Gold’s record-breaking feat this week to soar through the $US2,500/oz barrier was completely overshadowed by mining industry concerns about rising sovereign risk in Australia.
The well-documented turmoil surrounding the Federal Government’s block on Regis Resources’ (ASX: RRL) McPhillamys gold project in NSW is already reverberating around global capital markets and has sector leaders talking up greenfields opportunities in other parts of the world.
This turmoil infiltrated the first week of the profit season, with mining company leaders asked about their views on whether Australia was still considered a good place to invest in.
Northern Star Resources (ASX: NST), the largest Australian gold producer and with an enviable organic growth profile, came before investors on Thursday to discuss a strong full-year result and forecast-beating 25¢ a share final dividend.
Asked about the McPhillamys scenario, Northern Star managing director Stuart Tonkin reiterated that his company was not reliant on approvals for greenfields projects to drive growth.
The Perth-based company is more than halfway through a fully funded growth push to take annual output from its three production centres – Kalgoorlie and Yandal in Western Australia and Pogo in Alaska, US – to a sustainable two million ounces a year from FY26.
When asked about the McPhillamys scenario, Mr Tonkin highlighted Australia’s hitherto “great track record and reputation for – in a mining sense – being a fantastic, stable place to invest”.
“And every slow (regulatory) change like this just takes away some of that shine – and flight of capital has choices,” Mr Tonkin.
“So if Australia’s not sitting up there as a great jurisdiction to invest in (then) the capital goes to different countries.
“It comes back to the Fraser Institute index. Australia has a very high ranking (and) it is important to try to understand why that is and how we preserve that to attract (ongoing and future) investment.”
As boss of a $17.4 billion gold producer that attracts heavyweight support from key capital markets around the world, Mr Tonkin has a fair understanding of how global investors view Australia.
The Fraser Institute’s index is a key global barometer of the best destinations to mine. The latest iteration, published in May, included the views of 293 respondents from 86 jurisdictions around the world.
Worryingly from a Western Australian perspective, the key mining state slid from third to fourth in the rankings, behind the US states of Utah and Nevada and the Canadian province of Saskatchewan. Western Australia – long regarded as the most mining-friendly State in Australia – was ranked first as recently as 2021.
Sovereign risk is hardly a breaking-news topic for seasoned mining industry players.
It will again be a topic of discussion at Paydirt’s annual Africa Down Under conference in Perth in a fortnight. And no doubt McPhillamys will be used as a “it doesn’t just happen in Africa” example by Africa proponents brushing off concerns about ever-changing rules and regulations on that continent.
The truth is that for all the headlines of sovereign risk attached to particular countries or regions, the savvy investor will assess projects on a case-by-case basis.
And this includes assessing the performance of companies in terms of their stakeholder engagement and ability to secure and maintain social licences to operate.
Operating in mining-friendly regions might come with a higher operating cost. However, it often also comes with greater certainty with regards to approvals, a more supportive local community and access to a skilled workforce.
St George Mining (ASX: SGQ) is in the throes of finalising the acquisition of the Araxa niobium-rare earths project in the key Brazilian mining state of Minas Gerais.
St George executive chairman John Prineas has made clear to investors that one of the attractions of Araxa is that it is close to existing infrastructure and – most importantly – all but abuts the operations of the world’s dominant niobium producer, CBMM.
This week, Mr Prineas announced the appointment of two in-country executives to drive the development of Araxa.
St George expects to complete Araxa’s acquisition by early October and wants to waste no time drilling up the project’s historic niobium hits.
“With these executive appointments, St George acquires more than 40 years’ experience in managing mining operations in the Barreiro Carbonatite – including expertise in mine management, mineral processing, product development and environmental management,” Mr Prineas said.
“The unique skill set that Thiago Amaral and Adriano Rios bring to St George will be invaluable as we progress our aim of building a globally significant niobium company.”
