LLL (ASX) General Discussion

Article in the Australian about the increasing sovereign risk in Australia. (my bolding)

This is serious and extremely disturbing.
BHP – Australia’s biggest and most globally significant company, and absolutely critical to our future growth and prosperity – is close, very close, to going on an investment strike in its own home country.

It has, already, in one state – Queensland. But now the risk – the very real threat – is wider; with the critical, immediate pivot now South Australia.

Back in February, as I reported then, BHP raised the issue of serious sovereign risk of doing business in Australia, for the first time since the Whitlam years.

The company disclosed that it had suspended new investment in its Queensland coal mines. It would only make the basic maintenance investment, necessary to keep them operating effectively.

It would not invest for expansion or replacement.

“As a result of the Queensland government’s decision to raise coal royalties to the highest maximum rate in the world, the fiscal environment is no longer competitive or predictable,” BHP said in its interim report.

As I noted, BHP was being polite – to me those words spelt sovereign risk, a government threatening effective asset expropriation. Well, that was then, and nothing has or will change for the better in the Sunshine State, this side of next year’s state election.

Now, as BHP has again spelt out explicitly, at its annual meeting a month ago, the threat is now nationwide because of the Albanese government’s proposed Same Job Same Pay law, getting messier by the day.

Chief executive Mike Henry very clearly spelt out it could jeopardise more than $3bn of investment BHP planned for its South Australian copper business, following its $10bn OZ Minerals takeover.

“BHP strongly opposed the Same Job Same Pay Bill not only because of the damage it threatens to do to our business, but also for the hit it will have on Australia’s economy, to Australian jobs and to Australia’s productivity and international competitiveness,” Henry said with emphasis.

The government’s response – such as it’s been – is that “of course” BHP had to keep investing in SA copper, otherwise it would all-but throw away the $10bn spent acquiring OzMin.

But that shows an embarrassingly inept lack of understanding both of what BHP can still do – to minimally invest to maintain and keep making profits, Queensland-style – and the very real alternative options it has for multibillion-dollar new investments elsewhere in the world. Indeed, this year, BHP has committed a further $8bn to its major potash mine in Canada, taking its total investment there to over $17bn.

It is also looking at major expansions in its Chilean copper projects.
Further, if BHP did go ahead with its initial $3bn investment in SA, that would almost certainly be only the forerunner to even bigger investments in what could be developed into one of the world’s great copper basins.

Are all those jobs and state and federal tax and other revenues going to be rejected by the Albanese government’s mindless pursuit of a cocktail of ideology and pay-offs to union mates?

Will the Albanese government send “Australia’s BHP” off to invest anywhere but Australia’?

TERRY MCCRANN

BUSINESS COMMENTATOR

https://www.theaustralian.com.au/business/theres-a-real-risk-the-albanese-governments-foolish-ir-reforms-will-drive-bhp-investment-away/news-story/95608657a1f789afb86732176c2cc391?utm_source=TheAustralian&utm_medium=email&utm_campaign=Editorial&utm_content=TA_BUSINESS_BIZREV_COMMENT_01&net_sub_id=@@@@@@@@@&type=curated&position=1&overallPos=4&utm_source=TheAustralian&utm_medium=Email&utm_campaign=Editorial&utm_content=emailname_