Category archive: Mineral & Resources

Australia Blocks $13B Bid by Hong Kong Company for Pipeline Operator

The Australian government has rejected a $13 billion bid by Hong Kong-based CK Group for the country’s largest natural gas pipeline operator.

In June, CK Group launched a bid for APA Group, the owner of 15,000 km of gas pipelines across New South Wales, Victoria and the Northern Territory.

Treasurer Josh Frydenberg said he blocked the deal because “it would result in a single foreign company group having sole ownership and control over Australia’s most significant gas-transmission business.”

In a statement released on Wednesday, CK Group confirmed that the acquisition will not proceed.

Frydenberg said the government will continue to welcome foreign investment into the country that is not “contrary to our national interest”.

Two years ago, the Coalition government also blocked CK Group’s bid to take over NSW electricity distributor Ausgrid. However, the group’s $7.4 billion acquisition of power company DUET Group was approved last year.

A $38M Tesla Battery Plant to Run in SA Starting Next May

A $38 million Tesla battery plant in South Australia is on course to be running in May 2019.

The new 25MW/52MWh grid-scale battery will be built by Infigen Energy at the Lake Bonney wind farm with funding from the Australian Renewable Energy Agency and the state government.

“This project has had its challenges but it’s actually travelling very well at the moment,” said Igor Brandao, general manager of development at Infigen.

“It’s comprised of 296 battery packs and 48 converters …These are all containers that will be sitting on a bench and connected to the substation which is where the Lake Bonney wind farm connects into.”

Infigen’s CEO Ross Rolfe said the Tesla battery will help Infigen to become an active electricity market participant. “With this capability Infigen will be able to expand its supply contracts from the Lake Bonney Wind Farm to additional commercial and industrial customers in South Australia, which is at the heart of our business strategy,” said Rolfe.

“We will also be able to reduce our exposure to FCAS costs and respond to the impact of the five-minute settlement rule when it is introduced in 2021.”

The plant is expected to last 10 to 15 years.

Tesla has previously built a battery plant in the state’s Hornsdale region, which is now owned and operated by French renewable energy company Neoen.

Since the 100MW/129MWh Hornsdale power reserve went live, South Australia has seen reduced costs in calling for back-up energy, also known as Frequency Controlled Ancillary Service (FCAS). According to AEMO’s first Quarterly Report of 2018, FCAS costs dropped 57 per cent or around $33 million in the plant’s first quarter of operation.

Battery has played an important role in keeping South Australia online, especially after the statewide blackout in September 2016.

peabody energy mates in construction mining r u ok

Australian Mining Companies Join Suicide Prevention Program

As Australia celebrates R U OK Day, an industry has been working on its own awareness program. More than 1,000 construction and business sites across the country are taking part in MATES in Construction Fly the Flag Day, a campaign to raise awareness of suicide prevention.

MATES national chief executive Chris Lockwood said the number of participating sites has more than doubled last year’s, indicating greater momentum for the program.

“For the first time this year we have mining and energy businesses participating along with construction sites,” said Lockwood.

As part of its campaign, the organisation has trained over 140,000 workers to develop life-saving skills to recognise co-workers’ possible struggles and intervene when needed. According to Lockwood, 190 Australians who work in the construction industry take their own life each year, accounting for a suicide every second day. Australian Mining reported that construction workers are six times more likely to die from suicide than a workplace accident.

“The construction industry, which is predominantly male, has a culture that can often leave workers feeling isolated and not knowing how to ask for help,” said Lockwood.

“Factors such as job insecurity, high work demands, and financial stress combined with relationship breakdowns put workers in the construction industry at greater risk and MATES will continue to do all we can to prevent suicides in this and similar high-risk industries.”

Brad Geatches, MATES chief executive for Western Australia said that the industry was partly responsible for workers’ distress due to its competitive, insecure nature. However, ”society is generally becoming more aware of the issue of mental health and suicide, it’s coming out of the shadows, stigmas are breaking down,” said Geatches.

AGL Announces Power Price Drops

AGL has announced price drops for power in New South Wales, Queensland and South Australia, following competitor Origin’s similar move this week.

