This cheeky industry analysis was presented at Kalgoorlie: The Next 100 Years, an Association of Mining and Exploration Companies (AMEC) sponsored event held in conjunction with the Kalgoorlie Chamber of Commerce. In October 1990, the time the event was held, Australia was going through a time of change with the ‘recession we had to have’. The ‘barnacles’ referred to here are the multitude of taxes.
Where’s the red carpet?
Well here we are in Australia, in Kalgoorlie. Trying to explore, mine, produce, service and create employment and opportunities for those around us. Our industry is one that we can be proud of — as a productive export-earning group working hard at overcoming many of the nation’s problems, you would think we’d be given red carpet treatment.
Unfortunately, that’s not the case. If Peter Sellers of Goon show fame wasn’t dead, I would think he was writing the script for what we see happening at the moment on the Goldfields. It might be funny if not for the fact that in WA there is a bankruptcy occurring every eight hours. Similarly we somehow sit back powerless and watch governments borrow more money to pay the interest on their existing debt. We watch business borrow money to pay their taxes.
There are danger signals even in Kalgoorlie and we should learn to read these right now. We shouldn’t be fooled into thinking that there are no problems just because business is good for some of us. The best years in the 90-year history of my family’s small mining equipment company were the ones following the collapse of the nickel boom. Mining companies were trying to bring into production the discoveries made during the preceding years.
A shy industry
I suggest that we are in a similar period. There is virtually no exploration for new deposits, and for every new mining company moving into Kalgoorlie we are losing five. We are not discovering new ore at the same rate as it is being mined. The mining industry is traditionally very shy and reluctant to adopt a high profile. We stick to mining and exploration and under normal circumstances that’s the way it should be. However there is such a downturn in exploration that we can’t remain silent much longer.
To explain my concern, think of exploration as being a bit like football. Exploration is about kicking goals. Each time we have a new discovery, it’s like kicking a goal for Kalgoorlie. That means there’s a new mine out there in front that will be developed in the next few years. This results in more employment opportunities and more excitement, and in turn more exploration. As long as we can make Kalgoorlie an exciting place, we won’t have trouble attracting people here.
With others I share the growing concern that the Federal Government, the State Government and even Local Government seem to be marching to inappropriate set of priorities.
As a few thought starters, I’ve made out a list of what I term ‘barnacles’. In similar fashion to the way barnacles are fixed to the underside of ships slowing down their progress even to the point where the ship must stop and dust itself free from these barnacles. I regard the following as barnacles.
Barnacles: an industry analysis
Payroll Tax
If you are designing an economic system for a country and you really wanted that country to be successful, would you ‘fine’ employers for creating employment? Would you double the fine for successful employers? That’s what payroll tax is and it’s no surprise that unemployment figures are rising.
Stamp Duty
Stamp Duty has now got to such a high rate that it is an impediment in the way of doing business and prevents many normally successful deals from taking place. It prevents internal reconstructions and anything that prevents efficiency rates highly as a barnacle. Stamp Duty has now got to such a high rate that it is an impediment to normal business transactions.
Trading Hours Restriction
I’ll just mention the case of Murray Black who spent about $1m of his own money at that large BP service station and car wash. Now he’s been told that he can’t open at hours that suit him, his staff and his clients.
Fringe Benefits Tax
There is no mystery why new mines discovered will follow the fly in-fly out pattern as long as mining companies continue to be ‘fined’ by fringe benefits tax for providing onsite facilities for their staff.
One minister for mines, three against
It is interesting to note that the Department of Mines suffered a 13 per cent cut in funding this year while the Department of Conservation and Management experienced a 17 per cent increase. The conclusion to be drawn from this is that the gap between these departments has been widened. This strongly emphasises the government’s continuing commitment to green politics. The State Government has diverted the $320 million surplus generated by the mines department to other departments and services elsewhere.
Why lose the people we have just trained?
A large hidden cost to Australia is the threatened loss of many of our excellent technical people. I witnessed a similar situation in the early ‘70s when a local geologist, Tony Hall, was appointed head of the Saudi Arabian Bureau of Mineral Resources. He recruited 40 geologists, mainly Australian, and for eight years those geologists were contributing to the wealth of Saudi Arabia and not to Australia. Many of our geologists are now headed overseas and almost every Australian mining company I know has opened up a file called ‘overseas opportunities’.
WA’s image
Anyone who has been overseas recently, trying to raise capital is aware that the WA Inc shambles has created a worse image problem for us that even the several failed companies. There is a bizarre fascination overseas with how we permitted our state government to become involved in non-government areas. I’m not interested in the gruesome details but I do want the healing process to start quickly. It will only start if it is subject to a full and open investigation that is now being called for by almost every sector of our community.
Council rates on mining tenements
The increase in council rates (10 per cent increase, being 3 per cent above the CPI rise) is a surprise. Especially when told that the merger of the two councils would result in economies rather than cost overruns. Increases in costs are the greatest killers to industry at the moment and are paid on a ‘instead of what’ basis. All payments such as rates come out of exploration/development budgets. So higher rates mean less exploration, less new mines and less employment opportunities. Similar comments apply for exploration funds being re-diverted by local government into entertainment centres. What Kalgoorlie needs more than anything else at this moment is more exploration, more discoveries and more employment choices. Anything that diminishes these objectives will weaken the region’s long-term prospects.
Debt and bad debt (and worse debt)
From my observations this turndown is far more serious than the early ‘70s. This time we have debt and some $54m of bad debt. Those who have debt know it doesn’t just go away. There is some concern that at Local Government level there is potential exposure coming up with the entertainment centre and the new civic administration complex.
Attitude
I recall a rather vicious campaign against the mining industry in 1987 as a plan to introduce a state tax called the gold levy. This backfired and reawakened Canberra’s interest in the gold tax which we now see fast approaching. It also left a lot of residual platitudes such as one that I still hear: “the industry is not paying its way in the community”.
This has contributed to an all pervasive attitude. An example on the front page of yesterday’s Kalgoorlie Miner shows a Sydney-based economic geographer blaming the mining industry for the plight of the local Aboriginals. He suggests that “Aboriginal groups target the next mining boom”. I suggest that these attitude problems should be re-examined by the community. If turned around into a welcoming committee, we can start attracting new exploration instead of scaring them off.
What next?
Well that is a brief summary of some ‘barnacles’. I suppose barnacles are like fleas, which reminds me of the old saying: “A healthy dog can stand a few fleas”. Unfortunately the ‘dog’ called exploration and mining is not as healthy as we would all like it to be. It’s important to reduce the flea population before the dog runs away from home.
The mining industry – which is all Australians, directly or indirectly – has the ability to continue its successful track record and generate excitement and employment. But we must get through this low patch by ridding ourselves of these barnacles on which we are spending so much time and effort.