AUSTRALIAN COAL MINERS HOPE ELECTION WILL SEE NEW GOVT CUT RED TAPE

The World Economic Forum this week put Australia 129th out of 148 countries, ranking it 25 spots lower than India, in terms of the burden of government regulation.

And Australia’s red tape is hurting growth in its key mining sector at a time when other sectors are struggling to fire up to fill the gap left by a fading mining investment boom.

Australian miners sitting on coal lodes that could produce 100 million tonnes a year say they are frustrated by layers of state and national approvals that take years to secure, anti-coal campaigners using the courts to delay projects, and carbon and mining taxes eating into potential returns.

“Green tape in Australia really has become very stifling for business, to the point now where it’s difficult to tell the difference between green and red tape, it’s so embedded,” said Whitehaven Coal Chief Executive Paul Flynn, referring to lengthy environmental reviews by state and federal agencies.

Faced with high costs, weak commodity prices, emboldened environmentalists and nervous lenders, miners are counting on a new, conservative government in Canberra, expected to easily win Saturday’s national election.

Australia’s conservative opposition, led by Tony Abbott, has promised to scrap a super profits mining tax, a carbon tax, and create a one-stop shop for project approvals, eliminating duplication between federal and state processes.

“My expectation is that if Australia is going to stay competitive, they’ll have no choice but to streamline the approval processes,” said Paul Mulder, managing director of GVK Hancock Coal, a joint venture between India’s GVK Power & Infrastructure and Australian billionaire Gina Rinehart’s Hancock Prospecting, which is planning a $10 billion coal mine, rail and port project in Queensland.

When the current Labor government came into power in 2007, the mining boom had yet to peak, and the government hit the industry with taxes on carbon emissions and iron ore and coal super profits. Now, with prices having dropped and Chinese growth slowed, the industry is looking for help to revive its competitiveness and spur the next leg of the resource boom.

MOUNTING HEADACHES

GVK Hancock has already spent A$50 million winning approvals for the Alpha project in the untapped Galilee Basin in Queensland, but now faces a court bid against the project brought by environmentalists and some land owners.

At the same time, GVK Hancock is facing a delay on a decision by Canberra for a second project, Kevin’s Corner, deferred to after the election amid a campaign led by an anti-coal alliance called Lock the Gate claiming the mine would deplete groundwater crucial to farms.

Anti-coal campaigns are not new, but have gained steam after the state of New South Wales clamped down on coal seam gas developments and a state court overturned approval for an expansion of the Warkworth coal mine owned by giant Rio Tinto and Mitsubishi Corp.

“We are definitely taking heart from a case in the New South Wales land and environment court that was handed down this year on the Warkworth mine,” said Ellie Smith, central Queensland regional coordinator for the Lock the Gate Alliance.

Whitehaven’s A$767 million ($695 million) Maules Creek project, which took three years to secure approvals, has been hit by a last-minute court bid based on a technical flaw in the approval process.

Assuming the case is resolved in October, it is targeting first sales in early 2015, at least two years behind schedule.

“People are slowing down their decisions on acquisitions and reducing the prices they’re willing to pay,” PwC’s Australian mining leader Jock O’Callaghan said of deals in the sector.

“Whilst they’re starting to look less favourably here, they’re starting to look a little bit more positively elsewhere,” he said, adding that major foreign investors were increasingly eyeing West Africa and South America.

But even with the hassles of filing thousands of pages of environmental assessments, awaiting slow, duplicated state and federal reviews, and battling environmentalists in court, foreign investors are not about to abandon Australia, especially when they compare the risks in other countries, like Mongolia.

“We see Australia continuing to offer an attractive investment environment, including stable infrastructure, although overall costs such as labour are rising,” said an official at Japan’s Itochu Corp, one of Whitehaven’s partners at Maules Creek. ($1 = 1.1036 Australian dollars) (Additional reporting by Yuka Obayashi in Tokyo; Editing by Lincoln Feast and Michael Perry)

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