholders and pastoralists and it's not any other externality except for working with the legislative construct of the policies that we need. To say that there would be a negative or a positive impact of those issues in the Territory is neither here nor there; it's part of our landscape that we accept and embrace and it's certainly part of our success where we've been able to show some of the areas that we've moved forward in.

Mr BRIAN MITCHELL: The language of the mining sector has changed the last 10 to 15 years. It is acknowledging cultural ownership of land, the social issues and whatever else. It seems to be a much more holistic relationship and a healthier relationship. This just a personal insight from me. I think it's been a very good thing for the sector.

ACTING CHAIR: I will go back to the skill shortages that we have in surveying and rehabilitation. Are those services currently being provided because of the skill shortage by fly-in fly-out operators?

Mr Wagner : No. There are certainly a lot of opportunities to employ or develop the skills we have in the Territory but this is more, perhaps, trying to retain a connection to country, utilising traditional owners on their own landscapes to do such work rather bringing in Territorians from other areas to do the opportunity for them. It's working with and identifying local opportunities, it's working with and identifying local positioning and then moving forward with that to be able to articulate and undertake the work specifically in those locations.

ACTING CHAIR: And developing the local workforce for locally identified opportunities. Again, with workforce, and the post impacts construction phase—it's a general question—what's the role of the federal government in assisting us to capture the skills that we have out at the INPEX plant? Population is an issue for us here. We want to sustainably grow our population. What can the federal government be doing to enable the capture of that workforce here in developing further opportunities in the industry?

Mr Wagner : Extending on from what I said before, once again it's about making sure that we have the policies and the legislation in place that makes us an attractive place to invest. We have skeletal at best infrastructure here, obviously for reasons, once again, of tyranny of distance, population and the size of the area we're servicing. But utilising opportunities like the NAIF, for instance, looking at positions of infrastructure development, looking at approvals processes and looking at developing the certainty to provide that attractiveness are not just local government issues here with the NT government but also ones that we can be assisted with federally to ensure that some of these projects coming over the horizon are actually moving forward and the operationalisation of some of these projects comes to fruition. If we can use it, whether it be the catalyst or whether it be the cornerstone doesn't matter; it's having that development opportunity moving forward, it's servicing that northern market and it's focusing as the hub of northern Australia, which has obviously been a strong focus of the federal government in recent times. There are a lot of opportunities still to come where we can see deployments of a number of the facilities under that focused look at moving us forward holistically as an economy and, of course, positioning the Territory for further development. With that will come population growth, with that will come the pipeline of further projects and with that will come once again the training and development opportunities to make sure we retain the skills we're already developing in-house.

ACTING CHAIR: You mentioned earlier that the council made a decision not to promote certain projects. I wonder, when it comes to something like the Northern Australia Infrastructure Facility, whether you have a view on certain projects that you think would assist.

Mr Wagner : It's not so much that the council doesn't promote certain projects; it's that we don't individually target a project for a region. It's more that we have a project that we are a member of or as part of our industry is going into a particular location. We'll champion the entire or holistic economic development of that region and not just that project. There are very, very few projects the Minerals Council would never support if it was in the minerals area. It isn't for us to pick or choose winners or losers as far as investment cycles, as far as commercialisation or as far as successful projects, but what we would always advocate for is an efficient and effective approvals process. We would always advocate for the opportunity to move these projects forward through the facilitation of appropriate funding regimes, appropriate infrastructure provision, the ancillary services and the opportunity to enable these projects to move forward. We've got varied goods both domestically and internationally, looking at investment opportunities for particular projects. What we've not focused on is those investment opportunities for enabling. If I need 500 megawatts of power generation in an area to service four new projects, we don't know how to do that globally just yet, so there's space there for funding facilities like the NAIF to perhaps come into that space. So there are a number of areas that we go to, but it's not so much championing or recognising individual projects; it's more how we champion the development of a region holistically and see what other opportunities we can actually leverage on behalf of all Territorians to get the greater good for the greater number.

