Yancoal CEO Murray Bailey says red tape in NSW and Queensland `extremely frustrating' by: Sarah-Jane Tasker and Blair Speedy From:The Australian September 17, 2012 12:00AM Increase Text Size Decrease Text Size Print
AUSTRALIA risks losing "small entrepreneurs" as increasing red tape will see emerging miners swallowed up because they lack the balance sheet strength to wait years to receive cashflow from production, the head of China's top Australian coal miner has warned.
Yancoal Australia chief executive Murray Bailey has labelled the government red tape in NSW and Queensland, where the Chinese-backed company operates mines, as "extremely frustrating".
But while the size of Yancoal means it can wade through the significant layers of regulatory approvals, Mr Bailey raised concerns about the death of the smaller players, who are struggling under the weight of the increasing level of clearances that are now needed to develop a mine.
"Government red tape at a state and federal level is slowing things down and increasing the costs and it's causing a lot of problems for the smaller players," he said at the Australia in China's Century Conference, co-sponsored by The Australian.
"Those smaller companies that are sitting on undeveloped tenements in NSW and Queensland haven't got the balance sheet strength to hold out for three to six years (to enter production)."
He added that infrastructure to support new mines, such as railways and ports, now had to be privately financed, which created another major hurdle for the juniors.
"The smaller companies just cannot survive. They cannot fund that sort of development and put their shareholders at risk," Mr Bailey said.
"That is why we are seeing a lot of consolidation in our industry now because it is only the bigger players and the players with big pockets and patience, persistence and resilience that can hold out that long.
"That is a bad thing, we need those smaller entrepreneurs to develop the tougher and more remote resources in our country. We have to do something about that from a government (view)."
Highlighting that 15 years ago a miner could get a mining lease and be in production in 11 months, Mr Bailey said such speed was "unheard" of today.
"Our regulatory regimes in Queensland and NSW are frustratingly slow and frustratingly bureaucratic," he said.
"There are multiple layers, multiple documents to send in and a lot of private interest groups that have to be taken into consideration. It's a fact of life, we don't have to like it, but we have to find ways of improving it."
The coal veteran also referred to his role as a director on the Wiggins Island consortium, which is developing a coal export terminal at Gladstone in Queensland, outlining that the red tape for that project, once the development received financial close, was "mind blowing. A lot of the companies that invest in these leading edge infrastructure projects are having to put their money in today and put take or pay commitments for 10 years, before they see the benefits of their mine up and running in five years' time."
Fund manager Tim Schroeders at Pengana said "green tape" combined with take-or-pay contracts for essential infrastructure was threatening the viability of some operators.
"A lot of these companies have committed to take-or-pay contracts for port capacity, it puts some of them in a precarious position because they have to utilise the port allocation or pay the port authority for it, at the same time as they're facing delays in getting their mining projects operational," he said. "It's not a good situation at a time when coal prices are increasingly volatile."
Mr Schroeders said he saw no political will to change the situation in the short term. "There would be companies looking at contingent liabilities in the not-too-distant future who will be increasingly concerned," he said.
Patersons analyst Matthew Trivett said Stanmore Coal, MetroCoal and Cockatoo Coal were all liable to suffer in the event of such bureaucratic delays to the Surat Basin rail link or the Wiggins Island coal export terminal.
"If these infrastructure projects are delayed it will heighten the risk of them ever making it, and provide opportunities for the larger producers to take their pick of the assets," he said.
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