TIM Treadgold is correct when he states that Xstrata’s primary corporate goal is to improve shareholder returns (WA Business News, December 9 2004). This point was made clear to the Legislative Assembly’s economics and industry standing committee, which inquired into Xstrata’s dealings over its Windimurra vanadium mine.
As a member of that committee and the former exploration manager for Westralian Sands Limited (now Iluka Resources Ltd), I believe that transnational companies such as Xstrata pose significant threats to sovereign governments elected to make decisions for the long-term benefit of their citizens. Xstrata’s focus on shareholder returns is primarily short-term in nature, by which I mean five to 10 years.
In contrast, governments should (at least in theory) govern with longer-term goals in mind.
By definition, mineral exploration and resource development is a long-term activity.
While Mr Treadgold is correct that many initial mineral discoveries are made by prospectors or small explorers, the wealth generated by exploitation of those initial discoveries allows small explorers to become large miners, and then to invest much of their profits back into exploration.
Xstrata’s corporate plan is to maximise short-term shareholder returns, even if this means cutting the exploration budget to zero. Without a proportion of the wealth generated from mining going into this longer-term activity, our State and national interests will be disadvantaged due to the absence of expenditure from the exploitation of existing resource projects.
In time, if only junior explorers and prospectors are looking for new deposits, exploration expen-diture will fall.
At some time after this, companies like Xstrata will exhaust their purchased mineral assets and look elsewhere, principally overseas, leaving a diminished mining and exploration sector in Australia.
As a legislator, I could not support a requirement for resource developers to allocate a set proportion of their turnover to exploration.
However, as companies such as Xstrata maximise profit, I can see governments selectively increasing royalties and/or corporate taxation levels in exchange for which incentives such as flow-through share schemes are funded at no net cost to Australian taxpayers.
I urge your readers to examine our committee’s report into Xstrata’s Windimurra project.
In turn, I hope that the mining industry will publicly urge government to support our recommendations as they apply to transnational corporate entities such as Xstrata.
Independent MP for Vasse