Look what happens when governments bash mining.

Michael Baume I 8 March 2025 I Business/Robbery, etc I Spectator Australia

When our resources giant, BHP, ‘the Big Australian’, reported last month that it seeks its future prosperity much more in the Americas (north and south) than under home soil, it was not only on the basis that these resources provided an appropriate and potentially rewarding opportunity.

As CEO Mike Henry readily volunteered, BHP’s potentially massive move into copper in Argentina (adding to its existing huge Escondita operation in Chile and more in Peru that together made its South American copper empire four times larger in revenue terms than BHP’s under-performing South Australian ventures) was influenced by the ‘positive package’ of the Argentinian government which ‘is very focused on its efforts to attract capital investment’.

The crux of BHP’s move is in the enormous potential capital expenditure that will add to a capex that is already weighed more to BHP’s overseas adventures than home base. And that is even without making any provision either for the potential cost of its hopes to make its newest South American copper interest into one of the world’s largest not including its overall $US10.5 billion spend on Canadian potash.

Then last month the $2.6-trillion Australian superannuation funds industry advised us, from its Albanese government-supported New York corporate love-in, that the US provides better opportunities than domestic markets for investing superannuees’ funds and is putting a prospective one trillion dollars of their money where its mouth is. When Treasurer Jim Chalmers noted that this was ‘Not just a way to explore mutually beneficial investment opportunities but as a powerful demonstration of the strategic and economic alignment between our two countries’, it became evident that the government’s strong support related more to the political objective of using it as a lever in the hope of avoiding a Trump tariff hit on Australia than on whether it was a good deal for superfund members.

So what has prompted both a key Australian direct investor and a group of cashed-up portfolio managers to search overseas for suitable opportunities when so many essential projects, particularly in energy, are seeking funding at home, many having been? denied bank-sourced support on ideological grounds? Australia used to sell itself, successfully, as one of the world’s best places for investment. Not now. The second-rate people running Australia that, according to my old editor Donald Horne in his book The Lucky Country, share its luck, have now run out of it. The result is that the private sector has had to move the search for rewarding returns overseas – a fiscal version of the old cultural cringe that Horne railed against more than half a century ago. Our own projects aren’t good enough and there are not enough of them.

On the direct investment exodus, Australian governments are now reaping the sour seed they sowed in ignoring the repeated warnings across the spectrum of business leaders, but particularly in the resources sector, of the threat to investment posed by unfriendly governmental policies (federal and state), red, green and now black tape with unacceptable delays in approvals, rising costs (particularly of power) and obstructive (often government-funded) activism that are pushing capital offshore.

BHP’s Mike Henry reinforced this message in his company’s half-year report last month: ‘Given the negative impact on investment economics resulting from the change in coal royalty rates, and the increase in sovereign risk due to the decision to raise royalties without consultation, we will not be investing in any further growth at BMA [BHP’s joint venture with Mitsubishi which is Australia’s largest producer and exporter of steel-making coal] however we will sustain and optimise our existing operations.’ No wonder BHP is taking its multi-billion dollar projects where it is made welcome.

BHP is not alone. Hancock Prospecting’s Gina Rinehart complained ,‘The current policy environment, duplication of processes, overreach from all departments and delays to approvals is negatively impacting new investment into the mining industry and is reducing Australia’s competitiveness in the international resource sector.’

And Minerals Council CEO Tania Constable, after reminding the government of its reliance on the mining industry’s $74 billion in taxes and royalties to achieve its budget surplus, added, ‘Undermine it at your peril,’ pointing not only to the threat to future prosperity but also to the erosion of existing copper, gold, uranium, coal and iron ore operations through ‘reckless’ industrial relations policies, state government ‘royalty raids’, excessive environmental rules and high energy costs. ‘The cumulative effect is having a profound impact on the viability of projects, the risk appetite to unlock future projects, and the ability to attract investment. Each new regulation, each new tax, additional layer of complexity, and arbitrary decision makes it harder for us to compete against competitors with no such constraints.’

For the natural gas industry, these concerns have an immediacy. After six years of frustration, Woodside, which has been subjected to years of costly delays from unsuccessful but effective activist lawfare, now faces a further hiatus. It cannot commence work on the WA government-approved extension of its 40-year-old north-west LNG project while awaiting a politically motivated deferred federal government approval process.

All this is against a backdrop of last December’s warnings from the federal government’s chief economist of the prospect of declining earnings for the resources and energy exports that have made up more than three-quarters of Australia’s total merchandise trade exports of $560 billion a year. The warning significantly targeted the big ticket items like iron ore, coal and LNG, with the notable exception being gold. This always glitters in uncertain economic times, lifting its earnings to $35 billion.

Future revenue prospects from mining are not enhanced by this year’s forecast of only a modest rise in overall capital spending by resource and energy companies, particularly when compared to investment surges by overseas competitors.

The Albanese government pins its hopes on resolving any problems by a combination of a boom in ‘critical minerals’ (How really rare are ‘rare earths? And what is next for the lithium boom and bust?) and Australia becoming a renewable energy powerhouse meeting our Asian customers’ needs for energy security via a (readily cuttable?) undersea cable. Opposition leader Dutton sees the solution in removing the disincentives to investment (particularly activist obstruction) with the government becoming the industry’s ‘best friend’.

So Australia faces a diminishing capacity to depend on its traditional mineral resources for its prosperity as key industry players focus on overseas while retirement fund managers prefer to finance foreign enterprises.

In marking the beginning of the second quarter of the 21st century, the year 2025 has formally begun Australia’s next 25 years as we blunder towards 2050’s net-zero target that, with climate hysteria and an anti-business governmental mindset, is playing such a key role in our inevitable decline.

Author: Michael Baume