MINERALS COUNCIL OF AUSTRALIA NT DIVISION

SUBMISSION TO THE GREEN PAPER ON DEVELOPING NORTHERN AUSTRALIA

The Development of Northern Australia

AUGUST 2014

TABLE OF CONTENTS

1.0Executive Summary …..………………………………………………………………2

Section A: Profile of Northern Australia

2.1 Major characteristics of Northern Australia………………………………………. 42.2 Most Important features of Northern Australia to its current and future growth………………………………………………………………………………… 42.3 Demographic Trends…………………………………………………………………42.4 Prospects and Risks for the Northern Australian economy ……………………. 5

Section B: Opportunities for Northern Australia

3.1Rise of Asia…………………………………………………………………………… 63.2 Prospects to expand Northern Australia’s minerals sector………………………63.3Indigenous Australian Participation…………………………………………………73.4Realising the opportunities provided by the region’s unique natural qualities… 7

Section C: Barriers to Development

4.1 Major barriers to further economic development in northern Australia…………84.2 Labour …………………………………………………………………………………84.3 Infrastructure Limitations ……………………………………………………………8

4.3.1 Roads and Rail……………………………………………………………..94.3.2 Energy ………………………………………………………………………94.3.3 Port…….…………………………………………………………………… 10

4.4 How effective is accessing and using land in Northern Australia ……………... 104.5 Water ………………………………………………………………………………….11

Section D: Policy Directions

5.1 Delivering Economic Infrastructure…………………………………………………125.2 Improving Land Use and Access…………………………………………………...125.3 Improving Water Access and Management ……………………………………... 145.4 Promoting trade and investment and strengthening the business environment………………………………………………………………………….. 145.5 Fostering education, research and innovation………………………………….... 155.6 Enhancing Governance…………………………………………………………….. 165.7 Opportunity at Risk………………………………………………………………….. 16

Submission

This submission to the Green Paper on Developing Northern Australia provides some background to the minerals industry in the Northern Territory (NT). It then addresses the specific themes of the Green Paper and finishes with the Northern Territory minerals industry high level policy priorities. The submission does not seek to assess all items in the scope of the Green Paper, but focuses on the important role that the mining industry will play in the Developing of the North and specifically the Northern Territory. The submission is made by the Minerals Council of Australia Northern Territory Division (MCA NT) with a particular focus on issues and recommendations as they relate to the minerals industry in the NT. It sits alongside the submissions made by the Minerals Council of Australia (MCA) to both the Parliamentary Inquiry and the Green Paper. We are pleased to make the following submission on the Developing Northern Australia – Green Paper.

The Minerals Council of Australia (MCA) is the peak industry association that represents the corporate minerals companies in Australia. The members of the MCA are engaged in mineral processing, mining, exploration, or the provision of services to the industry and account for more than 85 percent of mineral industry output in Australia. The MCA’s strategic objective is to advocate public policy and operational practice for a world-class industry that is safe, profitable, innovative, environmentally responsible and attuned to community needs and expectations.

The Northern Territory Division of the MCA represents the interests of members operating, exploring and providing services to the industry in the Northern Territory (NT). The minerals industry has a large and diverse presence across the NT which comprises of 20% Northern Territory’s gross state product and employs 4,400 people. The NT has mining operations for a range of mineral commodities including manganese, iron ore, lead, silver, zinc, gold, bauxite and uranium.

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1.0 Executive Summary

Enclosed is the Mineral’s Council of Australia, NT Division’s submission to the ‘Green Paper on Developing Northern Australia’. This introductory note provides an executive summary of the key issues that the Northern Territory minerals industry believes need to be addressed if mining and minerals processing is to be a key pillar in the future economic development of the Northern Territory. There is significant untapped potential for further mineral resource development in the NT. Further mining development could play a vital role in building sustainable regional communities, underpinning population growth, the boosting of incomes and improving standards of living, as much of this resource potential exists in the less developed areas of the NT.

However, the development of these resources, a number of which could be classified as world class from a purely geological perspective, is by no means assured. The overwhelming majority of these world class resources are in the hand of junior exploration companies. It is highly unlikely that these companies will be able to, raise the capital or bring the technical, operational and market penetration skills and capabilities to bear that will be necessary to develop these resources.

Investment from larger and more global industry leaders in the relevant commodities will most likely be the key lever in underpinning the future development of these resources. However, capital for mining and minerals processing projects is mobile and these global players have a number of growth options across the world. Accordingly, greenfield mining projects in the north of Australia must be seen as globally competitive, by global companies in order to attract the capital investment necessary to underpin development. This is also true for operational mines where low cost operations have been the foundation of North Australia’s competitive position. Lower costs deliver higher returns under any circumstances but when future prices and margins are uncertain, as they are today, cost competitiveness is crucial to attract investment. The current operating mines also have to balance divergent stakeholder demands regarding the dilemma of how to best allocate capital and whether to undertaken expansion plans in the Northern Territory or to look elsewhere.

As previously indicated, in some cases, we have natural advantages in terms of the geology and the quality of the resources in commodities such as phosphate, manganese, gold, uranium, potash bauxite, zinc, lead and iron ore. However it should be noted that the NT does not have or has not yet been able to develop large mineral provinces such as the Pilbara in Iron ore or the Bowen Basin or Hunter Valley in coal. The historical investment in mineral provinces such as these more readily enables both greenfield and brownfield investment by leveraging off exiting infrastructure backbones that were created a number of decades ago. The NT is at the beginning of this evolutionary journey in many respects.

