Opening Address to Australasian Institute of Mining and Metallurgy 2009

Introduction

Good morning. May I begin by saying how delighted I am to be part of your annual conference and, in particular, to be invited to present this opening address.

I would first like to welcome you all, especially the international delegates and conference speakers. 

It’s a pleasure to be with you and I hope that while you are here in Queenstown you will have an opportunity to enjoy the many attractions that this beautiful part of New Zealand has to offer.

Let me begin by talking briefly about the government’s approach to our natural resources, then make some comment on your industry’s achievements over the past year.

Then I want to talk about the plans the government has to enable New Zealand’s minerals industry to grow over the coming years.

Government’s approach to natural resources

The National-led Government is absolutely determined to raise our living standards.

That is going to require a big improvement to our economic growth and productivity rates.

We see our natural resources as playing a big role in contributing to those goals.

There is no doubt that New Zealand is a mineral rich country.

A recent report by Richard Barker estimated our metallic mineral potential to have a gross in-ground value in excess of $140 billion, with lignite alone at least an additional $100 billion.

Australia is often referred to as the “lucky country” because of its natural resources endowment.

The Ministers in the previous Government often used to explain away the gap in per-capita income between Australia and New Zealand as being almost entirely due to their mineral abundance.

But New Zealanders need to know that this country is also well endowed with natural resources.

A report circulated by the World Bank some years ago ranked New Zealand second in the world in terms of natural wealth per capita. 

We were behind only Saudi Arabia, but well ahead of Australia.

So I am firmly of the belief that our natural resources have the potential to make a significant contribution to our prosperity and our economic development.

As a nation we have neglected the contribution that the resources sector could make to our growth rate, levels of employment, and quality of life.

Our Government wants to change that.

We are going to be far more pragmatic and supportive than the previous administration towards exploration and mining activity.

Of course we must be cognisant of our responsibility to the environment. But mining and the environment can co-exist together. I will talk more about that in a few moments.

Now for some facts and figures…

I want to commend you all on an extremely successful year. 

It has been a record year for mining activity with provisional data indicating that the national coal, metals and industrial minerals production for 2008 has exceeded $2 billion in value for the first time ever.

Looking briefly at 2008 in summary:

• gold production topped 520,000 ounces with a record value of $626 million, largely on the back of increased production from Newmont’s and Oceana Gold’s operations and high commodity prices;

• coal production was stable at 4.9M tonnes, marginally up on the previous year, but this should increase substantially over the coming years once Pike River is running at full capacity; and

• the total value of all industrial minerals and building stones produced was almost $537 million.

These figures represent total production value however from the data to hand it appears that exploration activity and expenditure for 2008 was down on recent years.

Total expenditure for prospecting and exploration was $18 million, down from $38 million in the previous year.

While the current global economic recession contributed significantly to the drop in 2008 expenditure by limiting credit and tempering exploration budgets, repeating the previous year’s bumper expenditure was always an unlikely outcome.

One bright spot however is the successful near-mine exploration of major producers to raise the resource base and extend the mine life of some of our larger mining operations.

I’m referring here of course to the efforts of Oceana Gold at Macraes and Reefton, Newmont Waihi Gold at Waihi, and Solid Energy at Stockton.

Improving access to mineral resources
 
So what has the government got planned to lift investors’ perceptions of New Zealand as an attractive mineral investment destination and to make things easier for you to go about doing what you do best – finding mineral deposits and developing them.

Increasing our international exposure is a fundamental way to encourage new explorers and investors into New Zealand.

Crown Minerals will continue to actively promote New Zealand’s mineral potential at appropriate international conferences and to target key investors and companies.  

For my part, as Minister of Energy and Resources, I am committed to unlocking New Zealand’s mineral potential for the benefit of all New Zealanders, both present and future.

At the beginning of the year the Prime Minister asked me to specify my top priorities for each of my portfolios.

I advised him that one of my top priorities in the resources area is to improve access to mineral resources.

In my short time as Minister I have become acutely aware that one of the fundamental barriers to mineral exploration and development is access to prospective land, particularly to land administered by the Department of Conservation.

Reasonable access to the mineral estate in Crown-owned land, particularly conservation land, is a key issue.

There are obviously competing objectives here but there is scope to explore how economic development objectives could be better reconciled with other land values.

There is the potential for more flexible arrangements that do not undermine conservation and environmental objectives.

The Minister of Conservation and I have agreed that officials from Crown Minerals and DOC are to work together with a clear directive to make progress on improved access to conservation land across three fronts.

These are, first, a review of Schedule 4 of the Crown Minerals Act.

Second, improvements to DOC processes for access arrangements

And third, consultation on the reclassification of DOC administered land

I now want to briefly discuss each of these areas of work in more detail.

Starting with Schedule Four, let me put it into perspective.
 
I understand that DOC administered land hosts a majority of our mineral potential – an estimated 70%

About 40% of that land is listed in Schedule 4 of the Crown Minerals Act.

That means something like 30% of our most prospective land is off limits because the Minister of Conservation is not allowed to enter into any access arrangement for any area described in Schedule 4, except for certain low impact activities. 

This effectively precludes all mining activities and most exploration activities on that land.

Collectively the areas currently covered by Schedule 4 make up around 13% of New Zealand’s total land area and include the highest value conservation areas.

Some of the areas within Schedule 4 are known to host significant potential for zinc, lead, copper, nickel, tin, tungsten and other metals.

The current inclusion of these highly prospective areas in Schedule 4 has potentially denied significant opportunity for economic benefit at both a national and regional level. 
I have directed Crown Minerals to undertake a strategic review to determine areas possessing significant mineral potential that, with the removal of the access prohibition provided by Schedule 4, could through responsible mining techniques contribute considerably to our prosperity.

