Ball tampering

An American speaking at the Lord's cricket ground in London, at the invitation of an Australia-based club, could be expected to face a few googlies. However, in accepting the challenge, Tom Albanese faced very few hostile deliveries (no mention, for example, of former employees imprisoned in China).

Speaking at the Melbourne Mining Club's annual dinner in London, the chief executive of Rio Tinto avoided the cricketing lexicon, and excused himself from giving any personal insights into the game.

He did, however, talk about a different type of international contest, the “face-off between challenge and opportunity in the global mining industry”

This led Mr Albanese, of course, into tax issues in Australia. He criticised, in particular, the government's original Super Tax proposal for being retrospective.

Mr Albanese described the Mineral Resource Rent Tax as “clearly an improvement” but warned that Rio Tinto remained “somewhat cautious”. He added, “there is still much work to be done to finalise the details”, and that “this will remain high on my personal agenda”

Mr Albanese bridled at suggestions that mining should be treated in a similar manner to the petroleum sector. He argued that the mining industry has many different characteristics from the oil and gas industries, and so are not comparable when considering tax treatments.

Differences include ownership and marketing arrangements that tend to de-risk oil and gas investments, and cost and demand structures that favour oil and gas profitability. He suggested that a headline tax rate of 40% is competitive for oil in Australia, but is not for the mining industry.

Mr Albanese said that Rio Tinto has a large range of options for expansion and investment. These options, he added, have been “hard won”, and promised a “disciplined approach” to capital spending.

Mr Albanese said that “inevitably, some of our projects got caught up” in the tax uncertainty in Australia. However, he did confirm that Rio Tinto is reviewing its Australian projects against the new, more positive, backdrop.

Nevertheless, governments worldwide will want increasingly to raise their share of revenue from mining, and are likely to demand greater control over the companies which develop their country's natural resources. This resource nationalism could, Mr Albanese predicts, limit the supply response to stronger demand.

Mr Albanese called on policymakers around the world to learn from the tribulations of the Australian government in introducing a new taxation policy. It is important, he argued, to consider “the broader economic consequences and continued investment impacts”. Decisions must be taken, he added, after taking in “a wide range of views, in a spirit of consultation and engagement”

Turning to challenges and opportunities for the mining industry itself, Mr Albanese drew attention to a widening skills gap and the challenge of sustainable development.

Mr Albanese warned that the expansion of some traditional operations “will become more difficult due to the reduced labour pool and greater competition”.

He also noted that the required skills in the industry are changing. He said: “The times of simply digging up dirt are far behind us.” The mining industry now demands a broad spectrum of skills.

For example, mining teams need to become more multi-ethnic and multi-cultural to reflect the industry's customer base and the advance of mining's geographic footprint.

Mr Albanese also addressed the issue of sustainable development. Mining companies must continue to concentrate on staff safety, and on the environment and community immediately adjacent to their operations. However, Mr Albanese commended that they also adopt a broader remit.

In terms of the environment, there are three inter-related areas, according to Mr Albanese, where “we can make the biggest difference: carbon, water and biodiversity”

Mr Albanese said there are two reasons for this focus. First, “we do have a significant footprint in each of these areas”. Second, “these three areas are where the potential environmental impacts go beyond local stakeholders and communities, and can even have global impacts”

The leading mining companies of the future will not just be those with brilliant geologists and top-class engineers, but those who understand the myriad issues facing the sector.

Mr Albanese concluded that the relationships with stakeholders, especially governments, will be just as important as being able to find and extract minerals.

The game might be the same but the rules are being altered. Mining-company executives need to be aware that the constituents of competitive advantage are changing.

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