Major economic benefit for NZ from Chatham Rock Phosphate
5 September 2012
Major economic benefit for NZ from Chatham Rock Phosphate project
New Zealanders will be $1.3 billion better off as a result of developing the Chatham Rock Phosphate resource, a study by the New Zealand Institute of Economic Research says.
The highly respected economic research agency was commissioned by CRP to study the economic impacts of its project to develop a seabed phosphate resource on the Chatham Rise. The report is supporting the company’s mining licence application to New Zealand Petroleum and Minerals. An environmental analysis by NZIER is underway.
“Implementing the mining project over 16 years is equivalent to the country becoming $1.3 billion richer today,” the report said. “At least $800 million of that welfare will accrue to people with no ownership in CRP.” On an annual basis it represents a wealth injection of $180 million a year, of which $115 million benefits non-owners of CRP.
The company will be applying for a mining licence within a few weeks to develop a 25 million tonnes rock phosphate resource located at a depth of 400 m on the Chatham Rise, 450 km from New Zealand and 150 km from the Chatham Islands. A marine consent, covering environmental issues, will be sought once the regulations are completed for the newly enacted EEZ legislation.
CRP expects the project to increase New Zealand’s exports of rock phosphate by $230 million a year and substitute for $110 million of domestic imports annually. CRP’s injection of wealth creates flow on effects that generate another $80 million in other non-phosphate exports. “The increase in household incomes generated by the extra wealth allows imports to rise by $170 million over and above the direct impact of CRP.”
The project will generate $300 million of export revenue for each of the 16 years of production, boosting GDP by $380 million. It will also remove New Zealand’s dependence on imported rock phosphate, of which New Zealand imports at least $185 million annually.
“The economic cost of the operation is primarily in the penalty our exporters pay from an appreciation in the dollar. However that penalty is small and the appreciation allows New Zealanders to obtain cheaper goods from overseas.”
The report notes the benefits are sensitive to world demand for rock phosphate. The scenario does not include the investment or environmental costs of the project (which is being assessed separately) and assumes that the increase in domestic production does not reduce the price of rock phosphate.
CRP managing director Chris Castle said the economic benefits of the project speak for themselves: “The project will reduce imports and increase exports of rock phosphate. It will also mean we reduce commodity price risk, foreign exchange fluctuations and security of supply from politically unstable countries and promote a new industry for New Zealand with skilled technical and support roles.
“While our shareholders will benefit, other New Zealanders benefit even more. Not only are there significant economic benefits, there are also strong environmental advantages.”
The NZIER report looks at the direct and flow-on effects of the project including $105 million in annual profits for CRP, $32 million in tax and royalties, $38 million in transport and $190 million in costs, as well as downstream spending by households.