Bridges: West Coast Minerals Forum
24 JULY, 2014
Speech to West Coast Minerals Forum
It’s a pleasure to be back at the West Coast Minerals Forum for another year.
The minerals industry is important for New Zealand.
The sector plays a major role in our economy and contributes more than $1 billion to our GDP. It is highly productive, provides high-reward jobs for New Zealanders, produces vital materials for industry, and adds significantly to our exports.
Developing our mineral resources can take decades — it is a long term game that the Government is committed to supporting.
Business Growth Agenda
National’s Business Growth Agenda (BGA) is one way in which we are helping industries to succeed. The BGA sets the framework for building a more productive and competitive economy by making it easier for businesses to get on with the job.
We cannot control international commodity prices but the cost of doing business has a significant impact on a company’s bottom line and that’s where we can help.
A few examples of what we are doing include:
• making significant investment in infrastructure like broadband and roading;
• implementing comprehensive Free Trade Agreements, and negotiating others;
• increasing New Zealand’s representation in China and other emerging markets;
• providing more capital-raising options for small and medium-sized enterprises.
The National Government’s strategy has seen our economy grow by 3.8 per cent in the year to 31 March – the third-highest among the world’s developed economies, and this included a 6.3 percent increase in mining activity.
Growth is forecast to reach 4 per cent this year – a far cry from the recession we inherited in 2008.
84,000 jobs were created in the year to March and Treasury forecasts another 172,000 jobs to be created over the next four years.
Cost of living increases are low – inflation was just 1.5 per cent in the year to March, well below average weekly wage increases of 3.2 per cent.
Unemployment is coming down – Treasury forecasts it will fall to 4.4 per cent by mid-2018 from six per cent now.
The balance of payments deficit – the difference between what New Zealand earns and spends around the world – narrowed to 2.8 per cent of GDP in the year to 31 March 2014. Helped by record exports, this is less than half of the deficit we had six years ago.
The hard work of this Government and New Zealanders is paying off.
Business and consumer confidence is up.
And the Government is on track to budget surplus next year and to post increasing surpluses in subsequent years.
Net Crown debt will fall to 20 per cent of GDP by 2020 if we stick to the Government’s plan – well below the 60 per cent of GDP that debt was projected to reach under policies inherited from Labour in 2008.
In the mining space, we have amended the Crown Minerals Act, establishing a two tier system for minerals permitting. This puts a greater focus where it is needed – on the larger Tier 1 permits – while making it easier for the smaller Tier 2 permit holders.
New Zealand Petroleum and Minerals (NZP&M) are implementing that change by splitting the permitting team — one will deal with the large, complex Tier 1 permits while the other will be free to deal with the more day-to-day permitting applications and get them done in a more timely fashion.
One of the most important means of strengthening our minerals industry, and our regional economies generally, is to attract more investment.
To support the regions, the Government has established NZTE’s Regional Investment Attraction programme which identifies investment opportunities and aims to develop a compelling ‘pitch’ for potential investors.
Overview of the sector
I know the industry, and the West Coast in particular, is going through a challenging time.
But that doesn’t change my underlying confidence for the future of our minerals industry both nationally and here on the West Coast.
If we look at the current state of play, there are still considerably more people working in the industry than there was a decade ago and, despite the recent downturn, I’m confident that the industry will continue to grow and prosper.
The West Coast region employs nearly one in five people in the industry and the potential is greater, with growing interest in the region’s prospectivity for oil and gas.
Exports, particularly for coal, are down at the moment, but we know that in the medium-to-long-term demand will return.
Last year, despite the low international coal price, there was only a six per cent drop in coal production in New Zealand – while gold production increased by 20 per cent compared to 2012.
New Zealand Petroleum and Minerals (NZP&M) continues to see healthy levels of permitting activity.
There are approximately 1000 current mineral prospecting, exploration and mining permits across the country with a further 156 permit applications being processed by NZP&M.
A total of 357 mineral permits and permit change applications were granted last year.
And there are some interesting developments happening in the industry right now.
A major focus for the Government has been on acquiring minerals data.
We invested $3.2 million in an aeromagnetic survey of the West Coast in 2012 and with $8 million from this year’s Budget are planning further data gathering projects across minerals and petroleum.
Our investment so far is paying off.
Last year total minerals exploration expenditure across New Zealand was more than $46 million – only slightly below the record $49.5 million in 2012.
The West Coast was the standout in 2013 with nearly $22 million spent due to the interest in gold and coal exploration.
Interest has also been spurred by our minerals tenders over recent years.
The Northland tender and Central North Island Epithermal Gold tender have seen four new companies begin exploring in New Zealand.
The four explorers estimate that $7.8 million will be spent over the first three years of the permits and, if this initial work is successful, it could increase to $17.3 million by the end of the five-year permits.
The international exposure from these tenders continues to attract wider interest.
Since the reservations over the central north island were lifted in May this year, Waikato Gold Limited, a subsidiary of the large Canadian explorer Eurasian Minerals Incorporated, has applied for two exploration permits in the Central North Island.
In addition, Newmont are progressing with the new Correnso gold exploration development pushing out from their Trio mine in Waihi East.
In coal development, we have seen Bathurst Resources finally get consent for their Denniston Escarpment project, which is encouraging. There’s only a small crew there at present but the operation is underway and is complementing the Cascade mine operation.