Furthermore, in the context of advantage, Australia is a stable, OECD country where investment risk is considered low by global standards, albeit perhaps not as low as it was perceived to be prior to the introduction of the minerals resource rent tax.

However, our natural and perceived political advantages may not be enough to ensure continued capital investment in greenfield mining and minerals processing projects. In the remote areas of the north and central Australia, greenfield development is the only option to create and grow this industry, but it is also where our competitive disadvantages are amplified.

There are six broad areas where barriers to future investment have manifested such that projects are seen globally as uncompetitive but also represent the areas where the right changes to policy direction could have significant positive impact.

Costs and productivity of labour – Australia has not always had higher labour costs than its OECD competitors but in recent years this has and remains the case. Moreover, the productivity of that high cost labour has declined. Industrial relation reform cannot be ignored.

Infrastructure – Remote areas of northern Australia lack transport infrastructure and the infrastructure that does exist is sub scale, inefficient such as the Port of Darwin’s capability to handle bulk commodities and provided at monopoly prices such as the Central Australian Railway line. Therefore, to enable global competitiveness, infrastructure needs to be put in place but the cost of utilising that infrastructure needs to be competitive.

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Energy –As has always been the case in Australia’s economic development, some of our competitive disadvantages have been compensated by access to cheap energy. Its hard to imagine that access to competitively priced domestic energy in the form of gas and electricity won’t be an enabler of future economic development.

Access to land – Access to land to conduct economic development and activities in the NT and the processes prescribed under the Aboriginal Land Rights Act and the Native Title Act is costly, time consuming and lacks transparency resulting in inefficient and non-value adding activity for mining companies, consultants, government and Land Councils that deliver less than optimal results for Aboriginal people. Moreover, this is a major barrier to attracting development capital to the NT. If there is general agreement that economic development is necessary to reduce dependence on welfare, lift education, health and living standards for indigenous Australians then the relevant legislation, policies and behaviours of the key stakeholders will need to be addressed.

Regulation and approvals – The current regulatory and approvals frameworks are time consuming, costly and generally fail to reflect alignment to actual impacts and risks against the economic opportunity.

Taxation – Australia has evolved to be one of the highest taxing economies on mining and minerals processing in the OECD. The combination of taxes, royalties, including the many deadweight state based taxes such as stamp duty, payroll taxes and industry levies, native title payments etc, all combine to make Australia a costly place to do business and create a disincentive to investment.

In conclusion, there is continued demand growth in minerals commodities across the world driven primarily by continued economic development and urbanisation. Global investment in large scale mining and minerals processing projects is continuing primarily in South America, certain areas of Africa and even in some of our OECD competitors such as the US and Canada. It is clear that mining and minerals processing investment in Australia will be low in forthcoming years. Therefore, the threshold issue that needs to be addressed through the ‘Developing Northern Australia’ white paper process, is how do we make our investment potential, regardless of whether it is mining, energy, agriculture or tourism, globally competitive such that Australia becomes, as it once was, a natural choice for global capital.

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Section A: Profile of Northern Australia

2.1 Major characteristics of Northern Australia

The Minerals Council of Australia NT Division (MCA NT) agrees with the major characteristics of Northern Australia outlined in the Green Paper, including the vast mineral and energy wealth and its related natural advantages. MCA NT recognises that the North is already growing with potential for further economic growth. Australia has benefited from the resources boom and the minerals industry has been a major contributor to Australia’s economic success. Northern Australia’s other major characteristics include rich cultures, unique landscapes and biodiversity, modern and growing cities, important agricultural developments and tourist destinations.

2.2 Most Important features of Northern Australia to its current and future growth

As the Green Paper acknowledges, the resources and energy sector is a major contributor to Northern Australia. The minerals industry currently has a large and diverse presence and it is the economic centre of many regional and remote communities. The minerals industry will continue to be important to future development as it drives infrastructure investment, wealth creation and employment.

The majority of Northern Australia’s resources are exported to Asia, particularly China, Japan, Indonesia and South Korea. This places Northern Australia in an important position for future growth and as the Green Paper acknowledges there is a large pipeline of new mining ventures throughout the region. The Northern Territory has mining operations for a range of mineral commodities including manganese, iron ore, lead, silver, zinc, gold, bauxite and uranium. Northern Australia also remains highly prospective with all of Australia’s known manganese ore and diamonds along with almost all of Australia’s phosphate rock. Over 70 per cent of Australia’s known resources of iron ore, lead and zinc, as well as significant deposits of silver, bauxite, tungsten and molybdenum are found in Northern Australia.

The minerals industry growth has delivered real economic and social dividends for communities in Northern Australia. The NT community receives a very large return in government revenues from the minerals industry with mining royalties projected to collect 19% of the Northern Territory’s own source revenue in 2013-14. The industry also plays an important role in building sustainable communities by stimulating residential population growth, boosting incomes and investing in regional and remote areas, including in community infrastructure and services, education and training and local contracting. Therefore future growth for Northern Australia will certainly develop from the minerals industry if the right policy settings are in place.

2.3 Demographic Trends

Improving human capital and building local capacity are key challenges for Northern Australia to reach its full potential. It is essential that Indigenous Australians are active participants in Northern Australia’s development, especially as an estimated 50 per cent of the population of Northern Australia will be Indigenous by 2040. The Northern Territory mining industry is heavily involved in Indigenous training and employment, with most operational sites having approximately 15% Indigenous employment. The mining industry is also the biggest private sector employer of Indigenous Australians.