Residential electricity prices will be cut by 0.3 percent in NSW, 1.5 percent in Queensland and 0.4 percent in SA, much lower than what market analysts predicted.

“While these price cuts are slight, they’re part of a downward trend that is emerging as more investment in new sources of supply comes into the market,” said AGL’s chief customer officer Melissa Reynolds, referencing the increasing network and green costs.

“We understand power prices have been high and that has put pressure on many households.”

On Tuesday, Origin announced that it will cut residential electricity prices in south-east Queensland and SA by 1.3 percent and 1 percent respectively, while maintaining the same prices for NSW and the ACT.

Origin’s Power Price Changes. Source: Origin/ABC

Both drops are far lower than the Australian Energy Markets Commission’s (AEMC) forecast, which expected 5.8 percent fall in NSW, 7 percent in south-east Queensland and 6.9 percent in SA in 2018-19.

Julian Meehan Adani

Queensland Government Considers Using Public Funds for Adani Road Project

The Queensland government is considering covering the $100 million cost of road access for Adani coal mine, despite promising that no taxpayers fund would go to the project.

The ABC said documents obtained under a right to information revealed the Palaszczuk government is still in negotiations with Adani and Isaac Regional Council about upgrading access to the proposed Carmichael mine site in central Queensland.

However, the Department of Transport and Main Roads said no decision has been made yet.

In November, Palaszczuk said she would not rule out helping the local council fund the access road. A spokesman for the government said it would cooperate with local councils in regard to their infrastructure needs. “Significant projects can impact on local road networks and improvements to those networks can benefit the greater community,” he said. “Costs associated with major projects are recovered by the state on a commercial basis.”

The ongoing negotiations have received backlash. “Annastacia Palaszczuk has lied to Queenslanders and has broken yet another election promise,” said Opposition Leader Deb Frecklington.

The Mackay Conservation Group said the government must rule out funding the road project. “The Queensland Coordinator General recommended Adani be responsible for road upgrades and Adani said it would pay for the upgrade,” said the group’s spokeswoman Maggie McKeown. “Why then would the premier spend public funds on this project?”

Rio Tinto’s Climate Change Resolution Marks a Significant Shift in Investor Culture

Anita Foerster, University of Melbourne and Jacqueline Peel, University of Melbourne

What does the advocacy group the Australian Centre for Corporate Responsibility (ACCR) have in common with the Local Government Super fund, the Church of England Pensions Board, and the Seventh Swedish National Pension Fund?

Quite a lot, it seems. These three institutional investors joined with the ACCR to co-file a shareholder resolution on climate change at mining giant Rio Tinto’s Australian annual general meeting in Melbourne yesterday. While Rio’s board advised shareholders to vote against the resolution, there was a very healthy showing of 18.3% shareholders voting in support (over 20% including abstentions).

The resolution called on Rio to review and comprehensively report on its membership of industry associations such as the Minerals Council of Australia (MCA). The MCA’s pro-coal political lobbying has been distinctly at odds with the position of companies such as Rio, which publicly support measures to reduce carbon emissions in line with the Paris climate agreement.




Read more:
Is BHP really about to split from the Minerals Council’s hive mind?


This alliance between civil society and institutional investors is significant for several reasons.

Institutional investors (large investors such as superannuation funds which pool money to buy shares and other assets) are increasingly concerned about the long-term resilience of their investments to the business risks posed by climate change.

For an energy-hungry miner such as Rio, these risks include changing energy prices and markets, as well as operational disruptions caused by climate impacts such as storms, floods, and droughts.

Investors want companies to disclose these risks fully and to outline how they will manage them to maintain company value over the long term. As the Rio resolution suggests, they also want companies to be transparent and consistent in their approach to climate change. Paying multimillion-dollar memberships for industry associations that lobby against climate action is inconsistent with the long-term investment goals of such shareholders.

New phenomenon

Shareholder resolutions on climate change are a relatively new phenomenon in Australia. In the United States, however, there is a long history of using resolutions to pressure companies to address human rights abuses and change their approach to issues like climate change.

