AUSTRALIAN MINING INDUSTRY COUNCIL
THIRD ANNUAL DINNER
Canberra, ACT 9 MARCH 1970
Speech by the Prime Minister, Mr John Gorton
Mr. President, Parliamentary Colleagues, Distinguished Guests and
Ladies and Gentlemen Thank you, Sir, for your introduction and for the generous
way in which you and the people in this room have honoured the toast to
your guests. I appreciate what you have said. I am sure my fellow guests
appreciate it too, and if through the press of affairs, Sir, it is impossible
for me to make this an annual event, at least I can assure you that both
myself and my colleagues will make quite sure that it is at least a triennial
event for a long time to come.
Sir, although your Council has not been in-existence for a
long term of years, as years go in our national history, I believe it has
already made its mark on Australia, on Government, both State and
Federal, and on the way in which the mining industry is conducted in
Australia. As I stand here before you and see the representatives of
so many companies, my mind's eye leaves this room, as I think perhaps
yours can do, and instead of being here in a hotel in the National Capital,
it moves away to the areas where you and your companies are operating.
It swings thousands of miles North, for example, to Weipa, where, in the
last war the Air Force landed on a lot of little brown pebbles, and they
wondered what on earth it was; and they were landing on bauxite where
there is now an aerodrome on probably one of the largest bauxite deposits
in the world. It comes south to Gladstone, where that bauxite is turned
into alumina for the great benefit of overseas companies: To Kambalda,
Sir, this hot, dry area which has given Kalgoorlie, the city of legend,
a new lease of life. Because after all, it is far more profitable to mine
nickel than gold today, unless of course, you can find some alluvial
deposit where you pick up the nuggets! / 2
Or to Gove again a great bauxite deposit, or to those
dreaming areas in the North-West of North Australia where for so long all
the experts, all the geologists told us there was no iron ore; it was a
waste of time to look, there just wasn't anything there. This was not
entirely the West Australian Department of Mines' geologists, although they
had a good deal to do with it but there to this area today, where Mt Tom
Price ( with not much Australian equity) but where Mt Tom Price and close
to it, Mt Whaleback have some thousands of million tons of iron ore
reserves. And where a stone's throw away in terms of our national
dimensions, there is the yet unexploited Rhodes Ridge with 3, 000 million
tons of iron ore reserves three times as much as the two great mines
I have mentioned. And where, hiding over the horizon, and known to many
people, so I am giving nothing away, is Mcamey's Monster, yet to be
proved, but again at least as large as Rhodes Ridge.
Leaving aside altogether the deposits at Robe River, leaving
aside the deposits which Broken Hill has taken up recently, we can go from
here to all these frontier areas where the companies which you gentlemen
represent are taking from the soil of Australia riches which were previously
undreamt of an which are the sinews of our growth at present and in the
future. I have mentioned but a few of the new areas being developed,
the new frontiers, and what frontiers they are. Because as you go around
and look at them, here are the pioneers living in air-conditioned houses
provided by the mining company, with electricity, electric refrigerators,
with shopping centres, swimming pools, and thanks to the benevolence of
the Postmaster-General soon to be with television. What a wonderful
way of pioneering that is, particularly for somebody with a memory as I
have of Aladdin lamps which had to be trimmed every night and a kerosene
refrigerator and later an electric generating plant of one's own which
only went when one went out and kicked it. Indeed, these modern facilities
are provided by your companies to see that people will go and vork in these
areas. Of course in some States not all but in some States, much
more than this is done. I was told by a representative of one significant
company that they didn't particularly mind building the railroads and
building the ports and the harbours and building the schools, but they thought
it was a little tough when they were asked to build the gaol:. But they
went ahead and did it anyway! ./ 3
It is a little hard to believe that all this advance, that all this
minerals explosion really began only some ten years or so ago. Until
1960, there had been a 20-year-old ban on the export of iron ore from
Australia. Indeed, our mineral exports in 1959/ 60 were valued at
$ 168 million. Today they are worth $ 759 million, and before the end of
this decade well before the end of this decade they will be bringing
us in 000 million. What an immense acceleration in what a short
period of time. And to emphasise this, in 1960, our exports of iron ore
were a few hundred dollars. This year they are to be worth $ 142 million.
Coal exports, ten years ago, were worth $ 121 million. Today they will
bring us in $ 142 million.
This is an immense expansion in such a short space of time
by the companies and the enterprises that you gentlemen in this room
represent. And what now? What is going to happen in the future?