The Northern Territory also has a relatively young population when compared with the rest of the country. The mining industry is seen as an attractive option for young Australians due to the many entry pathways into the industry and the good careers on offer through trades, apprenticeships and university degrees. The mining industry also spends 5.5 per cent of payroll expenditure on training which is much higher than comparable industries.

The Northern Territory has one of the lowest unemployment rates in the country. Other mining jurisdictions in Northern Australia have has seen a decline in mining related employment reflecting

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the transition from the construction phase of the mining boom to the less labour intensive production phase. The Northern Territory has bucked this trend with investment activity forecast to increase by seven per cent in 2014-15. This reflects the expansion of the BHP Billiton Groote Eylandt Mining Company (GEMCO) mine at Groote Eylandt and the Glencore mine at McArthur River and the development of the construction phase of the INPEX Ichthys LNG project. The strength of the mining sector has also supported growth in related services such as construction and transport.

2.4 Prospects and Risks for the Northern Australian economy

With the right policy settings, there is significant untapped potential for further minerals resource development, not least because of Northern Australia’s proximity to emerging Asian economies. The MCA NT considers that strategies for the development of Northern Australia should focus on core foundations for growth in areas such as tax, trade and investment, energy policy, infrastructure, skills development and government service delivery. This means ensuring the citizens of Northern Australia share in opportunities comparable to those of Australians elsewhere.

The Green Paper discusses that further opportunities for northern Australia rest with greater diversification of the economy, which is dominated by the resources and energy sector. There are many towns in Northern Territory which are heavily dependent on mining and with the recent impact of the closure of a minerals refinery in Nhulunbuy State Governments need to work in partnership with the minerals industry to support the sustainable economic development of other industries in these regional areas. It should be noted that the northern economy will remain reliant on its natural resources, but further diversification into new industries, along with growth in current industries such as agriculture, tourism and international education, is both possible and desirable.

The barriers and major risks around developing the North include infrastructure, energy supply, water, and land access. The limited infrastructure increases the costs of doing business and the perceptions around lack of infrastructure act as a deterrent for investment. The Aboriginal Land Rights Act (NT) 1976 Part IV also needs streamlining without diminishing Indigenous rights to prevent it acting as a barrier to investment.

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Section B: Opportunities for Northern Australia

3.1Rise of Asia

The expanding middle class in Asia is creating new global markets and unprecedented growth in demand for goods and services. Northern Australia is well positioned to take advantage of these trends and support the world’s emerging minerals needs by drawing on its rich and diverse resources. The minerals industry has well established links into Asian markets and this underlines the benefits to be derived from open trade and investment strategies. These links help improve the living standards of all Australians.

To continue to benefit from the rise of Asia a comprehensive and consistent approach to trade liberalisation through multilateral, regional and bilateral forums needs to be continued. It is also important that Australia remains open to foreign investment if Northern Australia is to secure large scale investments in capital intensive minerals projects. In addition, governments need to resist protectionist pressures. A whole of government approach to reduce unnecessary regulatory impediments to cross border business activity, investment and skilled labour migration is needed in order to remain consistent with the Australian Government’s and Northern Territory Government’s message that Australia is “open for business”.

3.2 Prospects to expand Northern Australia’s minerals sector

With the right policy settings, there is significant untapped potential for further minerals resource development, not least because of Northern Australia’s proximity to emerging Asian economies. As at October 2013, the Bureau of Resources and Energy Economics estimates that almost $32 billion worth of minerals projects are currently under construction or committed in Northern Australia. The value of minerals projects at the publicly announced or feasibility stage in Northern Australia is estimated at between $117 billion and $133 billion.

Northern Australia also remains highly prospective. Around 43 per cent of Northern Australia is considered prospective for minerals and almost half of Australia’s mineral projects at an exploration stage are located in Northern Australia. The Northern Territory is awash with junior explorers and there are some world class deposits, with current exploration for bauxite, copper, diamonds, gold, iron ore, manganese, nickel, phosphate and potash, rare earth elements, salt, tin, tungsten, molybdenum, vanadium, uranium, zinc, lead and silver.

In the Northern Territory a strong minerals sector means a strong Territory economy and there are many examples where expanding the minerals sector will lead to growth of new industries in the North. For example, a multi-billion dollar fertiliser industry that could help grow Australia's agriculture sector through the Northern Territory’s phosphate and potash minerals. The development of a major Australian based fertiliser industry would reduce the nation's reliance on 'unstable' supply chains in the Middle East and most of the ingredients are here in the Northern Territory.

Yet the realisation of this potential is far from assured, especially given the deterioration in Australia’s cost competitiveness over recent years. Policy and regulatory settings and the urgency with which policy makers tackle our structural competitiveness problem will determine the scale, duration and location of future resource development. A particular challenge identified by the MCA NT is the need for Australia to be ‘hungrier’ in bringing on projects of all sizes, including small and medium-sized mining projects, a challenge with particular relevance to a Northern Australia development strategy.

The MCA NT considers that strategies for the development of Northern Australia should focus on core foundations for growth in areas such as tax, trade and investment, energy policy, infrastructure, skills development and government service delivery and on ensuring the citizens of Northern Australia share in opportunities comparable to those of Australians elsewhere.

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3.3 Indigenous Australians Participation

Northern Australia’s Indigenous population has a vital role in the region’s long term development. The North cannot achieve its full potential unless Indigenous communities and individuals are able to pursue economic development and employment opportunities including through leveraging cultural, intellectual and land assets. It is very important that measures of support are in place for indigenous participation in the mainstream economy. This includes housing policy for people in public housing to transition to a market based rent and to enable people to temporarily relocate for work and maintain cultural connection.

