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Tuesday, 3 April 1973
Page: 966

Mr FAIRBAIRN (Farrer) - The last decade has seen a tremendous development in the Australian mining industry, especially in the field of discoveries of ore bodies and their development. Over the period 1960-71 exports of minerals increased sixfold to a total of $ 1 , 290m in 1971. This spectacular increase led some people to believe that development would automatically proceed irrespective of whether the mining industry was encouraged or discouraged. In fact the present Government seems to take the view that all it has to do is to milk the mining industry so as to achieve everything it wants without any thought of what our customers require.

The Government has shown itself completely ignorant of the major problems which have always been faced by miners, and appears to be well on the way towards killing the goose that laid the golden egg. In some cases decisions of the present Government made without even the relevant Minister being present have turned profitable projects into unprofitable projects overnight, and have made uneconomic,are bodies which were previously economic. In other cases off-the-cuff statements by Ministers have led to chaos in the industry, as no clear set of guidelines has been produced. One miner I know told me that he has funds in hand for further exploration, but he has no intention of using them until such time as he knows what government policy is.

In fact chaos and confusion caused by recent government decisions and statements is so widespread that Australia is being openly referred to internationally as another banana republic. Ministers are shooting from the hip. They talk first and think afterwards. But they should realise that we are not operating in a sellers' market, nor do we have a monopoly of any minerals.

Let us look at some of the recent decisions and statements which have undermined the morale of the Australian mining industry. Firstly, undoubtedly the greatest shock to the industry was that caused by the 2 recent revaluations of the Australian dollar. As my colleague, the honourable member for Stirling (Mr Viner) pointed out to the House earlier this month, the iron ore companies in the Pilbara alone will lose approximately $11 2m in income this year as a result of the decisions of December and February decisions which were taken without the Ministers responsible for fuel and power, industry and primary industries even being present. The loss in the value of long term contracts for all iron ore exporting companies approaches$1, 000m.

There seems to be a view held in some quarters that revaluation has only affected those companies which have export contracts written in United States dollars, and theyare then told it was their fault for writing them in United States dollars, instead of some other currency, presumably Australian dollars. This is nonsense. While the companies with United States dollar contracts will suffer most, every exporting company has been hit by revaluation despite the general buoyancy of metal prices internationally.

Look at recent reports of companies in this field. The recent report of Comalco stated:

The December 1972 revaluation of the Australian dollar will have a significant adverse effect on the consolidated profit in 1973. At the date of this report, it has not been possible to assess the likely effect of currency changes resulting from the devaluation of the United States dollar 13th February 1973.

And Bougaiuville Mining's Chairman stated:

The decision of the Australian Government on 23rd December 1972 to up value the Australian dollar against the United States dollar will further reduce the Australian dollar proceeds of sales by Bougainville Copper although some short term protection was obtained by taking out forward cover prior to the revaluation.

One can look at the Western Mining Corporation Ltd where we find again that the results of the joint venture on Geraldton iron ore have been seriously affected by the currency changes and the success of negotiations for an extension of the initial contract has also been jeopardised. So one finds this depressing similarity in virtually every report by every mining company that is coming out now.

What has the Minister done about this situation? He has done 3 things. First he has abused the miners. He has sneeringly called some of the finest brains in Australia hill-billies and mugs. The Government said that they should not have written their contracts in United States dollars, even though this was *he only possible currency in which these long term contracts could have been written in 1964. They were told that they allowed themselves to be picked off one by one by a powerful buying cartel. This ignores the fact that all export contracts for iron ore were approved by me and the Cabinet as being in line with current export prices. And they cannot have been too bad if these companies can still operate at a profit after a loss of 21 per cent in the value of the contracts in the last 14 months.

Thirdly, they were told that they should have taken out forward exchange cover, even though this is available for only 6 months or in exceptional cases for 12 months. Any exchange clause in the contracts, of course, would have had no legal binding.

