7-
AUSTRALIA'S NATIONAL RESOURCES
The First Six Months
under the Liberal-National Country Party Government
An address by the Acting Prime Minister,
Minister for National Resources and Overseas Trade,
and Leader of the National Country Party of Australia,
RT. HON. J. ANTHONY
to the Broken Hill Branch of
THE AUSTRALASIAN INSTITUTE OF MINING AND METALLURGY
Thursday, 2' 4th June, 1976
EMBARGOED: Nor for publication before
24th June 1976
That I am here tonight talking with mining people
is in itself evidence of the fact that there is a new
attitude by government to your industry.
The Government elected last December believes in
and strongly supports free enterprise. We think that the people
who produce things and market them are in the best position to
make the choices, the decisions, the judgements about their
own affairs. At the same time, we believe that a national
government has a duty to look to the national interest. it
has a duty to see that the nation's resources are used and
developed in ways that do not run against that national irnterest.
And certainly this Government has a firm commitment to encourage,
to stimulate, to work with the private sector with those
great mining organisations, for example, which are of such
significance to the national economy, and therefore to the
lives of every Australian. I hope that what I go on to say to
you will show that these ar ' e not just words, but a fair
statement of our attitude to your i ndustry, of our actions
and of our intentions.
The first six months
It is now six months since the Government was elected.
In every field of business endeavour in Australia, I was aware
of the strongest expectation that the new Government would get
things moving. There was also our belief that the stresses and
uncertainties which characterised the previous Government's
relations with the mining industry would disappear; that the
affronts to our valued overseas customers and Potential
investors would cease; that the near-vendettas which had been
waged against individual companies or sectors of industry would
become a thing of the past.
Tonight I want to review progress in the minerals and
energy areas in our first six months of office; to outline the
steps the Government has taken to create an environment which
will provide the positive encouragement that industry i s
entitled to expect from our Government. In those areas where
expectations have not been realised and there are such areas-
I want you to understand why. I also want to explain why action
has had to be delayed in some areas delay which certainly is
not going to be indefinite.
For three years under the previous Government not one
major new project was commissioned, although the Australian
Mining Industry Council indicated that no fewer than 40 major
projects were ready to proceed with a total investment of
$ 8,000 million at 197' 4 prices.
Could I mention the action the new Government has
taken to help advance this much-needed development?
We have given the go-ahead to three major coal
projects in Queensland Hail Creek, Nebo and Norwich Park
with a production potential of 14 million tonnes a year.
The Government satisfied itself, through my visit to Japan in
February, that there was a reasonable expectation of a market
in Japan for this quantity of coal. We approved certain aspects
of contracts that had been in-limbo. And we arrived at equity
arrangements different for each project which provide
adequate local participation but do not inhibit development. -I
will say more on that point later. So these arrangements have
all been concluded and there is no roadblock at the Commonwealth
level to these projects proceeding. These three projects
alone will involve capital investment estimated at $ 1500 million
at today's prices.
Inevitably there is a lag in all major developments
between the settlement of the basic framework and the construction
stage. In the case of Hail Creek, for example, the next step
and one now currently proceeding is a detailed feasibility
study costing over $ 4f million and extending over the next
months. This is probably not unrepresentative, and I
underline this fact: if a company is to embark on a project
involving hundreds of millions of dollars, then despite its
determination, or its customers' determination, or the
Government's determination to see development, there is always
a considerable lead time and massive feasibility studies before
contracts can be acutally placed.
The roads, railways, houses, rolling stock, port and
mining equipment, and all the flow-through benefits into the
entire economy that every Australian wishes to see, just cannot
materialise overnight. And bear this in mind: when many of the
final decisions are being made next year as to whether the
project can proceed, what has happened in the meantime to
Australia's competitive position in the world market will exert
a major influence. On iron ore, again we have moved swiftly to ensure that
much-delayed development can occur. Australian companies are
actively negotiating with the Japanese on the following West
Australian projects: i
* Expansion and beneficiation of Hamersley an
additional 7 million tonnes a year.
* Expansion of Robe River an additional ~ 4 million
tonnes a year ( with a reduced Australian equity
approved by the Government so the development can
prodleed). The development ( and I mention them in alphabetical
order) of th#., new projects of Area C, Deepdale and
Marandoo involving in all a planned initial production
of about 50 million tonnes a year, and of course Mt.