In the development of Northern Australia for Indigenous economic development there should be a medium to long term strategy requiring brokering of contractual opportunities across regions for enterprise development. However in the near term, the focus should be on building the literacy and numeracy skills and work readiness skills of individuals. The mining industry has a traditional strength in providing Indigenous Australians with training. Improving the skills base in the North helps attract investment and assists industries and businesses to diversify and respond to external economic shocks. It also ensures the North has the skills and capabilities required to realise the opportunities presented by a growing population.

Another possible strategy would be to maximise the long term investment of royalty monies and the potential for providing sustainable and intergenerational benefits to Indigenous communities through taxation incentives and legislative arrangements. This could include establishing entities such as the proposed Indigenous Community Development Corporation (ICDC).The ICDC, a new category of entity for tax purposes as an opt in structure for the management of payments and benefits, would allow greater accumulation of funds from multiple sources for the development of more lasting economic opportunities in remote locations.

3.4 Realising the opportunities provided by the region’s unique natural qualities

The success of Northern Australia’s economy has been tied to the mining and energy sector, which has delivered major benefits, both to the region and to Australia more generally. Northern Australia needs to improve its exploration and conversion of this exploration into mining operations if Northern Australia is to secure its share of future resource development. The Productivity Commission has highlighted rising costs, lower productivity and a long list of unnecessary regulatory burdens as impeding exploration activity in Australia.

Public investment in pre competitive geoscience information is made in recognition of the significant contribution of exploration to the future development of Australia’s resource sector. Pre competitive geoscience information reduces the technical risk of exploration by assisting explorers in the assessment of minerals potential and selection of target areas and is critical to successful and cost effective exploration. World leading exploration geoscience has been a key competitive advantage of Australia’s exploration sector. A renewed national commitment to advance the next generation of exploration geoscience as part of a long term vision for exploration geoscience in Australia is required to keep pace with competitors and emerging mining regions emulating Australia’s success in the field.

Along with public investment in pre competitive geoscience, infrastructure studies are required to select and fund some generation changing infrastructure projects to develop the North and its natural resources.

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Section C: Barriers to Development

4.1 Major barriers to further economic development in Northern Australia

MCA NT agrees with the barriers and major risks around developing the North mentioned in the Green Paper. These include infrastructure, energy supply, land access, high business costs, remoteness and liveability. All these factors affect whether the mining industry will be economically viable in the future of Northern Australia. The volatility in the market has seen access to capital and its allocation become one of the largest risks the mining industry faces. For the larger operational mines and their companies the dilemma is how to best allocate capital and all these mentioned barriers make Northern Territory a less attractive place to do business. For the junior mining companies it is the risk of not having access to sufficient working capital to stay solvent or turn their exploration into a mining operation. All these barriers mentioned above make it more difficult for the juniors to attract international investment to develop their projects.

4.2 Labour

The mining industry’s demand for skilled labour will remain high as the industry transitions from the construction phase of the Millennium Mining Boom to increased production. The Australian Workforce and Productivity Agency’s Resources Sector Skills Needs report of 2013 found that the minerals industry will need around 18,000 more skilled workers through to 2018.

In general, mining companies have a preference for hiring locally as it is more cost effective. However, skilled labour needs cannot always be met by local workforces, particularly in some regional and remote locations. Labour mobility through Fly-in Fly-out (FIFO), Drive-in Drive-out (DIDO) employment and skilled migration has been critical in enabling the Australian minerals sector to seize the opportunities of higher global demand for minerals over the past decade.

Some of the main factors which attract people to the Northern Territory which are already highlighted in the Green Paper include lifestyle choice and employment opportunities. As already mentioned in the Green Paper the MCA NT agrees other possible factors that deter people from working in Northern Australia are social infrastructure and cost of living affordability. The current share of FIFO/DIDO workers in mining is due to a number of factors including skills shortages, the availability and cost of accommodation in some local communities and the desire of many mine personnel and their families to live in their home communities.

Another barrier to development is the input costs such as labour costs in the mining industry which has grown rapidly since the mid 2000’s. The cost increases without accompanying productivity growth undermine Northern Territory’s capacity to take full advantage of a period of sustained growth in demand for mineral commodities. The recognition that productivity growth (and thus improved living standards) rests on the quality of the direct relationship between the employer and the employee and the effectiveness of that direct engagement in determining terms and conditions of employment to the mutual benefit of all parties.

4.3 Infrastructure Limitations

Infrastructure in Northern Australia is often identified as the main barrier to minerals industry growth across the North. A lack of appropriate public infrastructure flows through to the broader economy and society. For example, inadequate or inefficient roads, railway networks and ports increase the cost of doing business and can limit the development of export supply chains. A lack of productive public infrastructure can also make it difficult to attract and retain workers and their families. Even where public infrastructure is available, its durability can be a concern. The competition for public infrastructure funding nationally and the smaller population size in the Northern Territory can make it harder to build a case for Federal Government infrastructure spending in the NT. Many plans and strategies for long term growth, at both industry and community levels are predicated on overcoming these limitations. The Federal Government has a role to play in public, common user and shared infrastructure. It has the incentive to invest ‘patient capital’ to stimulate economic development as it

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comes from a combination of factors not just the infrastructure itself but increased taxes and royalty revenues and social benefits. Infrastructure can induce other investment, but the case must be built on clear accumulated social and commercial drivers.

