05/10/2011 - 11:17

Collie sale moves it into Premier league

05/10/2011 - 11:17


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Foreign ownership of Collie coal will have positive long-term outcomes.

Collie sale moves it into Premier league

COLLIE is a place that rarely hits the international headlines, but last week’s spat over a Chinese company buying the Premier coalmine will one day be seen as an important step in elevating Western Australia to an even-more-prominent position on the world stage – economically and politically.

Yancoal’s $297 million purchase of Premier from Wesfarmers attracted the most media attention because of the foreign investment issue, and the question of whether it is a good thing that all of WA’s operating coalmines are foreign owned.

Lanco Infratech’s earlier purchase of the Griffin coal assets transferred ownership of its Collie mining assets to an Indian company.

From a coalmining backwater with associated power stations, Collie today is the unlikely meeting place where interests associated with Asia’s giants – India and China – bump heads.

But the Collie foreign-ownership debate is just one clue to a much bigger period of change under way in WA, including:

• the direct government-to-government ties being forged between the Chinese and WA state government;

• the remarkable attraction of WA to African resource project developers, as seen in the 2,000 delegates at this year’s Africa Down Under conference; and

• continuing debate at academic and government levels about the creation of an Indian Ocean economic zone.

What’s happening in Collie is an example of the Indian Ocean economic zone taking shape with, or without, academic and government assistance.

The same can be said for Africa Down Under, where delegates from around the world travel to WA to talk about business and investment opportunities in Africa.

And the message is repeated in the way Premier Colin Barnett has replicated what one of his predecessors did 30 years ago in forging a form of the ‘state’s own’ foreign policy. Lost in time now, but having an independent foreign view of the world was close to the heart of the late Sir Charles Court.

As with so many significant changes in the way the world works, no-one has actually blown a whistle and declared the start of the Indian Ocean economic zone.

Attempts to do that at conferences organised by local universities and government agencies have failed, largely because such declarations are quickly proven to be hollow attempts by non-players in the game.

Today it is different; the players are real. Yancoal and Lanco have invested in Collie coal because they want to develop the coal assets in the South West for sale to power stations around the Indian Ocean, and perhaps up into China.

Mr Barnett’s one-man foreign affairs push is a way of opening an access route for Chinese interests into a stable, prosperous and inviting location, which represents the entire eastern side of the Indian Ocean and serves as a stepping-stone into countries around the rim.

Africa Down Under is a melting pot of African, Australia, Chinese, Indian, European and American interests seeking ways to make money from resource developments that harness Australian technical skills, with African projects, using US and European capital, to sell into Asian markets.

It is hard to find fault with any of this, except for what could be a surprise increase in local electricity costs.

Yancoal and Lanco have not invested in Collie to continue selling coal to local power stations at a price well below world parity prices. 

They will want to export coal, if they can overcome questions of Collie coal quality, and they will want to get an export equivalent price for what they sell to local power stations.

For local consumers it could come as a shock to discover what world parity pricing does to their power bills, triggering a backlash against foreign control of coal.

From a long-term perspective, however, the benefits of being at the centre of what could become the world’s next great trading region, which leads to the opening of India to suppliers from around the Indian Ocean, makes the short-term power shock a price worth paying.

Forrest’s fight

IF every taxpayer in Australia did not have some ‘skin’ in the legal games being played by the Australian Securities & Investments Commission and Andrew Forrest, then we could all watch with some amusement.

After all, the case of ASIC versus Forrest (and Fortescue Metals Group) is fine sport with the score one all and the ultimate umpire, the High Court, agreeing to join in for a spot of legal argument at 10 paces.

But we do have skin in the game because it is taxpayers’ funds being used by ASIC to pursue one of Australia’s richest people who is, justifiably, fighting tooth and nail to avoid a blot on his name.

ASIC probably believes it has no choice but to chase a legal rabbit down its burrow. Having started a case against Mr Forrest, on what one judge has already found to be in error when he dismissed the charges, the corporate regulator now has its name to defend.

So what is the prize, what is the cost, and will anyone ever actually win?

The prize is someone’s reputation. The cost is mega millions, which Forrest can afford but which taxpayers ought to query; and no, there will never be a winner.

Even if ASIC eventually gets a conviction the case is so old, stale and irrelevant that no-one will take any notice, and any punishment will not put a dent in Mr Forrest’s hide, let alone his bank balance.

If Mr Forrest wins there will be even less cheering because all that will have been proved is that a rich man has the option of fighting the good legal fight few others can afford.

In a word, ASIC versus Forrest has become a yawn, and a footnote in history.

Lucky Clive

OPTIMIST of the year (if not the decade) award goes to Clive Palmer, though not because the Queensland resources promoter is said to be lining up for a fourth attempt to float his Resourcehouse group on the Hong Kong stock exchange.

It is more because he is planning to fund his Galilee Basin coal mines using 85 per cent bank debt at a time when other mine developers are happy to get 60 per cent bank debt (and 40 per cent equity funding), and will even settle for a 50/50 split.

Good luck, Clive.


“The circulation of confidence is better than the circulation of money.”  

James Madison


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