The Minister has said that he expects the Japanese to renegotiate contracts written in United States dollars. But why should they? None of our major competitors revalued in December or February. This includes India, Canada, Brazil, Liberia, Chile and Peru. What we have is a self inflicted wound. Why should the Japanese re-open our contracts when they do not do it for any other suppliers, or when they cannot re-open their steel sales contracts? The Minister has had some discussions with the Government of Brazil, the idea being, apparently, that we should form a sellers cartel so as not to underbid one another in sales. But this will never work. There are many potential suppliers, and the contracts will go to those who can supply the best quality ores at the lowest prices, all else being equal. So we can say that the Minister has done absolutely nothing to soften the blow of revaluation.

One could say a lot more on revaluation, but time is short. So let me come to the second body blow that has been struck at the Australian mining industry. Permits and licences required by miners either have not been supplied or their issuance is extremely tardy. All exploration licences in the Northern Territory will have lapsed by September 1973. None has been renewed. Companies have to work out their programs a long way ahead, and uncertainties can kill exploration. A recent export permit for a shipment of zinc from Townsville was issued only hours before the ship berthed. Perhaps one of the reasons for this and other delays is the proliferation nf ministries which have a finger in the pie. Mining is meant to be under the control of a committee comprising the Ministers for the Northern Territory. Northern Development, Minerals and Energy. Aboriginal Affairs and the Environment and Conservation. To the best of my knowledge, this committee has not even met yet. Even if it does meet, it will be a case of too many cooks spoiling the broth. Meanwhile, farm-out and farm-in applications await the pleasure of the Minister, who is trying to get his sticky fingers on these areas for his socialist mining venture which he hopes to operate with the help of the Bureau of Mineral Resources and the Australian Industry Development Corporation.

Statements have been made on processing demands, some of which are totally unreal and may cause deferral of some projects. We all want to see the maximum amount of processing undertaken in Australia. But our customers also want to undertake processing, so some give and take must occur. A rigid policy on processing can lead our customers to get their ores and minerals elsewhere. All of us want to see the greatest possible share of Australian equity in mining ventures in this country. I myself said in an address to the American Chamber of Commerce in Australia in Melbourne in 1968:

The Government believes in a partnership between overseas and Australian investors where overseas capital is necessary for development. It considers that fears and misunderstandings are least where there is an Australian participation in shareholding and management and greatest where there is no Australian participation.

Unfortunately, Australians were loath to put their money into many of these highly speculative ventures. Everyone wants to be on the winner of the Melbourne Cup when he sees it go past the post, but people tend to forget that to win you have to put your money on it before the start of the race. Now Australians are being prevented from doing what we and, I believe, the present

Government would want them to do, namely, getting a greater share of our mineral resources. One of the ways of doing this is by Australians borrowing fixed interest money overseas and putting it into equity in Australian mines. But the Government's guidelines of 25 per cent of overseas borrowings being frozen makes borrowing virtually impossible. Money borrowed by an Australian overseas at 9 per cent will, of course, cost him 12 per cent.

As though the Australian miner and investor had not been sufficiently scared already, a few other Ministers have weighed in with statements calculated to scare the daylights out of anyone still enterprising enough to want to help develop a mine in Australia. Firstly, the Minister for Transport (Mr Charles Jones) tells us that up to 40 per cent of our bulk minerals must be carried in Australian bottoms in future. How and where are these bottoms to be obtained, and how much more are they going to cost to operate? Such a policy, even if desirable, must make mining more uneconomic. Then the Treasurer (Mr Crean) is out for his extra slice of the minerals cake. So-called tax anomalies are to be abolished, and we are to have a capital gains tax. No-one yet knows what rules will apply and whether tax will have to be paid on profits or paper profits from trading in mining shares. The only thing that is clear, as a member of the Melbourne Stock Exchange recently said, is that widespread apprehension about the policies of the Labor Government and their effect on business profits seems to be evident.

Let me conclude by saying that 'it's time' that the Government showed some consideration for the mining industry - an industry which has helped Australia to greatness and which supplies much employment and needed overseas funds. It is time that the Government set down the rules of the game so that miners will know where they are going. It is time that the sloppy administration of the present Government came to an end.

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