Leveraging private investment is also key to economic infrastructure challenge. MCA NT maintains that private investment can and should pay or make a contribution, where there is a commercial case and this is to be encouraged in the first instance. Governments have a crucial responsibility to nurture an open, transparent and competitive environment in which the market can operate and private property is respected. Below are the infrastructure limitations that are holding back the development of the Northern Territory from the Northern Territory minerals industry point of view.

4.3.1 Roads and Rail

The NT mining industry and communities in North Australia rely on the road network, with few alternative routes. The Northern Territory has only five major sealed roads outside Darwin, with other roads constructed for dry season conditions and closed or subject to tighter weight restrictions during the wet season, reducing access for local producers. The NT needs a backbone of infrastructure to make the sector efficient and competitive, and the industry will seek to spur off this backbone. It’s the efficiency of existing infrastructure and the creation of new infrastructure that will enable economic development in the Northern Territory.

For example the sealing of the Tanami Highway has long been an important issue to maximise the economic and community benefits for the Northern Territory. Essentially it would promote reliable access to mining operations, while providing agricultural benefits through lower transportation costs, providing a tourism route and helping with community business development such as the Yuendumu Art Centre. This is the only NT project currently on Infrastructures Australia’s national priority list - it is at Stage 3 where it is ready to be funded, however it still has not progressed.

The Northern Territory has one major North-South railway, however with over-priced rail user charges the NT junior exploration companies find it difficult to attract international capital. When you have mines in the Roper Bar Region hauling ore in quads and triple road trains to the port instead of the railway it says something about the capacity and cost of the rail. The railway should have been sold subject to a regulatory regime as infrastructure regulation prevents owners of infrastructure from extracting unreasonable returns from producers. It is currently acting as an expensive private monopoly.

Unreasonable user charges damage the cost competitiveness of projects, discouraging investment and terminating opportunities for the Northern Territory. Optimising infrastructure requires deliberate action to improve the alignment between asset owners and users. This requires policy intervention since unlike users, asset owners are not fully incentivised to optimised infrastructure. Comparisons of the value of a lost tonne to different parties make this clear. A lost tonne may cost rail operators very little or even nothing, by comparison producers lose the marginal contribution on every missed tonne. Government regulation of commercial infrastructure should only be used where it is demonstrated the most economically efficient way of addressing identified market failure and/or achieving a specific social objective. Market failure is not the same as a project not being commercially viable; it relates to the inability of buyers and sellers to interact successfully. For the development of the NT the pricing and access regime for the railway needs to be addressed to best align owner and user interests to optimise infrastructure investment.

4.3.2 Energy

The lack of reliable, affordable energy is another infrastructure barrier to the expansion of the mining industry in the North. The Northern Territory is not connected to eastern Australia’s national electricity market grid and has a separate energy network. Competitively priced energy is a key issue for resource projects. Without significant new investment, inadequate energy supply and cost will become a major capacity constraint to the growth of the Northern economy. With high energy costs, expensive labour, taxation and regulation, companies will go elsewhere without serious consideration into

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developing cheaper energy options in the North. There is the need to provide an environment that encourages spending on new investment in energy that is priced competitively. The building of new gas pipelines whether through public or private funds can assist in meeting the energy needs of communities whilst also supporting economic development e.g. mines. Mechanisms that drive up the cost of energy, such as the Renewable Energy Target, should be removed.

Another possibility for energy security and lower cost is having some energy storage facility in some strategic regions that would decrease the reliance on fuels such as diesel. For example Compressed Natural Gas (CNG) storage which could be transported to mine sites by road and replace diesel in the generation sets. Local communities could also assess the opportunity of converting their power and energy sources through CNG. The energy storage facility scheme would need to be assessed by Federal/State Government to determine the social and community benefits but the cheap energy would open up opportunities for Northern Territory development.

It was notable that the developing Northern Australia Green Paper has not mentioned uranium or considered nuclear as possible energy solution in Northern Australia. The Northern Territory has a long and continuous history of uranium mining since 1950’s and there are numerous opportunities for new discoveries of uranium. The White Paper should remove artificial barriers to the consideration of proven energy sources, including nuclear power.

4.3.3 Port

The Darwin Port is currently a barrier to development as it acting inefficiently for the export of minerals. At the Darwin Port it takes two thirds of a day to unload a train, because there’s no rail loop and the yard is 600 metres from the ship loader. The Federal and Territory Government should invest in improving the capabilities and competitiveness of existing infrastructure at the port. By adding small, incremental investments such as a rail loop, conveyor systems and bulk minerals loaders it will make a large difference to the capacity of the port and add significant value.

4.4 How effective is accessing and using land in Northern Australia?

Many stakeholders agree that land in Northern Territory is not being used effectively. Restrictive land tenure arrangements can drive up business costs and increase project risks, stifle innovation and deter potential investment. The Northern Territory minerals industry believes that a more efficient and effective land tenure scheme is required to attract investment and develop Northern Australia. In the Northern Territory the processes under Part IV of Aboriginal Land Rights Act (NT) 1976 (ALRA) are a significant burden in compliance for the exploration of minerals. MCA NT recommends that the Federal Government needs to review operation and efficiency of ALRA in total, not just part IV of ALRA.