In Australia, advocacy groups such as ACCR (and its counterpart Market Forces) have taken up this tool more recently and lodged resolutions to Australian banks, utilities, oil and gas companies, insurers, and now the big miners, asking for improved disclosure and better management of climate risks.

What’s more, institutional investors are increasingly backing these requests. This latest resolution to Rio Tinto is also reportedly supported by key voting advisors ACSI and Regnan, as well as other major Australian super funds.

As a result, it marks a significant shift in investor culture in Australia, signalling an increased willingness to engage proactively and publicly on environmental, social and governance issues.

Compared with the US and UK, shareholders in Australia have more limited rights to bring resolutions to an AGM expressing their views or requesting that certain actions be undertaken by company management. Australian court decisions have upheld a strict division of powers between company management and shareholders. Nonbinding advisory resolutions on matters that interfere with company management are not permitted. This means shareholders must lodge a special resolution to change the company constitution to allow them to put forward an advisory resolution on a substantive matter such as climate change.

This is not only clunky and inefficient, but also acts as a significant deterrent for investors to support a substantive resolution with which they would otherwise concur. There are renewed calls for law reform, widely supported by institutional investors and also, increasingly, by some of the companies facing these resolutions, to change the law to allow for a more consistent and orderly approach in Australia.

Do these resolutions actually change behaviour?

From their brief history in Australia so far, it appears that shareholder resolutions on climate change, together with a range of other influences, do have the potential to drive change. Many Australian companies that have faced these resolutions so far have responded with significant improvements in climate risk disclosure and management.

Santos recently released its first Climate Change Report; AGL has developed a long term energy transition strategy; and BHP Billiton (which faced a similar resolution to Rio Tinto on its membership of industry associations in 2017) has announced its withdrawal from the World Coal Association and reviewed its other industry association memberships, including the MCA.

While these developments are undoubtedly the result of many factors – including technology and market developments, behind-the-scenes engagement with investors on climate risks, and increased pressure from financial institutions and regulators – it seems that shareholder resolutions can help to focus a company’s attention on ensuring its climate stance is defensible to shareholders. The impact of these resolutions in Australia may also be a function of their relative novelty compared with other jurisdictions such as the United States.




Read more:
Why has BHP distanced itself from legal threat to environment groups?


This week’s resolution at Rio Tinto signals a coming of age for investor engagement on climate change in Australia. Shareholder resolutions have clearly become an important part of the toolbox for civil society in Australia seeking to influence corporate decision making on climate change.

As mainstream investors come on board with these resolutions, their potential impact is heightened considerably. For their part, Australian institutional investors seem to be increasingly willing to stand behind calls for better disclosure and management of climate risks by the companies in which they invest, including by forming new alliances and supporting the use of these more activist tools.

The ConversationIn a country with a relatively conservative approach to investor engagement, these are important cultural shifts. They offer promising signs that Australian businesses and investors are taking a more considered and proactive approach on climate risks.

Anita Foerster, Senior Research Fellow, University of Melbourne and Jacqueline Peel, Professor of Environmental and Climate Law, University of Melbourne

This article was originally published on The Conversation. Read the original article.

AGL to Build $400 Million Gas-Fired Power Plant in NSW

AGL will build a $400 million gas-fired power plant near Newcastle, NSW to replace the ageing Liddell coal-fired station.

The energy company said it is assessing sites for a 252-megawatt facility development, due for completion in the end of 2022.

“AGL is committed to supporting the orderly transition of Australia’s electricity generation capability to modern, clean and reliable energy supply,” said AGL chief executive Andy Vesey.

“That’s why we gave seven years’ notice of when we intend to close the Liddell power station at the end of 2022 and we are pleased to commit today to build the power station near Newcastle.”

AGL also said there were plans to “assess the potential” to develop a further 500 megawatts of gas-fired generation capacity, pending commercial and industrial demand.

The company’s announcement to the Australian stock exchange followed pressures from the federal government to sell Liddell power plant instead of closing it. Rivalling company Alinta has expressed interest in acquiring the power plant to keep it open until 2029.

Federal Environment Minister Josh Frydenberg said Liddell’s closure would still bring blackout risk, even with the replacement plan. “That’s why it’s really important that the executives of AGL consider on its merits this offer that comes from Alinta,” Frydenberg said.