Newman has expansion plans also.
These projects combined would involve a total
expenditure of $ 1800 million. It is expected that export
contracts for some of them will be forthcoming from the Japanese
mills this year. I would explain that the Government is not
setting any priorities as between individual projects, recognising
that this is properly a matter for commercial negotiation.
This is an example of how private enterprise decisions are
encouraged and respected by the Government. I stressed to / 3
the Japanese in February that Australia is an efficient and
stable supplier, and has the advantage of-geographic proximity.
I said they should consider the economic advantages of increasing
the proportion of iron ore requirements taken from Australia.
As with coal, of course, the new iron ore projects will involve
a considerable lead time.
For both the iron ore and the coal projects, the
Government's decision to introduce a 40% initial investment
allowance has been of assistance in making these projects more
attractive relative to those of our major competitors.
In contrast to the attitude of the last Government, I
have stated repeatedly that the new Government will allow the
limited export of natural gas to assist development of the
North-West Shelf. Proposals for development have now been
received from the North-West Shelf Joint Venture and are being
examined as speedily as possible by both the West Australian and
Commonwealth Governments. Amongst other things, it will be
necessary to examine the proposed level of exports against
Australia's own reasonable future requirements for natural gas.
Up-dated information is being studied, but I am satisfied that,
if we are competitive Japan could be ready for us to supply a
proportion of her uncommitted requirements from the early
eighties. A lengthy lead time is involved for development. The
company is speaking of further evaluation work with a subsequent
total expenditure if the findings are favourable of the
order of $ 2000 million. The company says that, under ideal
circumstances, construction could start with the objective of
gas coming on stream in early 1983. But I expect benefits to
Western Australia and the rest of the nation by way of increased
activity would be experienced well before then.
The Government has also acted on other projects. It has
approved the overseas investment aspects of the Jododex project
outside Goulburn, NSW, while an expenditure programme on the
Agnew Nickel project in Western Australia has been announced.
The Milmerran coal project in Queensland is also the subject of
renewed activity, although the previous Government had not
permitted overseas investment in this area.
In the area of our traditional base metals, some
companies have suffered from lower demand and lower prices caus= esby
the world recession at a time when the costs of o7peration nave
been rapidly increasing. The resultant low returns hnave been to
the detriment of some townships, the companies themselves and
the workers who rely on them.
These hardships, though not universal, have been very
real to those concerned. They are still being suffered. Nothing
short of a significant upturn in world economic activity is
likely to correct the situation. In the meantime, it is obvi , ous
that the companies involved in this situation cannot be expected
to generate significant impetus for fresh development.
Moves to stimulate oil search
The search for oil in Australia is at its lowest level
for more than a decade. In 1972, 100 wells were drilled in this
country. In 1975 there were 23. This has been brought about by
the combination of a number of factors including lac'k
prospectivity, the lack off s-ignificant successes for a niumber
of years, the active discouragement of private exploration by zte
previous Government and by the fact that new discoveries would
be rewarded only at the level of existing production that is,
$ 2.08 to $ 2.23 per barrel, or about one quarter of the present
world price despite, in recent years, both the oil crisis anc
a continuing high rate of inflation.
The price of new discoveries of oil is now related
to import parity the only sensible basis on which! it can be
set in today's circumstances. And the Government has also
given attention to the price of oil in reservoirs alread y
discovered, generally known as " old oil" T. Although some
increases were granted by the previous Government in late 1975,
it is questionable whether they are sufficient to bring about
the maximum possible recovery of oil in known pools. There is
also the related question of the need to encourage those
companies which have already proved -themselves successful
explorers to expand their exploration effort or, at least, to
maintain it at the existing level.
Accordingly, the Government has instituted an
independent inquiry by the Industries Assistance Commission. THis
will recommend an appropriate price for known oil from both the
fields now producing oil and those discovered but awaiting
exploitatio. n. The Government has asked for the report to be
completed by the end of September.
I am confident that the Government's approach to the
oil pricing question is fair, and will provide a much-needed
stimulus to the oil exploration industry. Already we-have
confirmed that all offshore petroleum titles granted by the
States in recent years have the full recognition of the
Commonwealth in the context of Commonwealth legislation. I am
acutely aware that this most depressed of industries is, however,
slow in showing real signs of recovery.
