Get up and go and visit a mine
16 June 2010
Sean Russo
LAST week I had the pleasure to attend the official opening of the White Dam gold project in South Australia. It's a long time since I have actually been to a mine site ? too long.
At Noah’s Rule we spend our time helping people sell the end product: either in advance, in the form of hedging to underwrite project finance; or, securing the prevailing price for contained gold, copper, nickel etc; or, we are poring over spreadsheets in an arm wrestle with potential financiers trying to secure a project financing that’s most appropriate for the client. During that latter process I often have to remind people who are getting lost in the detail that the financial model is not a mine but simply an educated guess of the outcomes associated with a mine. Excel spreadsheets don’t flood, they aren’t subject to seismicity, etc, etc. My visit to White Dam was a timely reminder of that issue but more so reinforced for me that while the world could do without Excel spreadsheets (in fact I would argue in many ways we would be better off without them –but that’s for another column) it can’t do without mines and more Australians should get to one and just be impressed by what miners do!
White Dam is a dump leach project: blast, dig, truck, stack, chuck in a bit of lime, reticulate, pump, run the pregnant solution through some carbon and you get gold bars. Elegantly simple.
The grade isn’t high but the costs aren’t high. Listening to the shareholders on the bus doing the mine site tour you could hear in their questions and feel in their pleasure at seeing the mine in operation, a sense of shared pride in what their company had achieved and in particular an admiration for the restrained way in which the project had been developed and was being operated. As we calculated two ounces of gold (about the size of two 20c pieces) per ore truck leaving the pit we had nothing but admiration for the combined talents that can make a decent buck out of that.
If I do want those risks and the potential benefits I can become a shareholder and then as a shareholder, like my mate, I want to be adequately rewarded for sponsoring the risk and I don?t want the taxpayer part of me sponsoring that.
The pride of all those involved in developing and running this relatively modest operation was palpable. They spoke of the 20-year history since first discovery to the recent first pour and the nearly $A50 million that had been spent to that time. They spoke of workers who travel from as far afield as Queensland and WA to make it run. Subtle but important reminders of the long term commitment and risks associated with mining and just how many communities not just in our harsh interior but all around our coastal fringes, miles from the nearest mine, rely on those pay packets.
Our bus driver for the day, a Darryl Broughman lookalike with a similar sense of humour, commented he visited the mine twice a week in his other job as a truck driver bringing in supplies from Broken Hill. Important additional regular work for him in a town that is largely supported by tourism but is too hot for tourists five months of the year!
Then there was my mate the sheep cockie and his wife from the Riverina who I was surprised and delighted to see at the opening. Unbeknownst to me they are shareholders in one of the mine’s owners. After tough dry years on the land the potential for capital growth and dividends from a venture like White Dam adds diversity and security to their family’s future.
To be clear my reference to the mine being modest reports to demeanour more than size. This mine is modest in the way old-timers who founded towns like Broken Hill and Kalgoorlie were; understated and hardworking, taking nothing for granted but happy for the opportunity to make a living and carve out a better life in a tough but rewarding environment. If this mine is “super” profitable it will be because it is superbly run. I can imagine other mining companies I have known could kill a project like this with a big fancy plant, big management and all the trimmings. If the guys finally turning the sods here after all those years since discovery make super profits more power to them and why should they (or others like them) be singled out if they do, except for thanks?
I didn’t go to White Dam with a strong feeling about the RSPT and I didn’t intend to write about it. I oppose the RSPT not for what it is but because I believe all Australians, be they a miner, a farmer or whatever, should reject outright anything delivered to us by our elected servants on a take it or leave it basis. I had also been turned off by the tone of the rants of Twiggy and Clive, a little bemused at the irony given the primary source of their current wealth. But as we drove out from Broken Hill towards Adelaide and turned off to the mine, the horizon visible in all directions I simply thought who the hell would want to work out here. I thought how tough were those old-timers who came out here with everything they needed on a wheel barrow. I figured the emus at Taronga Zoo probably say a little prayer every night for their good fortune. I admired the tufts of green grass (or weeds) all around and then realised it was probably a dust bowl only months before and I admired the cockies who work sheep on the two properties that surround White Dam.
All of a sudden the words of that song by Woodie Guthrie that they made me sing, hand on heart, at cub scouts when I lived for a short time in the USA as a child came back to me. “This land is your land this land is our land, from California, to the New York Island, from the redwood forest, to the gulf stream waters, this land was made for you and me”.
Why that song, at that moment? Because Kevin Rudd has been telling me this land is my land, this land is your land, that we are entitled to its bounties. At that moment driving across that land on the way to the mine, I thought this flat scrubby (often too hot, sometimes too cold, occasionally too wet, all too often too dry) land and the bounty that comes from on it or under it is not the asset of this Australian. I don’t want to live there! I don’t want to work there! I am delighted others do and in doing so I am delighted they seek our services and advice which we can give them from the comforts of the city.
As an advisor to the company we earn from the presence of that mine but we don’t take the risks so our share of the spoils is modest. As a taxpayer I don’t want the risks associated with operating out there and being exposed to the vagaries of world markets. If I do want those risks and the potential benefits I can become a shareholder and then as a shareholder, like my mate, I want to be adequately rewarded for sponsoring the risk and I don’t want the taxpayer part of me sponsoring that.
I want equity in taxation across all industries but I don’t want someone saying they are going to tax miners or others because they say they are mining my land and I am entitled to it because “this land is my land, this land is your land”. Perhaps that’s the problem with America today where over 30% of the population are net takers from the tax system and social security system. Too many people who think they are entitled to the outcome of the labours of others.
I don’t feel I own the land or that I am entitled to the returns from it. Those who work on it, or provide the risk capital for it to be worked (where ever they come from) deserve the lion’s share and from what I saw at White Dam the mine already makes a significant contribution to a significant number of working families and their communities all around Australia. Eleven of those working families live in suburban Sydney and Perth and rely all or in part on the success of Noah’s Rule and that ongoing success will be directly correlated to the success of White Dam and mines like it.
It might have a short mine life but I think White Dam will outlive any government that thinks it is above consultation and preaches entitlement.