Private equity might have faded as a force in the stock market, but there’s something bigger happening in the ‘private world’ – the rapid disappearance from public view, and public scrutiny, of Australia’s resource industry.
Chinese, Russian, Indian, South African, and even Ukrainian companies are busily buying Australian mineral and energy assets, and making them disappear.
In some cases the vanishing act is not deliberate, and not necessarily bad. In others it is questionable because it seems that the new owners of Australian iron ore, manganese, oil fields and gold mines do not welcome the prying eyes of the news media and, by definition, the Australian public.
Before explaining in detail, and naming names – a question. Is this privatisation of natural resources a good thing?
Briefcase reckons the correct answer is no, and that in time it will become a political issue – particularly when/if commodity prices fall and Australian workers find themselves sacked by a faceless man in Beijing, Moscow, Delhi or Kiev.
Now for the detail of what’s happening, starting with an important rider; legally, it’s fine.
Also, from a government perspective, when it comes to agreements and abiding by the rules of how to explore and run a mine, there is nothing to complain about. But when it comes to public scrutiny, and to that critical question of a company (like justice) being seen, there is a serious issue.
Examples: Earlier this year, the big Russian metals miner, Norilsk Nickel, acquired LionOre, a business with worldwide assets, including a number of mines in Western Australia.
Since then, control of the assets has reverted to Moscow. Nothing has happened to cause alarm, but the public profile of the LionOre mines (and its workers) has faded, and will continue to fade because there is no way an employee of Norilsk will say anything, to anyone, ever, because that’s the way Moscow works.
Last week, barring a sudden twist, a mysterious Ukrainian company run by an unseen oligarch (much like the chaps behind Norilsk), acquired control of Consolidated Minerals. Perhaps, in time, WA’s new investor from Kiev will make a public appearance, but Briefcase isn’t putting any money on that one. Privacy is paramount in the world of oligarchs.
Americans are not much better, as can be demonstrated by oil industry profiles. While Woodside, with its local management and local stock exchange listing, is always approachable, the totally private team running the Gorgon gas project is remote and seemingly disinterested in raising its profile. Why should it? Workers here report to management overseas, and only occasionally appear in public, and then in a very controlled manner, complete with intense security. They do the right thing, but exactly by a set of rules, in a colour-coded manual, mailed out from the US.
Before anyone at Gorgon gets upset, it’s the same at Alcoa, where public scrutiny is unwelcome and the media is seen as an enemy to be avoided at any cost. Why, Briefcase wonders? Do we ask embarrassing questions, or is it that we can’t be controlled?
South African owners of WA resource assets are equally guilty of buying, waving a flag briefly, and then withdrawing into a private world where decisions are made in Johannesburg.
Decades of doing it their way, complete with barbed wire compounds and armed guards, has made many of our South African friends very wary of appearing in public.
Chinese owners, who are likely to be the biggest single grouping, will probably be the worst yet. First, because of the language barrier, and secondly because there is no concept whatsoever of a free media (or any other form of freedom of expression) in China, where government makes the rules, enforces the rules, and owns most of the shares in so-called private companies.
Briefcase is not sure how the situation he can spot will work out, but it is going to demand greater scrutiny than before by government on how foreign owners behave – and are seen to behave.
The flip side, somewhat humorously, of foreigners rushing to buy Australian resource assets is an increasing exodus of Australians going offshore in search of their fortunes.
As is the case with all such migrations, there will be many failures and the odd success, and while it’s too early in the process to pass judgment, it is possible to start a competition for who can get as far away from Perth as possible.
No-one, as far as Briefcase knows, has yet pegged an exploration claim on a piece of the moon, but there are people exploring the ultra-deep sea floor of the Pacific, looking at ways to extract minerals straight from volcanic vents in a way that Jules Verne might have considered for a chapter in his classic 20,000 Leagues Under The Sea.
Other contenders include Sundance Resources, an iron ore hopeful that has attracted quite a following on the stock market as it promotes its Mblam project in Cameroon.
Briefcase wishes all aboard a jolly good time, especially when it comes to building a 1,000km railway across some of the dodgier parts of central/west Africa.
Andean Resources is also in the running with its gold project in southern Argentina. In terms of time zones and difficulty of getting to site, it’s right up there with Cameroon.
Kentor Gold, a company we don’t hear a lot about, is generating some interesting gold assays from a project in Kyrgyzstan, where the ex-Soviet state bumps up against China. Discovery is difficult enough; getting government approvals could be even more fun.
Then there’s freshly floated Northern Iron, which is planning to re-develop an old Norwegian iron ore mine near the port of Kirkenes fronting the Barents Sea.
But, the clear winner is Ironbark Gold, which has acquired the Citronen zinc prospect at the top end of Greenland, and by top end Briefcase means next stop is Santa’s home on the North Pole.
No-one doubts that Citronen contains lots of zinc, but it is also home to polar bears, seals, and a few passing Inuit. Never mind, seems to be the view of the small Subiaco-based Ironbark, we can do it from downtown Hay Street.
Best of luck, chaps.
“We are born crying, live complaining, and die disappointed.” Thomas Fuller in 1732