General Discussion, page-1748

The idea of producing down stream add-on value is a popular political argument that tends to flounder. It only really gets going when its too late and some disaster hits. Then it costs billions and takes years to get through endless red tape. Part of the problem in Oz is the govt regulations. We have state, Federal and local councils all with their hands out. There is duplication in the processes and endless costs. It now takes 10 years to find a decent mine and get it into production using its own plant. No one will wait. There is tooo much tape in the way of progress. Pollies talk, but do very little and industry wont take the risk with unstable policies coming and going. The gas cap is the recent mess. Power prices are not coming down and oil just took off again with OPEC cuts. We have seen carbon taxes, mining taxes, franking credits and now gas caps. Who wants to invest billions into industries when govts are so unreliable! These changes blow numbers up and financiers dont like that one bit. Would you want to invest with that?
Its called sovereign risk. Something people pretend doesn't exisit in Oz.
The issue we face is the cost of everything. Labour, energy, rents, insurance, raw materials are extremely non competitive when compared with Asia. You may remember the govt piled tens of billions into the car industry only for it to eventually fall over for the above reasons.
The REE companies that are taking the risk to build these things are seeing major cost blow outs. A high inflation environment just adds more risk.
DRE has the responsibility to get the highest return for shareholders in the safest way possible. Management own a chunk of stock. If they think building a plant makes financial sense, then they will do it. I would be more inclined to think they would like to pass the parcel to large miners who have the budgets and time horizons to get these things built. That is why they need tier 1 assets. That means 30 plus year mine life. The obvious way forward is to build a concentrator and add some value with less risk. DRE seems to have the geology to unearth a tier 1 asset. dyor.