Mining’s potential in regional growth plans
Op Ed - Published in The Dominion Post 12 April 2018
Chris Baker, Chief Executive of Straterra – the collective voice of New Zealand’s minerals sector
With the economic future of New Zealand’s regions in the spotlight, perhaps it’s time to address the ‘elephant in the room’ – namely, mining.
The minerals sector recognises the subject inspires powerful feelings. Not just those opposed to current or further projects, but also in the many New Zealand communities where mining provides employment and economic benefit.
These are in the regions, because that’s where mining happens. Straterra is commissioning further independent research into the current and potential future regional economic value of mining in New Zealand. However, our most recent figures indicate it supports 8000 jobs nationwide. And 40 per cent of the West Coast regional GDP is earned directly and indirectly from mining. The average income from mining in New Zealand is $102,100 a year – more than twice the national average.
Contrary to popular belief, most revenue from mining in New Zealand doesn’t go to the overseas investors who fund exploration and infrastructure. For example, a report for OceanaGold found, in 2016, that 88% of OGC’s expenditure on its domestic operations reached people and businesses in New Zealand through wages and procurement. .
So, when discussing the Government’s commitment to regional development, we do need to talk about minerals – because they put a lot of money into local economies, including the West Coast, Otago, Waihi, Waikato and Southland. They generate much needed export revenue directly (gold, coking coal) and indirectly (heat and mineral input for steel, dairy, infrastructure). Yes, many of these areas have projects underway to boost industries such as tourism, and the Government has ambitious plans through its Provincial Growth Fund, including planting a billion trees over the next 10 years.
These ventures could help ‘take up the slack’ if government policy prohibits new mining projects or exploration to extend the life of current ones. But do we want to significantly grow regional employment and populations, or will the same people do different and lower paid jobs?
The minerals sector wants to work with government to support regional growth. Realistic pragmatism will drive that growth. Mining must play a role in that – with conditions in place under which the sector can continue to invest and society can be confident high and appropriate standards will be imposed on proposed activities.
Minister of Conservation Eugenie Sage’s announcement that no new mining would be allowed on conservation land, did come as a surprise to the sector - because there are already very stringent measures in place, via the Resource Management Act (RMA) and the Environment Court. This regime weighs up the social, environmental and economic impacts any proposed project will have before a decision is made on whether it can go ahead and under what conditions.
Our sector respects the democratic process, and we believe, for the sake of regional economies and a respect for fairness and equity, there needs to be consultation on this issue, with the sector and communities, if such a policy were to be advanced.
No one disputes that mining involves digging holes in our land; however, the actual footprint of mining is small. The largest gold mine, Macraes in Otago, has a footprint of around 1,400 hectares. There are larger farms than that. Mining makes highly productive use of limited amounts of land. It has been estimated it would take 767 years of dairy production to match the revenue Macraes earned in its first two decades of operation. Ultimately, much of the land is rehabilitated, so the final footprint is even smaller.
Let’s talk about coal. First, it’s important to understand how New Zealand uses the coal we mine.
Coal, with gas, plays an important role in providing energy security in New Zealand - as a back up to renewable sources. We might note, during last week’s storm lightning strikes halted gas processing and gale-force winds reduced wind farm output meaning coal fired generation had to come into play. And it plays an important role in producing heat for industrial processes, including the dairy sector. Using other forms of heat would be more expensive, driving up production costs and making New Zealand less competitive in the international markets in which we compete. Until an economically viable alternative is found, coal remains an essential component for production processes for these regionally important employers and exporters.
New Zealand exports coking coal – essential to the production of steel. While steel industries are developing ways to reduce emissions and more steel is being recycled, there is currently no plan available globally to make steel, at scale, without coking coal.
New Zealand coking coal has certain special qualities and is in high demand internationally. If we don’t mine it, international customers will go elsewhere, and coking coal will still be burned. Australia, Africa, South Africa, Russia and China all mine coking coal. It would achieve nothing globally in terms of emission reductions – but our workers, regions and government would lose out in terms of employment and revenues.
We also need to talk about mining aggregates. The Government’s KiwiBuild programme alone proposes to build 100,000 affordable homes. You can’t make concrete or build roads or bridges without aggregates.
The regulations governing mining operations here in New Zealand are among the most stringent in the world – so are we risking throwing the baby out with the bathwater? Mining will always be a thorny subject, but society can’t function without the products of mining, and we have to foster and grow exports to meet our social goals including for health and education.
We believe that if government, the mining sector and the regions work together honestly and openly, we can maintain our social and environmental licence to pperate for the benefit of our economy, nationally and regionally.