The Northern Territory competes globally for investment into mineral exploration and mining projects and the confusing and duplicative processes which are unique to the Northern Territory under ALRA make it harder to attract this capital to the Northern Territory. There have been few mining projects, if any, that have gone through the full process under Part IV of ALRA, including delivery of a statement under section 46 ALRA and then ultimately the grant of a Mineral Lease following an agreement pursuant to section 46 of ALRA. This is a testament to the strictures of the processes under the Land Rights Act given that ALRA land makes up nearly 50% of the land mass of the Northern Territory.

The ability to access Aboriginal land for the purposes of minerals exploration (and potentially subsequent mining) remains:

Procedurally inefficient and lacks transparency – It would be more beneficial to have direct relationships with Traditional Owners rather than having everything done through the Land Council. MCA NT also recognises Traditional Owners rights to representation through Land Council if they should choose so. There needs to be transparency, around who has the right to speak for what country.

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Materially out of step with industry obtaining the grant of exploration tenure on non- Aboriginal land (for example, the timing for obtaining the grant of an exploration licence under the expedited procedure set out in the Native Title Act (Cth) is generally within 3 months compared to what has been reported to be an average of around 2 to 3 years on Aboriginal land). This is an extra hurdle for exploration but can simplify process in relation to mining if the exploration is successful.

Economically inefficient, as the significant costs and time of obtaining an ALRA agreement are at the expense of in-ground minerals exploration and are, in the case of the costs, typically directed to paying advisors of Aboriginal people, not to Aboriginal people themselves.

Relatively expensive compared to accessing pastoral lease land for exploration, with a typical ALRA agreement costing in the region of $100,000 to $300,000 (and sometimes considerably more) in respect to legal fees, consultant fees, meeting fees, anthropology fees and other costs and management time.

4.5 Water

Water is integral to development in Northern Australia. Improving access to reliable water supplies and better managing water resources are essential for the continued growth of agriculture, energy, minerals industries and all regional communities. Water availability and security of supply is a critical business risk for the minerals industry which generates a very high economic value-add from water use. Mining and minerals processing cannot occur without secure access to reliable water supplies. The minerals industry face a wide variety of water management challenges including variable and limited water supply, use and treatment of poor quality water, mine dewatering and the management of excess water. In regards to water infrastructure the minerals industry often install, operate and maintain the infrastructure necessary for their water supply. In some circumstances the water infrastructure provided and maintained by industry is shared with other stakeholders, including neighbouring communities, farmers and pastoralists.

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Section D: Policy Directions The MCA NT supports the six policy directions to develop the North highlighted in the Green Paper. The actions needed to drive development in the North coalesce around these six major themes, with industries including mining all standing to benefit. All Governments need to act to work together, along with the private and community sectors, to implement practical plans with timeframes to achieve this vision. The opportunities in Northern Australia are best maximised through private sector investment and ingenuity. However this does not remove Governments from the equation, but their main role is to put the right regulatory and policy settings in place to allow business to do what it does best — create jobs and wealth. The government also has a role to play in attracting this private investment and also investing itself in export infrastructure such as ports, railways and roads.

5.1 Delivering Economic Infrastructure

The NT mining industry has made significant contributions to the NT economy and while Western Australia has Royalties for the Regions the Northern Territory mining industry has not seen much in return to assist the industry in ongoing investment. There is an opportunity for the Government to reinvest some of the royalties into the NT regional and remote areas through infrastructure to grow the NT economy. To determine how to do this integrated infrastructure planning is needed to enable productive investment and to improve economic, social and environmental outcomes.

Conducting a comprehensive audit of Northern Australia’s ‘infrastructure gaps’, encompassing those vital to commercial investment (e.g. transport corridors, water storage and energy supplies) as well as services such as health and education is the first step. Both the Federal and Territory Governments have infrastructure reviews currently ongoing such as the National Infrastructure Audit and the Northern Australia Infrastructure Audit at the Federal Government level and then the separate Northern Territory Government Regional Infrastructure Study. These gaps analyses and the prioritisation process will determine the infrastructure that will unlock other projects and leverage opportunities, delivering the greatest economic and social benefits to the Northern Territory.

The MCA NT has been heavily involved and is very supportive of these infrastructure audits. They represent positive baseline data needed to make a business case for investment. This investment can come from Australian Government via Infrastructure Australia, private sector or the community sector, such as the Aboriginal Benefits Account (ABA). For example the 50kms of road on Groote Eylandt that was funded from ABA funds has been a great success. The planning and prioritising projects and identifying effective ways to fund and finance them will be crucial to ensuring further productivity growth in the North. With the provision of incentives private investment can and should be the most substantial source of funding for commercial infrastructure. Governments nonetheless have a crucial responsibility to nurture an open, transparent and competitive environment in which the market can operate.

5.2 Improving Land Use and Access

Indigenous communities in Northern Australia should be able to use their land for further economic development. This means making better use of existing ways, or exploring new options, for land holdings to support business opportunities and more jobs. There should be support of Indigenous economic development and wealth creation through mechanisms such as the Indigenous Community Development Corporation (ICDC). Also more efficient native title processes could improve business certainty and benefit Indigenous and non-Indigenous people. Implementing such reforms especially in the Northern Territory is a priority as with less complexity and lower costs for business, local and overseas investors will see the Northern Territory as a more attractive place to do business. Proposed solutions for the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA) include Reviewing outcomes of the Justice Mansfield Review of Part IV of the Aboriginal Land Rights (Northern Territory) Act 1976 and more of the delegation of functions and powers under Part IV of ALRA prescribed to the Northern Territory Government and NT Mines and Energy Minister.

