07/12/2016 - 13:03

Power muscles against mining tax

07/12/2016 - 13:03

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A proposal to roughly double the royalties paid by the state’s two biggest iron ore miners was divisive and could set a dangerous precedent for fixing budget issues, Fortescue Metals Group chief executive Nev Power told this morning’s Business News Success & Leadership breakfast.

Power muscles against mining tax
Fortescue chief executive Nev Power spoke to an audience of more than 300 business people. Photo: Attila Csaszar.

A proposal to roughly double the royalties paid by the state’s two biggest iron ore miners was divisive and could set a dangerous precedent for fixing budget issues, Fortescue Metals Group chief executive Nev Power told this morning’s Business News Success & Leadership breakfast.

Despite the tax only applying to Fortescue’s major local competitors, Rio Tinto and BHP Billiton, Mr Power said he hoped it would not be introduced.

“I think the prospect of fixing budget issues by simply levying different parts of the economy is a very bad precedent to set,” Mr Power told the audience of more than 300 business people.

“At the moment it might be iron ore but (if) we say ‘oh well the wheat industry is doing really well let’s put a levy on them, or the banking industry, or hey, the newspaper sales are up, let's put a levy on the sale of newspapers’ it’s a dangerous precedent for that.

“We shouldn't just dive into industries that we see are doing ok and try to levy them.”

Mr Power said the contribution of iron ore to the economy was stronger than ever, pointing out that royalty payments were four times higher than 10 years ago, despite the price being at roughly the same level.

“I do think there’s a danger that politics becomes divisive and tries to separate parts of our community,” he said.

“Pitching, in particular, business against community or against people is very very divisive.

“That’s a sad day if we start to go down that track.”

Mr Power said it was important for business to understand that it must reflect the needs and views of the community, while the community needed to remember that business activity created the standard of living.

“Our politicians need to be brave enough to put plans in place; we are in a cyclical economy, we need to be diversifying that in WA,” he said.

“One of the keys to that is low cost energy, particularly gas, which will help develop the base in WA.”

Success story

Mr Power gave an insight into Fortescue’s culture and his own life, revealing a passion for flying he developed after growing up on a cattle station in north-west Queensland.

He owns a helicopter and also enjoys yoga.

“You wouldn’t know it to look at me but I do try and work out. I love yoga, (but) it’s not a pretty sight,” he said.

Culture was very important at Fortescue, Mr Power said.

“Our approach really goes to the underlying Fortescue culture, and that is about working out where we want to be, setting those stretch targets and then empowering, engaging and encouraging our people to come up with innovative ways to solve it,” he said.

“Rather than perhaps do the top-down approach, we set those goals and then people go and figure it out and work out how to get there.”

There was a strong focus to keep costs down, Mr Power said, with the 2012 debt refinancing vital in the company achieving its current balance sheet.

“It certainly got us very focused; when we did that refinance, we had four different options and we selected the best option for the organisation,” Mr Power told the forum.

“That was the combination of a lot of hard work, a lot of phone calls and a lot of shoe leather up and down Wall Street in particular to pull those deals together.”

Mr Power said he and Fortescue chairman and founder, Andrew Forrest, had complementary styles and were usually on the same page.

One benefit of having Mr Forrest as a one-third shareholder was that his long-term commitment to the company was clear and there would be no share price overhang, he said.

For the full wrap up, check out the December 19 edition of Business News.

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