ACTING CHAIR: Thanks for clarifying that. I guess instead of projects I should have said companies—that you don't back certain companies, but you champion opportunities for a deposit or a resource somewhere and then champion the need for infrastructure to help to monetise that resource. I get that. Finally, what's the main thing you want this inquiry or the committee, which will provide recommendations to the federal government, to know? Is there a final point you wanted to make?

Mr Wagner : The final point is that we need to be able to encourage investment here. Capital is fluid; it flows to the path of least resistance. If we can't remove impediments, if we can't provide opportunities, we can't put things in place holistically as a community. Whether it be state or federal governments with regard to the position that we need with regard to approval processes we need to go through and with regard to the policy frameworks that encourage that investment, we won't see it come to fruition. We have particularly massive opportunities, if not world-class resources, still to be utilised here in the Northern Territory. The majority of the rest the states we've already got are well down the developmental path of what they've seen come to fruition and, as you said, they're already monetising many of their ore bodies. We are not held to ransom by iron ore or coal prices, as we are to our east and west. We have extraordinarily diverse mineralisation in the Northern Territory and we have massive opportunities to be world-class leaders in a number of ore bodies, with emerging technologies in areas such as rare earths, lithium et cetera.

Mr BRIAN MITCHELL: Are you suggesting those impediments are state based regulations or national policy issues? What are other states in Australia doing well that you see the NT replicating?

Mr Wagner : Right now, I've got in excess of a dozen pieces of major policy development under review. That's not to say that they're right or wrong in their current framework or format, but it's everything from land access through to management plans, security levies, security bonding, on-ground rehabilitation and mine closure guidelines. Once again, to use my earlier language: cradle to grave. That's just within the department of mines, the Department of Primary Industry and Resources. Whilst they're under review, there's no certainty. Whilst there's no certainty, it's very difficult to encourage further investment in the industry. Our entire environmental regulatory process and our entire environmental regulatory approval system is currently under review. That's not to say that what we've got now is right or wrong, but, once again, it's under review. Without certainty, we would never advocate on behalf of industry for anything other than a rigorous but efficient process to ensure that we're getting the greater good for the greater number. That's both the state and the federal—

Mr BRIAN MITCHELL: How long have they been under review?

Mr Wagner : The environmental regulatory reform has been under review since the last election. That was August 2016.

Mr BRIAN MITCHELL: Is there any time line as to when it's likely to be finished?

Mr Wagner : There have been announcements moving towards the second quarter of this year for draft instructions and draft regulatory outputs. You would have to ask a government official as to whether they're meeting that time frame at this point in time. We're also about to face an EPBC review, for instance, as well.

Mr BRIAN MITCHELL: All governments always update. Nobody has legislation that just sits there for 100 years and is never reviewed. Wouldn't reviewing be a normal part of the process?

Mr Wagner : It demands to be a normal part of the process, otherwise you don't maintain relevance and timeliness, as far as processes are concerned. It's not the fact that these reviews are there; it's the fact that I've got a dozen or 16 reviews happening at once.

Mr BRIAN MITCHELL: So it's just the scope of it?

Mr Wagner : Very much so. For an international investor, if I sit there and say, 'I have an alternate royalties infrastructure or regime that was announced in the last Territory budget, I've got an entire environmental regulatory review process, I've had moratoriums on other issues for which we don't really know the final outcomes because they're still being developed and, by the way, regarding pretty much every facet of your operation, the regulatory framework or the regulatory policy around that is currently under review as well,' once again the path of least resistance will mean that capital will flow elsewhere.

Mr BRIAN MITCHELL: Thank you.

ACTING CHAIR: That's a good place for us to finish. I thank you for making time to attend the hearing and give evidence to the committee today. Thank you very much, Mr Wagner.

Mr Wagner : Thank you.