EMBARGOED:

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. D. ANTHONY.

to the Broken Hill Branch of

THE AUSTRALASIAN INSTITUTE OF MINING AND METALLURGY .

Thursday, 24th June, 1976

Nor for publication before 8.00p.m.  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 goverriment 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 interest  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 are not just words, but a fair .  statement of our attitude to your industry,  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 is

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 1974 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 .

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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 $4 million and extending over the next  15 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:  .  .  .  .

.  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 b y 'the Government so the development can  proceed).

.  The development (and 1 mention them in alphabetical  order) of the 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. Ã¢ÂÂ   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 '

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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 caused  by the world recession at a time when the costs of operation have  been rapidly increasing. The resultant low returns have 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 obvious  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 lack of  prospectivity, the lack of significant successes for a number  of years, the active discouragement of private exploration by the  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 and  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 lias also  given attention to the price of oil in reservoirs already  discovered, generally known as "old oil". 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

exploitation. 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  of 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 $40 US per lb. One of the very few  companies with courage to undertake a proving programme  doubled its reserves in this period. The cprrent 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,

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the figure could easily double. The uranium industry has the  potential to contribute to the Australian economy on a scale  which probably exceeds that of any other single development.

Two forecasts are often put forward:  firstly, that by the year 2000 about half of the; western world?  s electrical  generating capacity will be accounted for by nuclear power;  secondly, that early in the next century, fusion or other  technology will have advanced to the stage where the demand for  uranium will be relatively insignificant.

Were it not the unique material that it is, the  obvious commercial approach would be to develop and export  uranium while the market for it lasts. But pranium is not  solely a commercial issue - although I know some would like  to think it, so. The Government has indicated that it will , not take final policy decisions regarding future uranium ,  development until it has received and considered the report  of the Inquiry. .

I emphasise again that we are dealing with something  of enormous potential economic benefit to Australia and an  area of major interest to our trading partners.  It involves  a commodity of such sensitivity as to be without parallel.  . The issues demand that any action by the Government be considered  action; that it be action which can be explained fully to all

sectors of the community; that it have proper regard to any  well-founded concerns 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 put in order

That brings me to the end of our quick review of some  particular areas.  But 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 altered under the previous Government;  the  ability to generate and attract risk capital; the need to  revitalise exploration in every sphere of mining and drilling  activity; the need to work with industry and State Governments  to consciously seek but and, whenever possible, remove obstacles  to future development.  .

These are some of the broad areas where the mining  industry has every right to expect understanding and direction  from this Government.

But clearly a specific incentive or series of  incentives to the mining industry is not going to ac'hieve any  worthwhile long-term result if our rate of inflation continues  to rear above that of 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 Government today. I make no apologies for this  emphasis. I have been personally involved over many weeks in the  most vigorous and rigorous process of screening and pruning of

expenditures that has ever 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 things 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 clear 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 decisions to divest the  Commonwealth's interests in Mary Kathleen Uranium, Cooper Basin,  the Wambo Coal Project and uranium exploration in the Ngalia Basin.  Uranium prospecting in the Northern Territory will return to

private enterprise. Previously the Atomic Energy Commission,  had been given a monopoly.  We have been unable - perhaps 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 CouncilÂ· 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 misunderstanding  of the true position.- There should be no misunderstanding.

The guidelines for foreign investment are quite clear.  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 50% Australian equity in new mining projects - 75% in the case of .   uranium. But we have made it quite clear that if foreign companies  genuinely try to secure 50% Australian involvement in projects

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.

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.  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

"open 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 said 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  at this stage - 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 Â·   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 factor to  which I attach a great deal of importance. My Government -  any Government - is only effective to the extent that its  departmental officers can advise, from an informed position. To  be informed, departmental officers must have a rapport with industry  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.

Hard evidence of how the philosophy of the present  Government has been put into practice is the stance taken by the  Government in negotiations which 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 negotiations  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  dommonsense 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. .  *  Ã¢ÂÂ¢

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.

Ã¢ÂÂ¢  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. .

Â· ? Â» ÃÂ½ say Â»-*Ã¢ÂÂ   ,  ...,

So in six months

.  We have moved to divest ourselves of the previous Government's involvement in areas that rightly Â·  . 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 have  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-making  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 decades -  ahead.

