Would it be nice if FMG swallowed BRU for $2.50 a share, it would make my day!
Twiggy’s land grab
The
Weekend Financial Review has discovered numerous exploration tenement applications to explore Minderoo. This is no surprise, as the Pilbara is synonymous with mining fortune but, interestingly, many of the applications are from Fortescue.
So far the story makes sense but the plot thickens when it turns out the applications are being opposed by a private company called Forrest & Forrest,owned by Andrew Forrest and his brother David.
Why is one hand of Forrest trying to do something that the other hand seems determined to block? Critics believe it is a complicated tactic to lock up the land and avoid “use it or lose it” rules that are supposed to apply to exploration licences.
In mining parlance, it’s called tenement parking – and Fortescue is an exemplary practitioner, having locked up as much as 57,000 square kilometres of land and coastal waters across north-west Australia, rent- and tax-free. It’s barely legal.
Tenement parking – or purposefully delaying the granting of an exploration licence – has been used by some of the country’s biggest miners to stifle competition by locking out opponents from the heart of the mining boom in the mineral-rich Pilbara.
Rio Tinto’s head of iron ore Sam Walsh is well known for telling employees and analysts that Fortescue’s reach is “real estate, not mining”.
Securing tenements in the Pilbara has become the name of the game in a mining sector that has grown in sophistication ever since Asian steel mills’ demand for iron ore began heating up about a decade ago.
Now, an army of independent and in-house specialists across Perth scour data, hoping to snatch a key tenement from a competitor, secure land for a mine or infrastructure, frustrate a rival or any combination of the above.
Tenement parking is not limited to iron ore reserves, nor the Pilbara. But with Pilbara iron ore sales in 2010-11 climbing to a record $57.3 billion, in a sector that represents Australia’s biggest export with forecast offshore sales of 460 million tonnes in fiscal 2012, it’s easy to see why companies aim to lock up the lucrative land.
At Minderoo, Fortescue’s application limits other miners from exploring it: the objection raised by Forrest & Forrest stops Fortescue exploring it.
“You would have to think it’s a delaying mechanism,” one Perth tenement manager says. “You put the application in to stop others doing it; then you oppose it. I’m going to make a wild prediction that negotiations between Fortescue and Forrest & Forrest will take some time.”
But a Fortescue spokesman says the miner has serious intentions to mine Minderoo. “Fortescue’s exploration team identified an area north-east of Carnarvon which may be prospective for mineral extraction,” the spokesman says. In a statement from the company’s media relations department, Minderoo pastoral operations director Greg Parker explains that the lodging of an objection is used to trigger discussions about the terms of access to a property.
Yet whatever ambiguity surrounds the Minderoo case, the same does not apply to several large parcels of land around the Yule River,several hundred kilometres east of the property. There, native title holders are as confused as anyone as to why several tenements pegged by Fortescue have been in a “pending” state since 2006, when the process can take as little as six months.
Kariyarra elder Donny Wilson, representing the region’s native title holders, says there is an agreement with Fortescue that means the miner can explore. “In simple terms, this means that the native title aspects of these tenements have all been agreed to and face no obstacle from the Kariyarra people,” Wilson says.
As Fortescue has had the Kariyarra tenements in a parked state since 2006, the miner has paid no rates to the local shire or rent to the state government. And it has not spent a cent on exploring the land in that period.
“Five or six years is an inordinate amount of time for an exploration licence to be granted,” one tenement manager says. “If it goes beyond two or three years, you have to be taking the piss out of the system.”
Asked why the tenements in the Kariyarra agreements, such as tenement numbers E47/1665 and E47/1666, had not yet been granted, the Fortescue spokesman says: “Fortescue adheres to the WA Department of Mines and Petroleum process for the application and granting of tenements and also the retention of those tenements.”
The principles behind WA’s tenements system, which are governed by the Mining Act, are colloquially summed up by experts as “first in, first served” and “use it or lose it”.
The system is designed so a resources company can stake a broad claim before promptly moving to an exploratory phase where it identifies precisely where it wants to mine, if at all. The transition from having a “pending” exploration licence to a “granted” one should take about six months, according to the department, as long as there are no extenuating circumstances.
Once an exploration licence is granted, a miner is required by law to drop excess tenure, leaving other resource companies to explore the land for their own purposes, for the good of the sector and the broader economy.
All the while, a miner must pay rent to the shire and the WA government, and adhere to minimum expenditure requirements to prove it is exploring the land. If it fails to pay the rent or progress its claim, other companies can swoop and snatch the tenements in a process called “plainting”.
Yet the principle designed to promote competition in the sector – “use it or lose it” – is often abused. Experts say there are several ways industry participants do so, such as purposeful stalling on an agreement with indigenous groups over land access, which is among the most common.
“You just don’t agree with the detail of the Aboriginal heritage agreement,”one Perth-based mining executive says. “Once you get lawyers involved, it slows everything. It just goes into suspended animation.”
Lengthy negotiations with indigenous groups should rightfully occur before a mining licence is granted, not during the far less intrusive process of applying for an exploration licence.
http://www.copyright link/p/national/twiggy_land_grab_yoPM5nGkewXEizoswt1GCP
Just for you Cudeco.
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