Australia at risk of losing its ‘shine,’ miners warn

BHP (NYSE: BHP; LSE: BHP; ASX: BHP) is among Australian companies concerned about the country’s new labour laws and a shock government decision to block a project that already had permits.

The company opposed the Same Job, Same Pay legislation passed by Australia’s Labor-led government last year. BHP, the world’s largest miner by stock market value, said the requirement to pay inexperienced labour the same wages as a worker with decades of experience, adds costs and is a drag on productivity. 

“We’ve always been strong advocates for tying wage increases to productivity increases, and of course, we’re supportive of that,” BHP CEO Mike Henry told reporters this week. 

“Our concerns around some of the recent changes are that they flow straight through the cost with no commensurate positive impact on  productivity – in fact, they can pull things in the other direction.” 

The new legislation has driven attempts to re-unionize Western Australia’s large mining workforce, which, if successful, Henry warned could impact potential future iron ore expansions. 

Industry already reeling 

Last week, a decision by Australian Environment Minister Tania Plibersek to veto the tailings dam for Regis Resources’ (ASX: RRL) proposed A$1-billion (US$680 million) McPhillamys gold development in New South Wales made the project unviable. The company took a US$130 million hit.  

Companies including BHP, Northern Star Resources (ASX: NST) and Patriot Battery Metals (TSX: PMET; ASX: PMT) contend the snap ruling and new labour rules reduce Australia’s international competitiveness and amplify uncertainty for project development.

The McPhillamys project, which sits on freehold farmland, had received state and federal approval in March 2023. One of the only outstanding approvals was under a law protecting Aboriginal heritage. 

The Orange Local Aboriginal Land Council (OLALC), the key local Aboriginal representative group, made a submission during the IPC process that any risks to cultural heritage could be mitigated. 

“Regis had every confidence that from a regulatory point of view, McPhillamys was an approved project with no significant showstoppers from a government perspective,” Regis managing director Jim Beyer told analysts and media. 

“Minister Plibersek’s declaration was a huge shock to us, and not a  decision that we felt was in keeping with past precedent, particularly given the already extensive investigation into Aboriginal cultural heritage issues.”  

Hot topic 

The decision sent shockwaves through the Australian mining industry and has made headlines in mainstream press for more than a week. 

Australian reporting season is in full swing and the issue has repeatedly  been raised, including with BHP Tuesday. It warned uncertainty in permitting inhibits investment.  

“BHP has been strong supporters of policies related to cultural heritage protection, and that certainly is something that we take very seriously as a business,” Henry said. “But on the broader point, the investment community does need as much certainty as possible, because that will ultimately improve investment attractiveness for Australia, alongside competitiveness.” 

‘Hard to believe’

Northern Star Resources, which is boosting output at Kalgoorlie Consolidated Gold Mines to 900,000 oz. per year, said Australia had a strong track record of being a stable place to invest. 

“Every slow change like this just takes away some of that shine,” managing director Stuart Tonkin said on a conference call last week. “If Australia is not sitting up there as a great jurisdiction to invest in, the capital goes to different countries.” 

Even companies with development projects outside of Australia, like Patriot Battery Metals, are heeding concerns from investors. 

During a presentation last week following the release of the preliminary economic assessment for its Shaakichiuwaanaan lithium project in Quebec, CEO Ken Brinsden was asked if a similar veto was possible in Canada. 

While Brinsden said he was confident that it couldn’t occur, he was amazed the issue had repeatedly come up. 

“It’s hard to believe we’re having this conversation in Australia,” he said.

Industry braces for green reforms

The Australian mining sector has already warned about possible negative implications of federal environmental law reforms.  

The ‘nature positive’ reforms include the establishment of a national environmental protection agency (EPA) in addition to existing EPAs in each state and territory. 

Legislation was introduced into Parliament in May, with the Labor government promising the EPA would be a “tough cop on the beat” with the ability to issue ‘stop-work’ orders to prevent serious environmental  damage and proactively audit businesses. 

Industry groups have warned the move would lead to duplication of  regulation, adding to the cost and timeline of getting new projects approved. 

“The environmental policy is just an absolute joke in Australia,” Minerals Council of Australia CEO Tania Constable told a conference in May. 

“I’m failing to see what a national EPA is going to add in terms of making sure that we get a better environmental outcome when we’ve got state EPAs out there.”