It seems to me inevitable that although Japan is our major
trading partner now in the export of iron ore, Europe will supplant it as
soon as sufficiently large ships are able to be brought in to cut down the
cost of freight to Europue. After all, we have got hematite of 64% or
65% 0 iron ore content and they are scratching around at 30% 0 or sonething
of that kind. They have to mine it. All we have to do is to get to the
top of a hill and take the hill away:
And I believe, myself, that before long, the United States
of America must be a strong customer for iron ore of the quality we have.
If US Steel does not come out here and build its own steel plant to use the
ore we have, then our ore will go to the United States in order to make
steel there. It will be cheaper for US Steel to do that than to continue on
the course they are now following in the United States itself.
The openings in front of us, the windows on the future look
on to a vista that is virtually unlimited. Let me, Sir, continue a little
with the importance which I see to Australia of these new enterprises.
At the end of last month, my colleague, the Minister for
National Development, issued a set of new projections for the mining
industry. I have mentioned the $ 2000 million of his projections. / 4
Stack that up against the projections made by the Vernon Committee which
estimated that mineral exports would be valued at about $ 330 million a year
by 1975. That Committee based that figure on known resources and on
expert predictions. There were a few people around who thought this
estimate a little conservative and said it might be a $ 100 million or so more
than that who could tell? And someone had the temerity to mention that
it might be $ 700 or $ 800 million and this was at once dismissed as a
complete flight of fancy, complete nonsense. But it wasn't a flight of fancy.
It was an underestimation by experts of what we had and of what we could do
with what we had and perhaps this underlines again what I have said that
the future is virtually without limit. We don't yet know all we have got, We
don't yet know what it can bring in for us.
There is always difficulty in planning of this kind. I am told
that the two best-planned cities in Australia are Broken Hill and Kalgoorlie
and the reason that they are the two best-planned cities in Australia is that
the roads were designed so that those using them could turn a camel team.
I have got to bring this to the attention of my colleague, the Minister for
the Interior, in Canberra: But whatever the reasons for it may be, this
indicates that sometimes planning has unexpected results and often
planning underestimates what can be achieved.
Now, Sir, I have been speaking only of the mining industry
so far, But what I have been saying tonight means that the change in our
pattern of trade is obvious as a result of ou~ r mineral developments. Last
year, mineral exports exceeded in value our greasy wool exports from
Australia for the first time, and there we get another pointer to the
dimension in our national affairs played by the mineral explosion.
In five years' time, the value of our mineral exports from
Australia should be greater than the total value of our rural exports today.
And since we have grown from an infant nation to our present state, very
largely if not entirely on the value of our rural exports, what a great
punctuation mark in our national history is here heralded. And that is the
export the overseas earnings side of the question. And I have already
said that the future is unlimited.
But we are talking of mining and what mining can bring into
this country, and largely one has been thinking of raw materials. Not
entirely, of course, because there is to be at Kwinana the new refinery
for nickel, there is now for which I take some personal pleasure to be
in Queensland a smelter which might well be the greatest in the world if
you put a four-pot line instead of a three-pot line, as I hope you will.
But very largely it is the raw materials, the ore and the pellets that are
being exported. But more and more, if we are to make the best use of what
has been discovered, of what has been and is being worked, more and more
I think we should seek to process the materials that are torn from the land
in Australia. I would like to see Australia with a second steel industry. I
am told there is more than one at present, but I don't believe it. I think
there is one which owns some subsidiaries. I would quite like to see a
second steel industry. I want to see aluminium smelters in this country.
I want to see more and more processing of the materials we produce.
And let me illustrate that by giving you some figures. I
have been talking of bauxite. Let's look at what is involved here. One
million tons of bauxite from Weipa or from Gove earns $ 5 million for
export. If it is converted to alumina, the equivalent of its earnings is
some $ 30 million. If that alumina is converted to aluminum, ingot
aluminum, it would be worth $ 120 million, and if, finally, that ingot
aluminum is fabricated into aluminium products then it would be worth
$ 600 million. There really is a premium, gentlemen, on getting $ 600
million or $ 200 million rather than not only a premium in what can
be earned overseas by it, but a premium in the factories that are
Srovided, the smelters that are provided, the jobs that are provided, the
ecentralisation that is provided, if we can more and more get into this
field. I know many companies are already acting along these lines.
The more companies that do this the better it will be for them, and for our
nation. And I believe that the gentlemen in this room would wish to see
that happen and will strive to see it happens.
