Mining blog recap for 2012

2012 saw the merger between Herbert Smith and Freehills, creating one of the world’s most experienced energy and resources firms. As it draws to a close, we pause to reflect on some of the key developments in the mining industry.

This year we saw several regulatory and legislative changes take place in the mining sector:

• New South Wales, Queensland, Northern Territory, Australian Capital Territory, South Australia, Tasmania and the Commonwealth all took steps to ensure the harmonisation of safety laws via the Model Work Health and Safety Act was introduced by January 1.
• In August, Victoria declared a ban on approvals to undertake hydraulic fracturing (fraccing) as part of onshore gas exploration, and the issue of new exploration licences for coal seam gas (CSG). While Queensland took a significant step in reducing red tape by passing the Mines Legislation (Streamlining) Amendment Act 2012.
• The new Indonesian Mining Law enabled foreign investors to hold business permits for the first time, although foreign investors are now required to divest ownership in companies on an incremental scale after 5 years of production (up to 51%).
• The Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012, which proposes substantive amendments to the Native Title Act 1993 (Cth).

In March, we reported that M&A transactions in the mining and energy sectors were buoyant, accounting for almost half of all deals in the preceding 6 months. Despite significant nervousness and negative opinions surrounding the market in recent months, Chris Richardson of Deloitte Access Economics suggested that the glass is still ‘half full’ for the resources sector at the Annual National AMPLA Conference.
In September, Queensland called for EOI in its lucrative bauxite leases, while also announcing an increase in coal royalties of up to 50 per cent per tonne. In October, Western Australia granted approval for Toro Energy to proceed with the State’s first uranium mine to be developed.
The year also saw a raft of inquiries and debates:

• Coal seam gas (CSG) was on the agenda on the east coast. Victoria released a report entitled ‘Inquiry into Greenfields mineral exploration and project development in Victoria’, in a move to understand how better to develop and regulate Victoria’s CSG potential, while New South Wales tabled an inquiry into the environmental, economic and social impacts of mining CSG.
• In October, the Productivity Commission announced a 12 month inquiry into the non-financial barriers to mineral and energy resource exploration to determine if there is unnecessary regulatory burden.

With still a month or two to go in 2012, be sure to keep an eye on our blog for further updates.

Right to negotiate and other native title reform

Native Title Act reform

On 20 September 2012, the Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012 (Bill). The Bill proposes substantive amendments to the Native Title Act 1993 (Cth) (NTA) and, if passed, may have a direct impact on proponents establishing or operating mining, energy and infrastructure projects in Australia.

The key amendments relate to:

• Right to Negotiate: the amendments codify what constitutes ‘good faith’ negotiations and extend the minimum negotiation period from 6 to 8 months; 
• Historical Extinguishment: the amendments include provisions to enable the historical extinguishment of native title in national parks and nature reserves to be disregarded in certain circumstances; and
• ILUAs: clarifying and changing some aspects of the processes for the authorisation, registration and amendment of indigenous land use agreements (ILUAs).

A summary of these proposed reforms and implications can be found by following this link to Herbert Smith Freehills website.

The Australian Resources Economy – the glass is still “half full”

This morning saw the 36th Annual National AMPLA Conference in Brisbane officially kick off with key note address from Chris Richardson of Deloitte Access Economics, providing an overall insight into the complexities of the Australian resources supply/demand economy and external influencing factors, as well as a general overview as to the significance of the resources sector to the Australian Economy.

While there has been some significant nervousness and negative opinions surrounding the market of late, the address provided a timely reminder to the industry that while a cautious approach is perhaps warranted, Australia still remains in a relatively positive position (particularly as against the US/European economies) with further growth opportunities still to come.

The key takeaway points on the market for the industry were:

• Australia is still going well, but unlikely to see the same growth from recent times as China demand slows, but we should retain “a glass half full” attitude;
•  Workforce demand vs. workers, interest rates, high aussie dollar and excess gas in the US are all having effect on the Australian resources demand;
•  The future maybe more about stability - changes to a more democratic system in China may also temporarily slow demand from China; and
• Growth in India (which is typically 15yrs behind China) will increase demand from Australia but may be unlikely to be as great as in China.