The Australian Energy Market Operator (AEMO) said there would be a potential shortfall in capacity of 850 megawatts if Liddell was to be closed, but it also said AGL’s replacement plan “would deliver sufficient dispatchable resources to fill the identified 850MW resource gap”.

Will Rio Tinto’s Bid to Escape from Its Contracts with Rusal Succeed?

Mark Giancaspro, University of Adelaide

Mining giant Rio Tinto is attempting to use new American sanctions on Russia to walk away from an agreement with a Russian aluminium company, Rusal. But if the contract is not worded precisely, the law may actually work to Rio’s detriment.

Many companies have successfully ended contracts when war has broken out or the government has changed the law in ways that significantly impacted the contract. However, the fact a government’s actions have made a contract harder or more expensive to complete does not automatically mean it will be terminated.

Rio Tinto’s case depends on whether it can invoke a “force majeure” clause in its contracts with Rusal. This kind of clause allows parties to suspend or end a contract when unique and unforeseen events beyond their control occur.

Under the new sanctions, companies and individuals within the United States have until May 7 to divest or transfer any debt, equity or other holdings in Rusal. Rusal is controlled by Russian billionaire Oleg Deripaska, who has previously been investigated for money laundering, extortion, bribery and alleged links to organised crime groups.

Rio Tinto has a joint venture with Rusal that could be affected by the US sanctions.

The effect of force majeure

Typically, when unique or unforeseen events occur, the contract may be legally “frustrated” and end automatically. Frustration is the legal term for a contract being so radically affected by unforeseeable events outside the control of the parties that it is terminated.

A force majeure clause generally prevents this happening because the inclusion of the clause is regarded as “foresight” of the event. However, force majeure clauses typically allow parties to end the contract if the event lasts for a given time, and don’t always require “radical change” like the frustration doctrine does.

It all turns upon the wording of the particular clause in the Rio Tinto contracts.

Force majeure through history

A successful claim of force majeure was made in the American case of Eastern Airlines v McDonnell Douglas Corp. In this case aircraft manufacturer McDonnell Douglas argued that US government policy during the Vietnam War (occurring at the time) caused the government to prioritise military contracts over civilian ones.

As a result, McDonnell Douglas’s contract with Eastern Airlines was delayed. It invoked a force majeure clause covering “acts of government” to avoid liability for the airline’s lost profits.

The court ruled that McDonnell Douglas was entitled to rely upon the force majeure clause and walk away from the agreement due to the government’s policy.

Importantly, just because a contract has a force majeure clause, this does not mean it can be used freely. Some English cases suggest that parties must still make reasonable efforts to keep the contract alive before resorting to force majeure. Evidence of attempts to preserve its contracts with Rusal would likely work in Rio Tinto’s favour.

The courts have also stressed that force majeure cannot be relied upon where there were reasonable alternative ways to complete the contract.

In the Australian case of European Bank Ltd v Citibank Ltd, Citibank was unsuccessful in claiming force majeure when it transferred European Bank’s deposit to a New York account and the funds were seized by the United States Marshal. The force majeure clause allowed Citibank to escape liability if it could not perform due to “reasons beyond its reasonable control”.

The court held that Citibank could have refunded European Bank’s deposit from other accounts or made other arrangements, so the situation could have been avoided.

In Rio Tinto’s case, its efforts to make alternative arrangements will be of critical importance. If there are no feasible options other than to cancel the Rusal contracts, force majeure will likely apply.

When force majeure doesn’t work

But there are plenty of examples where force majeure events such as government intervention have not been regarded as sufficient grounds to end a contract.

In 1962, a court in the United Kingdom found that the closure of the Suez Canal was not sufficient to end a contract requiring 300 tonnes of Sudanese nuts to be shipped between Port Sudan and Hamburg.

The Suez Canal would have been the cheapest and fastest shipping route. However, it was still possible to deliver the nuts by sailing around the Cape of Good Hope, even if this increased the cost for the seller and took more time.

Inadequate wording in a force majeure clause can also backfire, as in the Kriti Rex case. Here a force majeure clause covering ‘“events beyond the control of the parties” was deemed inapplicable because the courier hired by the purchaser (which damaged the goods) was regarded as being within the purchaser’s control.

