• Evolution Mining boss Jake Klein says Australia needs to deal with inconvenient truth that ‘globalisation is over’
  • Framework to develop and approve new mines needs to approve, with Klein taking aim at Tanya Pilbersek’s McPhillamys gold mine decision
  • Downstream supply chain involvement and long term energy planning needed to ensure Australian and its mining sector remain competitive

 

One of Australia’s top mining bosses has called for legislative changes to end permitting debacles like the McPhillamys gold mine and urged Aussie lawmakers to make the country more competitive, warning we can’t rely on China to power our economic engine room forever.

Evolution Mining (ASX:EVN) executive chairman Jake Klein said globalisation was now over, telling a WA Mining Club luncheon yesterday the federal backflip on Regis’ McPhillamys was emblematic of the challenges faced to future proof the Australian mining industry.

Klein says a combined and bipartisan approach is needed to keep up with China, where a long term strategic vision and cheap capital has seen its miners grow at a multiple of the pace of those in the West.

“I think we need to recognise that we’re in a very competitive situation,” Klein said, comparing the fortunes of Chinese gold, copper and lithium miner Zijin to those in the west like its South African cornerstone investor Gold Fields.

“The reality is their 10% stake that Gold Fields subsequently sold would be worth more today than Gold Fields in totality is worth.

“So we are up against formidable opposition and the more we keep talking to each other about small issues over here the more China and its strategic approach to things is just going to eat out breakfast.”

Legislative changes

McPhillamys may stand as an isolated incident, but it highlights for Klein, whose company is producing around 750,000oz of gold and 75,000t of copper a year, a broader problem.

The canning on Aboriginal heritage grounds of the mine’s tailings dam location, which came after State and Federal planning approvals had already been granted, has soiled the relationship between the mining industry and Albanese Government environment minister Tanya Plibersek.

Security of tenure is an issue Klein says needs to be dealt with, saying it is “becoming increasingly expensive to discover mines and process minerals in Australia”.

“I’ve often made the point that Australia is God’s gift to miners, a vast underpopulated, geologically prospective country that is a great place to mine,” he said.

“But we have the opportunity and in fact I would argue the obligation to make it even greater.

“There needs to be a change in the legislative process that ensures that any red flags at a state or federal level that risk a project’s approval are identified and dealt with early.

“To have them emerge

Jake Klein. Pic: Diggers and Dealers

at the end of a process after millions of dollars have been invested is unacceptable and unnecessarily tarnishes the attractiveness of Australia as a mining destination.”

 

 

Surrendering to the opposition

Klein, who led the largest foreign gold investment vehicle in China in the form of ASX-listed Sino Gold ahead of his founding of Evolution, said China had been the biggest driver of Australia’s economic prosperity in the past 30 years.

But he said Australia needs to be prepared for what happens if this trade relationship fractures completely.

“China has not integrated into our western democratic world, globalisation is essentially over, and China is very close to becoming the world’s largest economy,” Klein told delegates at Optus Stadium.

“(Chinese miners) have access to cheap capital, they have ambitious expansion plans and they enjoy very, very strong government support.”

According to Klein, China has outmanoeuvred and outplayed western miners, especially in copper growth, control of the battery supply chain and its support of Indonesian nickel miners, who have sent Aussie producers to the wall by oversupplying the market.

“I truly believe the key difference is that China has been able to act strategically and unless we can shift from tactical short-term decision making I’m afraid we will consistently be on the losing side.”

While the past 30 years have shown the benefits of globalisation, Klein says Australia needs to shift gears as separate supply chains emerge.

“If going forward this is no longer available to us and we need to produce our strategic and critical minerals and materials outside of China we need to recognise and respond to this new paradigm.”

Inconvenient truths

Taking a page out of Al Gore’s book, Klein said the end of globalisation was the first of three inconvenient truths for Australia’s mining industry.

The increasing difficulty of developing new mines and finding resources is another, with Klein also throwing his support behind calls for Australia to capture more of the critical minerals supply chain onshore via downstream processing.

The third is that the transition from fossil fuel to renewable power is a nation-building project and requires long term investment from Australian governments.

He said a $7 billion pumped hydro energy storage project at its soon to close Mt Rawdon mine in Queensland is a case in point. A feasibility study shows it could run for 80 years and produce 20GWh of power a day, equivalent to the energy needs of 2 million homes.

“Each state has its own (green energy) targets,” Klein said. “This is not a recipe for success, but with the right policy settings and commitment, transitioning our grid to green energy is possible.

“Who’s going to pay for projects like Mt Rawdon and many others that need to be built?

“To me, it seems there are really only two options. Either the government owns or lends money to a project like this and finds the money on its balance sheet today or it guarantees offtake at a higher future power price.

“The green grid is a nation building project and will be expensive, but like national endeavours of this nature that our country has tackled before, it needs a federal government strategic plan that is endorsed and agreed by the states as to how it will be collectively funded and implemented, not just long targets.”

Speaking on the broader gold and copper markets Evolution plays in, Klein said there were “good reasons” gold was moving up having recently touched record highs above US$2700/oz, citing the need for China to reduce its exposure to the US dollar.

Asked about M&A, Klein highlighted the need to act counter cyclically, saying for gold miners currently it was a time to “make money” rather than do deals. He expressed his interest in new copper assets, but said the commodity was hard to find, with volumes from even big producers in South America stagnating.