Peter Lynch can tell you exactly the difference between setting up a mine in Indonesia and Australia — the former takes four years; the latter somewhere between seven and 10.
And the cost of producing coal from Indonesia is about two-thirds that from Australia.
Mr Lynch is in a position to know. A veteran mining figure who worked for MIM and other companies, he was the first to realise the potential of the Galilee Basin in central Queensland in 2006. He pegged out 13 exploration permits covering 250sq km. In 2010, Clive Palmer made him an offer he couldn’t refuse, paying $130 million for Waratah Coal and control of the project.
Now chief executive of mining company Cokal, Mr Lynch saw potential in Indonesia, and in early 2011 started digging exploratory holes in a remote part of Central Kalimantan. Three years later, he has all his key approvals in place and is finalising his financial backing, with the aim of starting production in September next year — a bit over four years from when he first eyed the area. By contrast, the earliest date for coal to come out of the Galilee Basin is 2017, despite the approvals process starting several years earlier.
Mr Lynch’s tale illustrates the concerns the Business Council of Australia and Hancock Prospecting chairman Gina Rinehart have raised this week about Australia losing its competitive edge because of high labour costs and red tape.
On Monday, Environment Minister Greg Hunt approved Adani’s proposed Carmichael mine in the Galilee Basin, but the Indian company still needs to get approval for the construction of a proposed railway line to Abbot Point.
The Waratah Coal project is further behind the two Indian companies and has no set date for when it can start exporting coal.
Yet Mr Lynch is adamant that environmental standards that mining companies in Indonesia need to meet are no less rigid than those in Australia.
“The Indonesian approval process is based on an international standard, and you’ve got to do all the things that you do in Australia — identify threatened species, do land management plans, water management, that sort of thing — but the big difference in Indonesia is that it’s a predictable process,” he said.
“It’s a very rigid process and very vigorous. But the big difference is that in Indonesia everyone knows where they stand. In Australia, the process is highly political and subject to the whims of politicians, and they come under their own pressure.
“In Indonesia, we went from digging the first borehole to a full mining licence in less than three years. It’s at least double that in Australia.”
He said the processes miners had to go through in Australia involved the company identifying any environmental issues, the government responding, terms of reference for an environmental impact statement being drawn up, a statement undertaken and then, in most cases, a supplementary EIS being completed.
Cokal’s mine in Indonesia is 750km up the Barito River in one of the more remote parts of the country, similar to the Galilee Basin, which is 400km inland.
Mr Lynch’s Indonesian project is also considerably smaller, with a projected output of six million tonnes a year at full capacity while the Palmer project in the Galilee Basin has a capacity of about 30 million tonnes a year. One advantage that Mr Lynch’s mine in Indonesia has over where his holdings in Australia were located was that coal could be moved from the Indonesian mine by river, whereas in Australia it required the construction of a 500km railway.
Consequently, he is planning to export coal at a cost of $80 a tonne from the mine to a point where it is loaded on a boat. In the Bowen Basin in Australia it costs about $130 a tonne to get coal on to a ship.
“That low cost structure is one reason why Indonesia is overtaking Australia as a coal producer. And it’s also a far more predictable place to do business than in Australia,” he said.
“Sudden changes in tax, governments bowing to political pressure — that’s the sort of thing that Australians say happens in Third World countries. It doesn’t happen in Indonesia, but it does happen in Australia.”
By Andrew Fraser – The Australian | 30 Jul, 1:17 AM Industries | Resources and Energy