So what for Rio Tinto?

Ultimately, the success of Rio Tinto’s attempt to invoke force majeure depends entirely upon the wording of the clauses and whether these account for events such as sanctions being imposed.

But it is highly unlikely the clauses would be this specific as the circumstances are unique. Traditional inclusions in force majeure clauses are things like natural disasters, labour strikes or war, not a foreign government’s political sanction of a company’s controller.

Force majeure clauses are also interpreted quite narrowly by courts, so cannot just be stretched to cover every situation.

If the clauses in Rio’s contracts are deemed not to account for the US sanctions, Rio must rely on the doctrine of frustration. It would need to demonstrate that contracting with a company controlled by a Russian oligarch who has been subsequently sanctioned by the US was a reasonably unforeseeable event when the contract was made, and this event radically altered the contract.

It would not be enough for Rio Tinto to argue it might lose money or be inconvenienced. Though the US government’s actions might have been unexpected, the broader effects of Rusal’s suspension upon Rio Tinto’s operations remain to be seen.

The ConversationIf the consequences are purely financial or inconvenient, Rio Tinto’s legal mettle might be tested.

Mark Giancaspro, Lecturer in Law, University of Adelaide

This article was originally published on The Conversation. Read the original article.

Rio Tinto Appoints Simon Thompson as New Chairman

Rio Tinto has appointed former investment banker Simon Thompson to be its new chairman starting March 2018.

Serving as a non-executive director in the company’s board since 2014, Thompson will be replacing 63-year-old Jan du Plessis.

“Mr Thompson has over 20 years’ experience working across five continents in the mining and metals industry,” the mining company said in a statement. Thompson has also chaired private equity firm 3i Group and British exploration company Tullow Oil.

Du Plessis also welcomed the changeover. “I am really pleased to be succeeded by Simon, especially given how closely we have worked together since he joined the board some three years ago,” said du Plessis. “I am handing over the baton at a time when the business is in great shape and Rio Tinto has the strongest balance sheet in the sector.”

Thompson said: “I look forward to leading the board as we work with [chief executive Jean-Sebastien Jacques] and his team to ensure that Rio Tinto continues to deliver superior returns for its shareholders by maintaining its capital discipline and ‘value-over-volume’ approach.”

Upon taking over the position, Thompson is expected to deal with increased scrutiny surrounding issues like alleged coverup of losses in Mozambique in 2011 and corruption in the Republic of Guinea.

News: Petrol Prices Rise in Australia as OPEC-Led Deal Takes Effect

Petrol prices have risen by up to 20 cents a litre in a number of areas in Australia, following the December agreement between the Organisation of the Petroleum Exporting Countries and non-OPEC oil producers to cut production.

According to the Australian Institute of Petroleum, the national average price of unleaded increased by 2.2 cents over the week to Sunday to 128.3 cents per litre.

While Melbourne prices remained steady at $1.22 per litre, Sydney and Adelaide’s prices reached above $1.40. Other capital cities fell in between these extremes, with prices around $1.30 a litre.

There were also some local variations, with some parts of Tasmania – such as Hobart and Launceston – reaching $1.46 a litre.

Experts have recommended motorists to fill up quickly before the prices rise even further.

“The low petrol prices are not sustainable and prices are likely to lift markedly in coming days,” said Savanth Sebastian of stockbroking firm CommSec.

The Australian Competition and Consumer Commission (ACCC) warned that the price hike could be exacerbated by the falling Australian dollar.

“The ACCC is concerned that petrol prices are increasing in Sydney, and those in Melbourne, Brisbane and Adelaide may increase in the coming days,” said ACCC chairman, Rod Sims.

“Motorists should get in early, shop around, and consider filling their tanks before prices jump.”

Sebastian said the petrol price hikes would be applied around the world.

“The focus now shifts to see if oil producers comply with the stated production cuts,” said Sebastian.

“The early indications are that producers are already notifying customers in Asia, Europe and the US of cuts to oil deliveries from January. Importantly for motorists it means higher pump prices in the medium term.”