Interview: U.S., Europe Debt Loads More Worrisome Than Chinese Slowdown – S. Australian Mining Official

Debbie Carlson

05 March 2012, 04:50 p.m.
By Debbie Carlson,
Global news editor, Kitco News
http://www.kitco.com/

Toronto (Kitco News)—China's growth slowdown does not concern South Australia but the high sovereign debt loads of the European Union and the U.S. are worrisome and could cause economic problems, an official with the South Australian government said Monday.

"The biggest threat to (economic) growth isn't in China, isn't in India, isn't in Asia, Australia or Canada, it's in the United States and Europe. And I think the new world, when I saw new world I'm talking about Asia, is probably going to be the powerhouse of the new economy. It has the population base, it has the demand … My view is, the southern hemisphere has the most economic life," said Honorable Tom Koutsantonis, minister for mineral resources and energy for the Government of South Australia.

Australia is a major supplier to China and India, the two growth powerhouses in Asia. Given that China's economy is expected to slow from the rapid pace seen in the past few years, there have been concerns that Australia may have been too dependent on its neighbor for trade.

The commodities boom has helped South Australia invest in mining in the state, and in the past several years has seen several new mining developments start. The relatively new mining industry means that many of its mines have lengthy life prospects. That's made it desirable to retirement funds looking for a long-term investment in stable investing environment, Koutsantonis said.

"Australia is one of the few western industrialized countries that has positive growth, very low debt to GDP, no sovereign risk, tier one assets, in a non-exotic location. You're not going to the Congo, you're not going to the far reaches of Russia or Pakistan to find natural resources," he said.

The biggest mining resources in the state are copper, uranium and iron ore. Taxes on mining, particularly taxes on "super profits" have been floated in the country. Australia is not the only country which has looked for new revenue streams from mining. Koutsantonis pointed out that as it currently stands, the "super profits" tax would not affect copper and uranium, but would impact iron ore.

FOCUS ON ENVIRONMENT

The South Australian government "believes passionately" in multiple uses of land, meaning that industries like farming and mining should be able to coexist in the same plot. Given that mining has had a history of environmental harm, Koutsantonis emphasized that the government said from the beginning firms wanting to mine in the state need to keep environmental conditions as part of their entire plan.

"South Australia … (produces) enough food to feed 60 million people a year. It's one of the largest industries in the state. We're not going to risk it for mining. What we are going to do is educate people that you can mine and grow wheat. You can mine and grow barley. You can mine and maintain the environment," he said.

With that in mind, firms need to have mine rehabilitation plans in place from the beginning. The term rehabilitation takes into account everything from replanting of native vegetation to engaging with the indigenous population. "We know what's going to happen at the very end…. It sounds like a risk, but it's really not. It's all about planning," he said.

Koutsantonis said the rehabilitation policy is attracting higher-quality investment, rather than companies that are shying away from details that will come into force perhaps decades from now. "We're finding it's attracting companies that want to be good corporate citizens. We're attracting the best and brightest to our state," he said.

All countries and companies will eventually need to do mine rehabilitation, said. "We're creating an industry from scratch that will become world leaders. We decided to be the leaders in environmental rehabilitation. We make no apology for it," he said.

SEEKING INVESTMENT

Like most countries, the Government of South Australia is trying to lure investments. Koutsantonis said his priority for 2012 is to promote the state's copper resources, along with oil and gas fields, now that the uranium investment has started to grow. He said he welcomes foreign investment, but had some sharp words for other countries who he said claim to be about free trade.

"The Canadian government has very strict rules about investment in Canada, but it expects free trade in Australia. I have no problem with Canadian companies investing in Australian resources; I'd like to know why the Canadian government has a problem with Australian company investing in Canadian resources. The idea that Rio Tinto and BHP can't have more than 49% share when (Canadian uranium company) Cameco is more than welcome to have a 100% share in uranium mine in Australia. That's not how friends treat each other….. We have a lot of Australian firms that want to invest in Canada. Why can't they have a majority share? What is the Canadian government afraid of? Private investment? That's not a bad thing," Koutsantonis said.

Editor’s Note: Click Here For More PDAC 2012 Coverage.


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