The most sensitive, -the most difficult, the most
important single issue in the area, of national resources is that
o/ f uranium. There is currently proceeding a major Inquiry under
the Environment Protection ( Impact of Proposals) Act the
' Ranger or Fox Inquiry and it would be wrong to canvass uranium
issues in depth until the report of that Commission has been
received and considered by the Government.
I merely want to say this: for over two years any
meaningful activity in this area ceased while the planners
pondered. In the meantime, largely because of the world energy
crisis, the price of uranium has increased from around $ 6 or
$ 7 US per lb. to around $ 140 US per lb. One of the very few
companies with courage to undertake a proving programme
doubled its reserves in this period. The current Australian
reserves position of about 400,000 short tons must therefore
be regarded as conservative indeed.
Should large-scale mining and export of uranium proceed,
then even on conservative assumptions, an export income of
around $ 1000 million per year at current money values can
be envisaged. Some would put the figure higher. If uranium
enrichment should prove possible and economically attractive,
the figure could double. The ura.' nium industry has the
potential to contrK:;' e-to the Australian economy on a scale
which probably ex'; 5that of any other single development.
Irwo or:'-Z3are often put forward: firstly, that by
the year 2000 ab of the western world's electrical
generating capacl. ty7 -1111 be accounted for by nuclear power;
secondly, that earj. y in the next century, fusion or other
technology will jha/' advanced to the stage where the demand for
uranium will be re-;_ t. vely insignificant.
Were it the unique material that it is, the
obvious commercial archwould be to develop and export
uranium while the :. fc~ tfor it lasts. But uranium is not
solely a commercial -Gue although I know some would-like
to think it so. Th' 2 Government has indicated that it will
not take final poli,-. y decisions regarding future uranium
development until it~ has received and considered the report
of the Inquiry. I emphasi: ; e again that we are dealing with something
of enormous potential economic benefit to Australia and an
area of major itrr to our trading partners. It involves
a commodity of such, , ensitivity as to be without parallel.
The issues demand thiat any action by the Government be considered
action; that it be a. rtion which can be explained fully to all
sectors of the comrmunilty; that it have proper regard to any
well-founded concern,-, or requirements. This is not a matter
which can be approached on any basis other than calm, considered
judgements, and we are determined that this will happen..
Priorities must be puit in order
That brings-me to the end of our quick review of some
particular areas. Buit there are some matters of fundamental
importance which concern the whole minerals and energy sector.
There are things such as incentives to capital investment;
the effectiveness of the mining taxation system in Australia which
was so drastically a3ltered under the previous Government; the
ability to generate Anfd attract risk capital; the need to
revitalise explorati. on in every sphere of mining and drilling
activity; the need to work with industry and State Governments
to consciously seek out and, whenever possible, remove obstacles
to future development. These are ,; ome of the broad areas where the mining
industry has every rijght to expect understanding and direction
from this Government. But clearly a specific incentive or series of
incentives to the mininfg industry is not going to achieve any
worthwhile long-term result if our rate of inflation continues
to rear above that oC. -the rest of the developed world. Unless
inflation is contained, it will quickly consume any advantage
received by any particular sector of the Australian community.
Control of inflation has to be the first task of a
responsible Governmont today. I make no apologies for this
emphasis. I have bccn personally involved over many weeks in the
most vigorous and rigorous process of screening and pruning of
expenditures that h13ever been undertaken during all the years
that I have been involved. in government.
We must reduce the deficit, so we had to reduce
spending in the public sector. We must get Australia's house
in order before we can work from a base of greater economic
stability towards the more positive thi'ngs we should be doing
and want to do. If we do not first establish this stable base,
we will only be sabotaging our own future efforts. I say this
to make 6lear to you the difficulties the Government faces
in introducing quickly new measures to stimulate and encourage
the mining industry.
Could I now mention some other areas in which the
Government has been active? In line with its political
philosophy, the Government has taken decis~ ons to divest -the
Commonwealth's interests in Mary Kathleen Uranium, Cooper Basin,
the Wambo Coal Project and uranium exploration in the 3ags3iin .
Uranium prospecting in the Northern Territory will re-turn to
private enterprise. Previously the Atomic Energy Commission
had been given a monopoly. We have been unable perh-aps not
unexpectedly to find a buyer for the Moomba'-Sydney natural gas
pipeline, but I have set in train a study for the restructuring
of the Pipeline Authority.
