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Miners fire back at Greens

Peter Ker
June 30, 2011

AUSTRALIAN investors are paralysed by their short-term focus and their reluctance to take a risk, according to junior mining companies who yesterday leapt to defend the role that foreign capital plays in Australia's mining sector.

Claims by the Greens that foreign investors had too big a slice of the Australian mining industry sparked an angry response, with many juniors saying their projects would not exist if it weren't for foreign capital.

Leading the charge was Sandfire Resources managing director Karl Simich, whose company is developing a copper and gold deposit in Western Australia - considered by many to be one of the most exciting in decades.

Mr Simich said the deposit, Degrussa, would not have been discovered if it weren't for overseas money, particularly from Korean steel manufacturer POSCO.

''Had it not been for them this company probably wouldn't have made this discovery and wouldn't be in the shape it is today. We'd probably still be bouncing around as a $10 million company,'' he said.

''They made the investment when no Australians would, and when we went along to talk to Australian investors, they had no interest whatsoever.''

POSCO owns about 16 per cent of Sandfire, which is about 25 per cent foreign owned. Mr Simich estimated POSCO's stake in Sandfire has grown from close to $25 million to be worth more than $150 million because of solid gains in Sandfire's share price.

Mr Simich said Australians could learn a lot from Asia's culture of long-term investment, echoing the comments made this week by Sundance Resources chairman George Jones.

He said: ''I think China, Japan, Korea and those places have got longer-term vision, Australia is being run by actuaries, and it's very much instantaneous the gratification we require. We can't see in front of our noses half the time and it's very sad.

''The guys in the investment funds are worrying about their monthly returns, their quarterly returns, their quarterly bonuses and it's all short term,'' he said.

POSCO's investment required Sandfire to offer the Korean company first opportunity to buy the resources produced at Degrussa, and Mr Simich said many foreign investments were part of a bigger deal to supply minerals.

''A lot of mines will not get off the ground and bankers will not provide money unless they can see that you can sell your product, and often that comes with a fixed offtake arrangement,'' he said.

This was supported by BC Iron managing director Mike Young, whose company was able to develop courtesy of a $50 million loan from Hong Kong private commodities trader Heng Hou Industries.

Heng Hou's loan was interest-free on the grounds it gave the company access to iron ore supply from BC Iron's Pilbara operations.

Mr Young said scaring away foreign investors was effectively scaring away prospective buyers of Australia's minerals.

''When the Chinese invest, they are not investing to just make money... they are investing to secure supply for the future,'' he said. ''The Chinese are buying future supply, the privates are buying future capital growth.''

Greens leader Bob Brown has long advocated taxpayers get a bigger share of Australia's mining wealth, and yesterday he said he preferred the original mining tax to the revised version now being championed by Prime Minister Julia Gillard.

Mr Young attacked the idea that people should get a bigger share of the spoils without putting in any effort.

''If people don't want to take the risk and don't want to take the investment, then aside from royalties, why do they deserve a bigger share? It's not fair,'' he said.

''The reason that an owner of a share gets a return is because they've taken a risk. What Bob Brown wants to do, he wants people to also get a share without taking the risk,'' he said. ''It's bloody hard to start a mining business, something like one in 1000 projects ends up being mined. It's a huge high-risk business and for someone to sit there in Canberra and say we are not going to take the risk but we want the return is completely unfair.

''For Bob Brown to say we deserve a bigger share, sure you do, but take the risk and invest. You either invest or you go start your own mining company and go dig it up yourself,'' Mr Young said.

BC Iron shipped the first ore from its joint venture with Fortescue Metals this year.

http://www.theage.com.au/business/miners-fire-back-at-greens-20110629-1gqya.html