And if it is to happen, then there is another aspect to which
I think we should all turn our minds. Some of you may have heard or read
that I have a view that the more Australian ownership there is in these
fields the better it is for Australia. Of course we need, and nobody
denies we need, overseas capital in very.* large quantities, both for the
development of the mining section and, more particularly, perhaps, for
the development of the processing section of which I have spoken. And we
cannot but benefit from such an exercise; even if it is 100 per cent
ownership, we cannot but benefit from it. We benefit because we are
virtually 50/ 50 partners since we take some 45 per cent of profits in company
tax. There are some companies who can minimise their profits, of course,
which has some effect on this, but once they really get going and the
opportunity for hiding things is gone, then we take 45 per cent, andso
we are 45 per cent partners in this manner. / 6
We benefit because of the townships that are built, and
because of the people who are employed, and because of the taxation given
us by those who are employed. We benefit because of the manpower which
comes in and which otherwise we might not get. We benefit because of
access to overseas markets which very big overseas companies have got
sewn up and which we might not be able to enter if we didn't have this
capital here. In all these ways we benefit.
But having said that, and having said that we must not in any
way interfere with this flow, it would be wrong, I think, to say there is
no price that has to be paid for the benefits I have outlined.
There is a price. There is a price to be paid in that the
overseas earnings which companies make are going eventually to be
diminished by the dividends that have to be paid overseas for the fixed
interest loans that have to be paid off. There is a price, perhaps, to be
paid, if there is too great a concentration of overseas ownership, on the
refusal of access to particular markets because of arrangements made
by international cartels. So there is a number of prices to be paid.
Now, Sir, none of these prices is sufficient for us to prevent
the inflow of overseas capital and the benefits which we get from it, but
surely the lower we can keep this price without preventing such inflow,
the better it is for us and for pur country.
And it is for these reasons that my Government has made
it abundantly clear that we look with favour on partnership arrangements,
that we look with favour on overseas companies offering opportunity to
Australian investors to take up equity in those companies. And having
made this known, I am happy to say that significant overseas companies
are taking notice of it and are, more than before, providing these
opportunities. I have no evidence to indicate that having made this known
has in any way inhibited the inflow of capital from abroad. I have plenty
of evidence to indicate that overseas companies are offering more
ownership to Australians if they are prepared to take it up.
And it was for these reasons that we instituted the idea of
convertible notes so that citizens in Australia who have money to invest
but who must have an income to live on from that money, would have the
opportunity to invest it, to receive income from it, and at a later stage,
when a company became profitable, have the opportunity to convert that
into equity. And it was for these reasons that we instituted guidelines for
/ 7
borrowing in Australia by overseas companies, guidelines which would give'
to overseas companies an incentive to provide equity to Australians because
the greater the equity, the greater the opportunity to borrow in Australia, and
the less interest had to be paid by those who were borrowing.
And now we propose a further step, and that is the setting UP ofC
a corporation to enable Australian companies to compete in overseas fixed
interest borrowing with the gia it companies which now can borrow overseas.
There is no n.-eed to expound upon this to those of you who are in this room'--
because you know it like a book. I have on my right a gentleman whose
company is borrowing large, very large sums of money overseas at quite
high rates of interest to develop Australia, at any rate to smelt in Australia.
The other day, Hamersley had a new float and borrowed large sums of mon--ey
overseas at high rates of interest to further develop Mt Tom Price. Utah
is doing the same. Let us not go any further. We all know that for purposes of
development, companies with complete or partial overseas ownership will
borrow as much inside Australia as they can and the rest outside Australia
or. their business judgment of what will best help to develop their compa.. i-es,
and their business judgment of how they can service the loans they borrow.
And this is made easier to do because on the international markets Alcoa,
General Motors, companies of that calibre can go and establish with no
difficulty their credit worthiness for large loans. What we are seeking to
do by this new step, the latest in the ones we have already taken, is to
establish a corporation in Australia which, by its size, will be able to
be seen by those who have money to lend abroad, to be at least as creditworthy
as General Motors or Alcoa, or other companies of that kind. This
is so that it can, in that way, for Australian comparies who on a business
judgment believe they need it, borrow money at high rates of interest which
they think they can service and thereby be put on the same footing as the
other large companies of which I have spoken. We believe in that way we
will help preserve that Australian equity and reduce the price and we
believe that to reduce the price and to protect as much Australian equity as
possible is a good objective for a government to have.
These steps, I think, will compleme-nt for the benefit of our
nation what you geitlemeri are initiating a-id which is I am sure for the
benefit of our nation.
Sir, both government and industry are, to a great extent
perhaps n-ot to as great an extent as the Council would like but to a
great extent co-operating in the furtherance of the aims of your Cwn:-cil. / S