With the States, we have established the Australian
Minerals and Energy Council, to replace the Australian Minerals
Council. This Council will bring Commonwealth and State
ministers together to consult on the nation's energy needs,
resources and policies., as well as on matters affecting the
minerals industry. We have introduced, as I mentioned earlier, an
investment allowance.
And we have announced, and are implementing, our
policy on foreign investment in Australia. There have been
comments recently on this matter which point to a misunderstancinC
of the true position. There should be no misunderstanding.
The guidelines for foreign investment are quite clea-r.
They have been introduced to give Australians encouragement and
opportunity to participate in Australia's development. They will
not hinder or delay new projects if those projects are in
Australia's interests. The guidelines, as made clear by Mr.
Lynch when he first announced them on April 1 this year, and as
emphasised by both the Treasurer and myself since, and by the
Prime Minister in his statements in Japan, are not rigid and
inflexible. We want, as a general rule, to see at least
Australian equity in new mining projects 75% in the case of
uranium. But we have made it quite clear that if foreign compan-es
genuinely try to secure 50% Australian involvement in projectcs
other then uranium but are unable to do so, then we will not see
worthwhile development held up. A lower level of Australian
equity will not necessarily prevent a project from proceeding.
Of course, in such circumstances we would seek, as appropriate,
satisfactory arrangements for Australian equity to be increased
to at least 50% at a later stage.
There has never been any suggestion that the Government
will apply the guidelines in a doctrinaire way. We were elected
on a policy which included foreign investment guidelines. I am
certain~ that the Australian people do not want to see an
" 1open slather" policy on foreign ownership of Australia's resources
The policy we have announced, and the method of its implementation,
will give Australians encouragement to participate in the
development of their country's resources, but that development
will not be hindered.
I have saii in the Parliament that the question of the
$ 6 per tonne coal export levy will be considered in the Budget
context. I have asked my Department, in co-operation with the
coal industry, to undertake a full analysis of the effects of
the levy on existing and projected coal operations..
The sharp rise in the price of foreign crude oils caused
a great increase in the cost of L. P. G. and naptha. In order to
mitigate this effect, I recently decided that L. P. G. and naptha
used for production of gas and nitrogenous fertilisers should in
future be included amongst the products qualifying for an
allocation of indigenous crude oil. By so doing their price will
in future be related to the price of Australian crudes, with
beneficial effects for many authorities producing town gas, and'
for fertiliser production.
In 1973 the mining industry lost many of the special
features of the taxation system which for many years had operated
in a way that was meant to reflect the reality that a finite
resource industry like mining IS different from the manufacturing
or rural industries. We will shortly be considering the report
from the Industries Assistance Commission on the effects of
taxation and royalty measures on the Australian petroleum and
mining industries. It would be inappropriate to comment further
atthisstage other than to say that the fundamental importance
to the mining and petroleum industries of the issues involved is
well appreciated in government.
Communication channels open again
One of the satisfying things about my role to date
has been the direct and continuous communication with the
industry. This is normal, and when things return to normal,
rarely is attention attracted to it. However, it is a Jfactor to
which I attach a great deal of importance. My Government
any Government is only effective to the extent that its
departmental officers can ad Vise from an informed position. To
be informed, departmental officers must have a rapport with indusltr
which can only come from frequent discussions in an atmosphere of
mutual co-operation. Since we came into office last December, I have taken
steps to re-open the communication pipelines with industry
organisations and individual companies and I propose to extend
this. My department must discuss problems and developments with
industry, and priority will be given to such discussions. To
engender this co-operation with industry, my department will be
seeking out opportunities to talk to company representatives in
their own environment. I know I can anticipate a favourable
industry response as this can only be to our mutual advantage in
the long run.
l T11UW_ LIY11f P11iiL_) U P1j1y U0 L 1 1) k2: : c1 I
Government has been put into practice is the stance taken by the
Government in negotiations whicl> have taken place in recent
months. Let me remind you that in the last few months Australian
iron ore producers have concluded major negotiations for ore
prices in Japan and Europe. Important sectors of the Australian
coal industry have completed their negotiations in Japan and the
remaining negotiations are proceeding.