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Other proposed solutions to improving Indigenous land use and access in the NT include:

Removing inefficiencies which result from up to four levels of approvals being required (traditional owner, Land Council, NT Government and Federal Government, with each of these often having their own internal layers of approval) and the implications this has for timely outcomes in a capital constrained environment, particularly when these are run consecutively rather than concurrently.

Consideration of veto rights which lead to extremely convoluted conjunctive minerals exploration agreements that are expensive & often questionable whether they are consistent with s44A(1) ALRA that must not include terms providing for compensation based on mineral value.

Consideration of Section 46 ALRA which is out of step with current environmental regulatory regimes and practice & is unworkable in some respects. It is impractical to give a s46 statement including environmental information to a level that would be expected in an Environmental Impact Statement (EIS). Completing an EIS is a lengthy & expensive process & there are various imperatives that require mining titles are obtained before that stage is reached.

Removing the requirement of a full land council vote on all proposed projects which is seen as cumbersome and impractical by both Land Councils and Resource Companies.

Consideration of the representative function of the Land Councils in negotiating leases and access agreements could be changed under effective governance conditions to more fully empower Traditional Owners or their chosen representatives. The need for further consideration to be given to the contemporary roles and resourcing of Land Councils, this in relation to negotiating leases and access arrangements, and in the context of maximising socio-economic outcomes for Aboriginal people given the enhanced capacity of traditional owners to lead their own negotiations.

The need to reconsider the arrangements for negotiating and parties to an agreement, including the option for traditional owners to take on direct agreements with the companies, where this can be demonstrated as having good governance, economic development objectives and transparent administration (e.g. via charitable trusts or the proposed Indigenous Community Development Corporation). If this is not possible the Land Councils should take on a Coordinator General role to facilitate in this process.

Consideration that exploration agreements should be standard and uniform across all ALRA lands. This would not include mining agreements negotiated upon the discovery and development of a commercial project, which would obviously be negotiated on a case by case basis.

Consideration of amendments to create greater transparency at s42 meetings, with minimal government supervision of the consultation/meeting process.

Reconsideration of whether it is necessary to specify details of commodities sought and potential of mining and recovery when applying for consent via the Land Councils, this given the complexity in accurately specifying these ahead of exploration.

The need for governance capacity building – there is a need to sufficiently resource Indigenous parties to both understand and undertake their roles in the ALRA process.

Improving land use should also include public investment in pre competitive geoscience information. A renewed national commitment to advance the next generation of exploration geoscience as part of a long term vision for developing the North is critical to successful and cost effective minerals exploration and land use.

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5.3 Improving Water Access and Management

The Government can support industry and Northern Australian communities by creating a reliable and consistent data set of accessible water. Once the resources are well understood and the best opportunities to expand storage capacity have been identified, consideration should turn to planning and funding water infrastructure. All water planning and management decisions should be based on sound science and stakeholder engagement, be transparent and have agreed and reasonable timeframes for review. Industrial users should be included in water resource planning to provide opportunities for maximising economic, social and environmental outcomes. When improving water access the cultural and environmental water flows should be quantified and secured prior to determining the quantity available for consumptive use.

In regards to regulatory measures consideration should be given to amendments to the Water Act to further incentivise high value water use and the further maturation of water markets. The Government should also make clear the water access pathway for new market entrants and allow water to flow to its greatest economic use.

5.4 Promoting trade and investment and strengthening the business environment

The Federal Government is implementing a national deregulation agenda to improve the business environment across Australia, including Northern Australia. The minerals industry supports the Federal Government’s step in removing unnecessary impediments to growth such as the carbon tax and the mining tax (both of which impact heavily on Northern Australia) as a near-term priority. The MCA also supports the Federal Governments removal of unnecessary regulatory impediments to investment and production, including through a ‘one stop shop’ for environmental approvals. Removal of these impediments will have particular benefits for Northern Australia by improving certainty around major project developments.

To create a mechanism for the Northern Territory Government to be strategic in its minerals development the MCA NT proposes that a NT Minerals Ministerial Advisory Council be formed. This is more imperative now than ever given the focus on Northern Australia development with strategic investment throughout rural and regional areas of Northern Territory. The Ministerial Advisory Council’s aim is to be a strategic advisory collective between industry and State Government. With the Advisory Council Terms of Reference including to advise on the regulatory environment, its improvement and appropriate strategies to encourage exploration investment and support the transition of these projects to operations. MCA NT sees this proposal as a must to open up strategic sustainable economic development of the NT.

Mining approvals are multi step processes requiring proponents to interact with numerous departments and authorities across all levels of Government. There is obvious potential for needless delays stemming from process duplication, unclear requirements and under resourced departments. Three types of approvals reform are need for Northern Australia and specifically the Northern Territory to unlock minerals economic development.

Introducing clear and predictable requirements and timeframes for all approvals and managing planning department performance. The standards, requirements and technical studies required for approval should be made clear from the outset of the process. Clear timeframe’s should be established for processing and statutory limits considered. Planning department performance should be measured and managed for improvement. This may require increases to departmental resources.

Managing approvals through a single point of contact responsible for progress against clear timeframes and benchmarks. This is needed in the Northern Territory to decrease the overall perception of increased risk. Current multilevel approvals systems will not function smoothly without deliberate coordination effort. A good model to use is that of South Australia’s lead agency model for the assessment of significant projects. Under the South Australian model, project proponents are allocated a case manager who coordinates all development, environmental and licensing approvals processes with a view to delivering projects with

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‘minimum risk in minimum time’. South Australia targets six months for mineral lease approvals for major mines, well below national bench mark of two years.