The Crown Minerals Act sets out a process for amending Schedule 4 and as part of that process the Minister of Conservation and I will need to consult with interests likely to be substantially affected by any changes before making a decision.

While most here would agree that a review of Schedule 4 land is much needed, others in the community will have the view that, given most of the land has a high conservation value, there are very few places listed on Schedule 4 where mining activity might be appropriate.

In the case of Crown land, including that administered by DOC, the Crown has distinct interests in both the land itself and the Crown owned minerals on, or under, that land.
 
The relative value of these two interests depends on the specific circumstances.

Accordingly, before making a final decision to recommend that certain areas are removed from Schedule 4, the Minister of Conservation and I will be required to carefully consider the land’s mineral potential and conservation values respectively.

DOC processes for access arrangements

Turning now to the Department of Conservation access arrangements, I am well aware that, although DOC access applications are generally granted, there are some particular concerns in your industry about the process.
Common concerns include the length of time to process applications, costs in time and resources, a lack of transparency, and conditions that some applicants consider unduly onerous.

There are also indications from industry that devolved decision making and the absence of generic DOC processing procedures has resulted in inconsistencies as different conservancies take different approaches.

The Minister of Conservation and I will require DOC and Crown Minerals to progress the development of mandatory nationwide DOC standard operating procedures for processing access arrangement applications under the Crown Minerals Act.

A large part of the solution, in my view, will be better communication of what the rules are, and how they will be consistently applied across all conservancies.

The new procedures will provide for:

• improved clarity regarding the information that needs to be included in an application;
• improved guidance on the factors that DOC needs to consider under its legislation – in other words, to explain to applicants why certain information is needed;
• specified fees and consistency in setting compensation; and
• clearer timeframes for each step of the process to reduce the delays and frustrations currently experienced by both the industry and DOC.

As part of the process, officials will also seek comment and further information from the minerals industry, in particular about the guidance and application forms that industry would like to have available to assist applicants in preparing access applications.

I envisage that the new standard procedures will be operational early next year.

Consultation on the reclassification of DOC administered land

I would now like to touch on the reclassification of DOC administered land.

Reclassification currently takes place under several different provisions of five different statutes.

None of these statutes require the Minister of Energy and Resources to be consulted prior to public notification and only two - national parks and national reserves - require me to be specifically notified.
 
Accordingly, under current law any opportunity costs associated with a reclassification can only be assessed by Crown Minerals and raised with me after proposals to reclassify areas have already been publicly notified.

This situation is clearly unsatisfactory as reclassification of DOC land can significantly raise the conservation threshold in respect of gaining access to mineral resources.
  
Fortunately, with the Oteake Conservation Park proposal, at a late stage I was able to meet with the Minister of Conservation to discuss the impact that the park would have on any future development of the Hawkdun lignite deposit.

The Minister of Conservation gave due consideration to the economic development potential and consequently the park boundaries were amended to exclude this important lignite deposit which constituted just 0.3% of the proposed conservation park.

To improve the present situation, the Minister of Conservation and I have directed officials to develop options to improve processes around DOC consultation with Crown Minerals on conservation land reclassification.

Personally, I favour a system where all DOC land reclassifications are referred to Crown Minerals prior to public notification so that an early review of the land’s mineral potential can be undertaken.

I am confident that the three initiatives that I have outlined today will provide a solid platform for improving and increasing access to conservation land for responsible mineral exploration and mining activity.

Environmental Responsibility

Let me pick up on that theme of responsibility for a moment.
One thing I always stress when talking about our natural resources is that good economic outcomes must not be inconsistent with good environmental practice.

As a government we know that we need to preserve the environment for future generations.

There are a number of examples that demonstrate that good mining practice can be reconciled with respect for the environment.

Take for example the Pike River coal project on the West Coast, which was presented with a certificate from DOC for the “environmental consideration it demonstrated” in the development of the coal mine.

The mine’s environmental footprint has been kept to a minimum through good design, with little damage to the ancient trees and bush.
Driving through the spectacular Paparoa ranges, you would not know there is a coal mine only a few hundred metres away.

The building of a road through the ranges to get access to the coal mine has actually opened up that area of the country for people who otherwise wouldn’t get to experience it.

There is ample scope for environmental tourism.

The Newmont Waihi Gold in Martha Hill is another example of mining co-existing with environmental responsibility.

Rehabilitation of the Martha Mine has been a major part of mine planning.

Waste rock embankments and disturbed land are being returned to productive pasture.

When the mine closes it will be turned into a safe, stable, and self-sustaining rehabilitated state.

The pit and surrounds will become a recreational lake and park, and extensive areas of pasture will be established over waste rock stockpiles and other disturbed areas.

A final example is the work of Solid Energy at the Stockton Opencast Mine.

Solid Energy has an environmental policy of reasonably minimising the adverse local environmental affects that may be an unavoidable part of operating coal mines.

As part of this, it spent 13 months between 2006 and 2007 collecting over 6,000 “Augustus” native land snails from the Mt Augustus ridgeline of Stockton Mine.

Following collection of the snails, much of the original habitat was moved 800 metres north.

By the end of 2007, approximately 4,000 snails, and over 1,000 eggs, had been released onto this and other sites.

The three examples I’ve mentioned demonstrate that mining and good environmental practice can sit side by side.

I hope to see many more examples of these in the future as the industry expands and grows.

Conclusion

In closing, let me reiterate what I said at the start of my address.

The National-led Government is absolutely determined to raise our living standards.

The development of our abundant mineral resources will play an important role in achieving that goal.

My hope for the sector in the coming years is that we see increased prospecting and exploration in New Zealand, leading to increased production and added value to the New Zealand economy.

Thank you again for the invitation to speak to you this morning and I wish you all a productive and informative conference.