Unlike previous occasions when price-setting
were involved, the iron ore producers, when reporting the outcome
of their negotiations to the Government, were NOT ordered back
to Japan to do better. Unlike the last occasion, the coal
exporters did not find a Commonwealth minister in Tokyo himself
negotiating the export price for Australian coal and incidently,
in the view of the Australian producers, ' Making a mess of it.
Rather, the processes of commercial negotiations between
responsible Australian companies and their commercial counterparts
overseas have now resulted in deals which were, in the view of
those Australian negotiators, the best that could be obtained.
That view is respected by the Australian Government. In a
tommonsense and co-operative way, the companies and the
Government discussed the issues before the negotiations took
place. These two negotiations involving our major export
minerals heralded a change of style and an increase in
meaningful communication between government and industry. This
change will permit the Australian Government to understand and
help complement the activities of its exporters, rather than
confront them or our overseas customers.
Associated with this much-needed change of style, with
the emphasis now firmly on the side of commercial negotiations,
I have recognised the need to simplify what have been, for the
industry, frustrating and time-consuming procedures. These
procedures were imposed three years ago and have hampered
exporters' efforts in shipping their minerals out of this country.
In the context of minimum government involvement, my department
is at an advanced stage in developing proposals to streamline
the existing export control procedures. In the past few weeks,
I have removed from the controls a number of semi-processed
products and others are currently under review.
. For those remaining minerals where, in the national
interest, government monitoring of exports is vital, I am
simplifying the procedures for exporters and expect to make
a fuller statement on this in the very near future. Although
the details are yet to be finalised by my department and the
other departments and authorities involved, the objective is to
reduce the paper work and administrative effort involved over the
past three years of exporters having to seek ship-by-ship
approvals. With these revised procedures, the Government will
still carry out its responsibilities in ensuring that contract
terms and conditions conform with the Government's policies.
However, this will be done on a basis of the goodwill and
trust to which responsible companies are entitled. This will
enable exporters to have access to long-term export approvals
which will fit in with contract terms and minimise the red
tape and the unnecessary rubber-stamping of approved
contracts every time a ship leaves the country.
Although these changes are basically improvements in
administrative efficiency, they do point to the way the Government
is thinking and acting in this field. They will, in my view,
smooth the way for the industry to get on with the job it knows
best how to do.
So in six months
* We have moved to divest ourselves of the previous
Government's involvement in areas that rightly
belong to private enterprise.
* An initial investment allowance has been introduced.
* The coal export levy and the questions of taxation
treatment for the mining and petroleum industries
are under study in the correct context that of
the Budget.
* Three major new projects in coal have been approved.
* Those in iron ore have been assisted through
discussions in Japan to help restore confidence
in Australia as an assured and stable long-term
source of supply.
* The way in which export controls are used has been
completely changed so as to respect, rather than
usurp, the role of private enterprise.
* We are working with the State Governments in the revived
Minerals and Energy Council and with the West
Australian Government on the development of the
North West Shelf.
And of course we are doing all this against the
background of first getting our domestic situation in order. To havq:
done less than these things in our first six months would have
been to let down those who elected us to change the disastrous
course on which Australia had embarked. To attempt to do more
in this period, and in the economic circumstances of today, could
only have been achieved at the expense of economic responsibility,
or by ignoring the due processes of good government.
I believe this balance signifies good government: a
calm and consistent Government operating within a decision-mak-ing
process of the Cabinet where the effects of any action are
measured and understood in relation to the effects on the
community as a whole.
I would like to emphasise yet again the Government's
philosophy in relation to our natural resources. We seek to
provide an environment which will effectively encourage positive
and concrete development to benefit all Australians. In this
regard we are on the way to achieving significant progress by our
broad policies on matters such as overseas investment; by
keeping the industry fully informed on our attitudes; and by our
commitment to what we consider to be the proper role of
government that is, to encourage and, where necessary,
assist private enterprise, but not to unnecessarily intervene
in its operations. Again I stress that I intend to maintain close
communications with industry so that together we can work as a
unified team to achieve the common and worthwhile objective
of responsible and beneficial development.-
The establishment of this basis, of good government
has been achieved within six months. From this basis the mining
industry can look forward with confidence to well-informed and
sympathetic government'in the years and I hope decadesae
ad.