Minister explains Cazaly decision 27-April-06 by James Moses
Resources Minister John Bowler has belatedly provided an explanation of his controversial decision to hand the disputed Shovelanna mining lease to Rio Tinto.
The minister reiterated that the Mining Act did not require him to give reasons for his decision, before providing three reasons for his decision.
He also said that each reason was sufficient by itself to be satisfied that the public interest was best served by denying Cazaly's claim to the lease.
The State's Iron Ore Policy
The state's iron ore policy recognises that long-term iron ore contracts are needed to produce the large volumes in the Pilbara region of the state, and give companies the security to invest in extensive capital infrastructure.
Also, Implicit in this long-standing policy is the certainty that some tenements containing iron ore deposits will not be mined for a lengthy period from the time of discovery.
The Minister said that these policy objectives of the state's iron ore policy and therefore the public interest were best achieved by terminating the Cazaly Resources application.
Promoting Investment in WA
The minister also took the line that the public interest is best served by policies and decisions that promote investment, and that investment in the resources industry is best promoted when explorers can be confident that ownership of resources will not bejeopardised by minor oversights or actions.
Fairness
The third reason revolved around fairness and the need for decisions under the WA Mining Act to be consistent.
On this point, the minister wanted to ensure the decision would have been the same if the circumstance of the parties had been reversed. He said he had no doubt that this would be the case.
In explaining the decision the minister also said that it must be recognised that it was a very substantial decision, and in making it he examined the hundreds of pages of submissions provided by both parties, and thought long and hard about their implications.
Last Friday the minister settled the dispute over the lease by awarding it to resources giant Rio over Cazaly Resources, who had pegged the site after Rio has inadvertently let its lease lapse.
THE FULL MEDIA RELEASE AAPEARS BELOW, INCLUDING AN ASSESSMENT OF THE FACTS CONTRIBUTING TO THE DECISION.
Attention: News Editor/Chief of Staff
27/04/06
Minister explains reasons behind Shovelanna decision.
Resources Minister John Bowler today issued the following explanation of his decision in relation to the dispute over the Shovelanna lease between Rio Tinto and Cazaly Resources:
The Mining Act does not require me to give reasons for my decision.
However, I recognise the strong interest in this matter - both from the media and the public - and believe in those circumstances it is appropriate for me to provide a fuller explanation of my decision.
It must be recognised that this was a very substantial decision to make, and in making it I examined the hundreds of pages of submissions provided by both parties, and thought long and hard about their implications.
The undisputed facts are:
1. Rio, via the Rhodes Ridge Joint Venture, held the subject ground for over 30 years under various tenures, most recently under Exploration Licence 46/209. Over this period, Rio's reported expenditure in exploring this ground totalled $587,063. This exploration resulted in the discovery of significant iron ore mineralisation of 132 million tonnes at 62 per cent Fe, now known as the Shovelanna Resource.
2. E46/209 (Shovelanna Lease) was granted to Rhodes Ridge JV on August 27, 1989 by the then Minister for Mines, who also on that date approved the inclusion of 'iron' in the licence title pursuant to section 111 of the Act. During its 16-year life, Rhodes Ridge JV applied for and was granted partial exemption from (the bulk of) the required annual expenditure in 10 of these years; was granted exemption from the compulsory 50 per cent surrender 'drop off' on two occasions; and the term was extended for one year on 11 occasions.
All these exemptions and term extensions were granted on the basis of WA's long-standing (and still current) iron ore policy, which provides for a difference in the treatment of iron ore tenements from those of any other mineral commodity.
3. The Shovelanna Prospect was due to expire at midnight, Friday August 26, 2005.
Page 1 of 3 4. Rhodes Ridge JV paid the State Government the forthcoming year's rent on that licence on July 28, 2005.
5. On Friday, August 19, 2005, Rhodes Ridge JV dispatched the forms applying for the extension of licence by an 'overnight first-class' courier.
6. The documentation was not received by the Marble Bar mining registrar's office by the required close of business on Friday, August 26, 2005 and the licence automatically expired at midnight.
7. The package containing the renewal forms was received by the courier's agent at Marble Bar on Friday, August 26, 2005 at approximately 4pm. The Marble Bar Mining registrar was not informed that a package addressed to her was awaiting collection, until Wednesday, August 31, 2005.
8. Immediately on notification, the mining registrar collected the package and upon discovering Rhodes Ridge JV's application for the extension of the licence, she telephoned Rhodes Ridge JV's office in Perth to inform them that the Shovelanna Prospect licence had expired.
9. Meanwhile, on Monday, August 29, at about 1.50pm, Cazaly Resources applied for a new exploration licence over the Shovelanna Prospect.
Against this set of facts and after considering the extensive submissions provided by both parties, I present the following reasons for my decision.
Each of the three reasons I will elaborate upon was sufficient on its own for me to be satisfied that the public interest was best served by terminating the Cazaly Resources application.
The State's Iron Ore Policy
Among the materials provided to me by the Department of Industry and Resources (DoIR) was the following advice:
'...Parliament intended that iron is a mineral for which special treatment be accorded under the Act...Parliament wanted the Minister to be in a position to exercise a much broader discretion in relation to iron tenements...this would have the effect of encouraging exploration for iron ore, ...and the life of these mining operations can last for decades, and in fact may need to last for decades to make the capital investment economically feasible...there is logical support for a special provision that allows an exploration licence for iron to be held on less onerous terms than licences for other minerals...'
The policy recognises the need for long-term tenure to underpin long-term contracts. Iron ore mining in the volumes developed in the Pilbara can only be carried out with extensive infrastructure such as rail and ports. In order to invest in such extensive capital infrastructure, companies need the security of long-term contracts, supported by secure tenement holdings. Page 2 of 3 Implicit in this long-standing policy is the certainty that some tenements containing iron ore deposits will not be mined for a lengthy period from the time of discovery.
This policy has been maintained by successive governments for many decades and it is my view that it has been a significant reason for the Pilbara region being the world's most prolific exporter of iron ore.
Any company mining iron ore in WA needs to have access to long-term reserves in order to secure their future viability. For example, a company that has access to known reserves can more quickly respond to increases in demand.
Whilst this policy is under review, I am of the view that to arbitrarily deviate from its objectives and present method of implementation would be detrimental to the state's sovereign risk profile and therefore contrary to the public interest.
On reviewing the material I concluded that the objectives of the State's iron ore policy and therefore the public interest were best achieved by terminating the Cazaly Resources application.
Promoting Investment in WA
I consider that the public interest is best served by policies and decisions that promote investment.
Investment in the resources industry is promoted when explorers can be confident that their ownership of resources they have discovered is not jeopardised, with consequences disproportionate to minor oversights or actions. This is particularly true where a tenement holder has clearly signalled their intentions to Government by, for example, paying rent in advance.
I concluded that goals of promoting investment in WA and therefore the public interest were best served by terminating the Cazaly Resources application.
Fairness
The effective administration of Ministerial discretion under the WA Mining Act requires that the outcomes be consistent.
In considering this matter, I was particularly focused on ensuring the answer I came to would be the same were the circumstances of the parties' to be reversed. I have no doubt that this would be the case.
In other words, if the roles of Rhodes Ridges JV and Cazaly Resources were to be reversed, I would have found in favour of Cazaly Resources.
Accordingly I am satisfied that the public interest was best served by terminating the Cazaly Resources application.
(20min delay)