Eliminating needless process duplication. To accelerate decision making, duplication between State and Federal processes should be removed. This includes accrediting State environmental approvals as equivalent to the Federal approvals under the Environment EPBC Act.

As mentioned in the Green Paper economic development in the North will be driven by the private sector, including domestic and foreign investment. The Government has mentioned that it is committed to work with business, industry, and major trading partners to establish a business environment that is conducive to growth; this includes through special economic taxation zones. The benefits of economic zones can include increased foreign investment, employment opportunities, foreign exchange earnings and growth in exports, as well as expanded government revenue. This is a proposal worth exploring and also there may be areas where the tax system unnecessarily impedes the development of the North, to the detriment of the broader national interest, if so these should be examined.

The MCA NT also encourages stable and competitive taxation arrangements, recognising the risks and challenges that surround making large, long-term investments in Northern Australia. Capital intensive industries such as mining make large, multi-decade investment decisions, with long lead times before the generation of cash flows. The combination of all business tax rates and measures are used to assess project viability. To support the industry MCA NT encourages the stable and competitive tax and royalty arrangements so as to attract future minerals industry investment in Northern Territory. Benchmarking the international competitiveness of tax and royalty arrangements remains critical if Northern Territory is to attract new minerals resource investment.

A well-designed fuel tax credits regime forms an important part of a competitive tax environment in Northern Australia. The purpose of the fuel tax credits scheme is to remove the effect of fuel tax on business inputs; the same tax policy principle that underpins the GST. MCA NT supports the full reinstatement of fuel tax credits for diesel fuel used off-road in mining operations and recognises explicitly the importance of a well-designed fuel tax credits scheme for future development in Northern Australia.

Northern Australia’s share of global expenditure on minerals exploration has been declining. Tax certainty in relation to the immediate deduction for exploration expenditure is required to ensure the deduction meets its policy intent. The immediate deduction for exploration expenditure encourages exploration and recognises its long-term benefits including, critically, the delineation of the next generation of resource projects. Government should resist moves to curtail legitimate deductions for exploration expenditure.

All the strengthening the business environment initiatives mentioned above will help to secure the next wave of investment in Northern Australia by removing unnecessary burdens on industry. To build industry confidence and Northern Australia’s reputation as a resources investment destination, it is also important that there be an open and extensive consultation process with industry through the forthcoming White Paper on tax reform process. The Government should also continue to promote open trade and investment relationships to secure foreign investment and export markets for Northern Australia. This in turn will increase exports, secure jobs and continue to support the minerals industry’s contribution to government revenues.

5.5 Fostering education, research and innovation

The MCA NT would like to dispel some of the myths around that the Fringe Benefit Tax (FBT) ‘concessions’ provide an incentive to companies to employ people on a  FIFO basis and are unfair because they create two sets tax rules for employees. Companies will always prefer a local workforce and company decisions on FIFO are not tax driven. The skills availability leads to the decision to source workers of FIFO arrangements.

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The current FBT arrangements for FIFO workers recognise that housing and transportation costs are a necessary business expense to ensure labour can be deployed in remote areas. The purpose of the FBT system is to improve the integrity and fairness of the tax system by ensuring non-cash benefits provided to employees in the course of their employment are appropriately taxed. The FBT exemptions for FIFO workers recognise that essential transport and housing provided to workers in remote areas are not private in nature, and are therefore not taxed under the FBT system. Flying to a remote camp is not a ‘fringe benefit’ and never should be taxed as one, and if anything some of the FBT arrangements for housing actually help encourage people to live in towns and these rules could be improved which members would support on a deregulation basis.

The North also requires:

A skilled and mobile workforce to ensure Northern Australia can secure major resource developments.

Commit to industry-led training to ensure training funds are linked to real employment outcomes.

Support flexible labour mobility arrangements and access to skilled migration to ensure labour operates efficiently and gains from resource development are captured.

Wind back unnecessary and intrusive regulation associated with the mandating of Australian Industry Participation plans under the Australian Jobs Act

Industrial relations reforms to improve productivity. The legal instruments governing workplace arrangements, in whatever form, should support direct relationship between the employer and the employee. The dividends of flexible workplace arrangements are not simply economic. They are found in a modern workplace culture which is safer, more harmonious and more conducive to the needs and expectations of individual workers, businesses and communities. Direct relationships between the employer and the employee in turn create the environment for innovation and productivity.

5.6 Enhancing Governance

Effective governance arrangements that align with the needs of diverse local interests:

Address fragmentation of governance arrangements for economic and social development and ensure structures are genuinely representative of diverse community interests.

Better define roles and responsibilities across different tiers of government, industry and community stakeholders.

5.7 Opportunity at Risk Northern Australia’s mineral resources remain fundamentally attractive despite weaknesses in our current competitive position. If we get their development right they will deliver enormous benefits to Australia as a whole and particularly Northern Australia. Getting it right means converting exploration into new mines and adding new volume from existing projects and making them more attractive to investors than those of our rapidly proliferating competitors.

Right now we are not well positioned. Across minerals commodity sectors, Australia’s cost position and competitive advantage has declined markedly relative to our competitors. As a result, market share gains of earlier decades have been replaced by stagnation or share losses, while new projects have become less attractive just as new rivals have emerged. For the minerals industry in the Northern Territory and Northern Australia there is a huge opportunity. Developing Northern Australia’s challenge is to ensure that in years to come we are not talking about a lost opportunity.

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