WHEN the newly installed chairman of Murchison Metals invoked the name of Italian Renaissance figure Niccolo Machiavelli this week, the only surprise to some watchers of the Oakajee port project was that it took so long for the master of political intrigu
WHEN the newly installed chairman of Murchison Metals invoked the name of Italian Renaissance figure Niccolo Machiavelli this week, the only surprise to some watchers of the Oakajee port project was that it took so long for the master of political intrigue to crack a mention.
Asked about the decision by Sinosteel to put a halt to its Weld Range project in the Mid West and whether the Chinese company had its own internal issues, Murchison’s Ken Scott-Mackenzie provided what really could have been a stock answer to any of the goings on around Oakajee for the past year.
“There are all sorts of Machiavellian views around about what might have been the motivation around that,” Mr Scott-Mackenzie said.
Mr Scott-Mackenzie was named chairman at Murchison this week as part of a management overhaul that also resulted in a new managing director, Greg Martin.
Mr Martin has significant big company and infrastructure experience from his days at AGL and Challenger Financial Services Group, and his appointment is clearly an effort to calm market concerns about Murchison’s acknowledged ability to fund its share of the billions required to build the port and magnetite operation.
It is notable, though, that the management change is not as dramatic as the fresh-faced pictures show. Founder Paul Kopejtka and Trevor Matthews still retain important roles in the company.
While Mr Scott-Mackenzie’s Machiavellian reference was in the context of Sinosteel’s sudden decision to shut down its $2 billion development just days before Murchison was due to receive feasibility studies on the Oakajee port and its related Jack Hills iron ore mine expansion, there has long been speculation about the behind the scenes power struggle over the vital Mid West infrastructure.
The rumour mill has swirled around the Oakajee port and rail project in particular, as concerns about cost and Murchison’s ability to fund it have played into the hands of those calling for a broader spread of investment.
As far back as January, WA Business News was informed by one leading player in the Mid West that the crunch time for Murchison would be June – that was before the state’s March 31 deadline for the receipt of a bankable feasibility study was extended until the end of this year.
It seems no-one but the government was prepared to wait that long.
The intrigue doesn’t get any better than that which purportedly pits two great Asian rivals against each other. In the case of Oakajee that is the Japanese – represented by Murchison’s partner Mitsubishi – and the Chinese, who are backing the two most critical projects to the success of the port. Apart from Sinosteel at Weld Range, Ansteel has partnered with Gindalbie Metals in the Karara magnetite project.
Both these projects are foundation partners in the port, providing the infrastructure with major customers from the outset.
Both are known to be upset about the supply chain agreements being negotiated, apparently complaining about the prices being demanded and whether they will be subsidising a rival mine, Jack Hills, which is owned by the existing Oakajee partners Murchison and Mitsubishi.
In the background to these commercial negotiations is control of the port, a key piece of infrastructure for any ore exporter.
There has long been talk the Chinese – and many will argue that the state-owned companies that invest in Western Australia act as one group – want to control the port, especially given their home is the ore’s destination.
This rivalry is enhanced by the role of the state government in the process. The Oakajee port project was awarded to the current consortium by the former state Labor government.
However, it was Liberal Premier Colin Barnett who proclaimed Oakajee as one of his government’s pet projects, highlighting the Mid West development and making its success ever more political.
As state development minister, Mr Barnett has taken a hands-on role with Oakajee, a very personal connection that makes the project even more of a target to those who wish to inflict damage on the state government.
Mr Barnett meets regularly with all the proponents, including Gindalbie chairman George Jones, regarded as a WA businessman with some of the best connections to China available.
It is hard to imagine that Mr Jones has not told the premier that the Chinese want part of this project, given they are the ultimate customer.
Indeed, Mr Barnett has suggested that an ultimate outcome is likely to be a restructuring to bring the Chinese into the project, now thought to cost more than $5.9 billion.
Murchison and Mitsubishi have not been slow to shore up their own political power.
The installation of John Langoulant as CEO of their joint venture, Oakajee Port & Rail, in January last year put one of the most connected individuals in the state as the face of the infrastructure business. Mr Langoulant is a former state under-treasurer and former CEO of the Chamber of Commerce and Industry WA.
The power of infrastructure to invoke Machiavellian comparisons is significant. Just ask any of the newcomers to the iron ore scene about the backroom challenges to getting started.
First it was Fortescue Metals Group challenging the might of multinationals Rio Tinto and BHP Billiton. Many credit the game of hardball played by the iron majors in dealing with customers as the prompt for the Chinese to develop the Mid West as an alternative source of supply.
The big companies have an army of advisers and in-house staff focused on lobbying for what they want.
It is not just the big guys who attract this kind of speculation. More recently, those following in FMG’s footsteps in the Pilbara have complained equally bitterly about the price it demands to use its rail or, in the latest case, its efforts to dictate the play at Anketell, site of another significant export port development.
Back in the Mid West, the state government’s involvement in the Oakajee port and requirements that infrastructure agreements are subject to regulation were meant to remove some of this distracting angst.
But each of the players is lobbying hard behind the scenes – a look at the names on state government’s Lobbyist Register really doesn’t convey the efforts that are going into the fight for this project. That is just the tip of the iceberg.