NZP&M have also received and are considering an application for further underground coal mining at Roa (east of Greymouth). The existing operations at Roa are highly regarded by industry and regulators alike.
In ironsands, I was very pleased to learn late last year of plans to expand operations at NZ Steel’s Taharoa mine – increasing ironsands export capacity from 1.3 million tonnes to approximately 4 million tonnes annually. Not only will this help grow New Zealand through higher GDP, it is expected to create more jobs which will directly benefit the Taharoa community.
We are also seeing interest in offshore mining in New Zealand.
Chatham Rock Phosphate is going through the EPA’s marine consent process at the moment, and Trans-Tasman Resources are appealing the decision to decline their marine consent. As with any new industry and any new legislation, I expect it to be tested from all sides.
We are seeing interesting petroleum activity on the West Coast, with local company Ocean Harvest International Limited signalling their intention to drill an appraisal well in an existing oil discovery south east of Greymouth.
Ocean Harvest is an example of a New Zealand company that has been diligently exploring the West Coast for more than a decade. They have shown their commitment to supporting the local industry by using local contractors and suppliers where possible.
And finally, Mosman Oil and Gas have had a technical petroleum discovery on the Kotuku oil seeps. Though it is still early days, the company is planning to drill more exploration wells.
This looks promising and I hope it does result in the discovery of commercial quantities of petroleum, which would be one of the first commercial oil finds outside of Taranaki and would be very good for the West Coast region and New Zealand as a whole.
At the very least I expect the discovery should increase interest in the West Coast among other oil and gas companies and lead to more exploration and investment.
So as you can see, despite the international downturn, New Zealand still has a lot of activity occurring at a local level, and the Government is continuing in its efforts to raise New Zealand’s profile and put us on the map as a destination of choice for safe and environmentally responsible explorers.
And that’s why I’m really pleased to be here with you on the West Coast today to announce the outcome of our latest tender — the 2013 Platinum Tender in the South Island.
The Government is awarding five exploration permits to explore for metallic minerals to a new international exploration company — Lynx Platinum Limited.
Lynx are backed by Canadian company, Coronado Resources Limited, who have interests in electricity generation and retail here in New Zealand. TAG Oil, an established Canadian petroleum operator, which has wells in Taranaki and on the North Island’s East Coast, is a substantial shareholder in the company.
Three of the permits have been awarded near Murchison and two across Southland.
Lynx will spend almost $3 million over the first three years of their permits, with the potential to invest an addition $4.5 million in the following two years if the initial work is successful.
Separate to the tender process, Lynx has also applied for a minerals exploration permit in the Bluff area, which is currently being considered by NZP&M.
It is encouraging to see a new minerals operator enter the New Zealand market at a time when investors are understandably selective about where in the world they put their money.
Lynx is the single biggest new entrant into minerals exploration since I’ve been Minister of Energy and Resources, and I believe that it is a credit to the sector and to this Government’s approach — we treat the mining industry as a valuable part of the economy.
It is a pleasure to welcome Lynx to New Zealand and I wish them all the best with their exploration.
“It’s about the people”
Before I finish today, I want to touch on the theme of this year’s conference as I believe if the minerals industry is to succeed it really does have to be “about the people”.
We need to make sure the New Zealand public is well informed and that those who work in mining are kept safe.
In my experience the closer you get to the point of resources actually being developed, the better the understanding and the greater the social license. I see this in Taranaki and here on the West Coast.
It’s the national debate taking place away from development that needs maturing.
Straterra have been working in this area and I encourage our mining companies to share their stories and show how valuable they are to communities. For example, most people would be unaware that platinum is used in environmentally-related technologies such as fuel cells and solar technologies.
On the Government’s part we have developed detailed fact sheets and are running a series community information sessions in regions that are experiencing petroleum and minerals activity.
These sessions allow the public to talk directly with officials from a range of government departments and really understand how the activity and regulatory system works.
The strong regulatory regime the Government has put in place around petroleum and minerals development is in itself important to building confidence among the public of New Zealand.
It sets world-class standards and sends a strong message that development is being done in a safe and environmentally responsible way.
We all know how important workplace safety is. Pike River has left its mark on this community and opened our eyes as a country.
I would just like to acknowledge the 29 men who lost their lives in the Pike River tragedy, and the families of those men.
In response to the tragedy we have undertaken the largest health and safety reform for a generation.
And I’m pleased to say that we have virtually implemented all of the recommendations of the Royal Commission.
We have established WorkSafe New Zealand and got its High Hazards Unit fully operational; we’ve passed a comprehensive new set of mining regulations into law; and we are looking at health and safety in New Zealand workplaces as a whole through the Working Safer reform package.
I urge companies to ensure they have a strong health and safety culture, where employees are encouraged to raise potential health and safety issues.
There has to be clear leadership from the top, backed up with words and action every day that reinforces that culture.
To support this, last year I released guidance to help managers in the mining, quarrying and tunnelling industries build and promote a strong health and safety culture in their operations.
Aptly titled “People Come First”, the guidance shows what a good culture looks like and what to do to make sure your business is operating at best practice levels.
There must be a sustained commitment towards a safer mining industry and this guidance contains advice managers should be using every day.
In closing, I would just like to reiterate that the Government recognizes the contribution the minerals industry and its people make. And I am confident in the future of our minerals sector.
There is strong interest in our mineral resources from companies both here and overseas and it’s only a matter of time until more discoveries are made and we reap the benefits.