Metals Markets Steel for Price Rises as Australia Pushes to Save Cultural Sites
10 December 2020 - 10:19PM
Dow Jones News
By Rhiannon Hoyle
SYDNEY-- Rio Tinto PLC's destruction of two ancient caves in
Australia to expand an iron-ore mine could have ramifications for
global commodity markets if local lawmakers intensify scrutiny of
mining activities that threaten heritage sites.
Among the most controversial recommendations made by a
federal-government inquiry into the destruction of the rock
shelters at Juukan Gorge in Western Australia in May is a
moratorium on expansions of existing mines or new pits that
encroach on sites of cultural or historical significance. Even if
lawmakers opt for a less hard-line approach, experts warn of
potential delays to production and higher costs that could affect
supply of key raw materials such as iron ore, used to make
steel.
None of the recommendations handed down by the inquiry in its
interim report on Wednesday are binding, but miners risk inflaming
tensions with some investors who feel the industry needs to show
greater sensitivity to environmental and cultural issues if they
don't accept them. They also face sensitive negotiations with
indigenous groups that are the traditional owners of the land.
Metals prices have been rallying as China's economy bounces back
strongly and other major markets recover from the coronavirus
crisis. Copper prices have risen to their highest level in almost
eight years. Iron ore is one of the best-performing assets this
year, fetching $150.75 a metric ton on Wednesday, its highest price
since early 2013.
China's unexpectedly strong appetite for these commodities has
raised concerns over whether there's enough supply, with many
analysts predicting market deficits for iron ore and copper through
at least the middle of next year.
Delays to mining projects in Western Australia, where companies
dig up metals including copper and gold, could push commodity
prices higher and exacerbate shortages already worsened by
pandemic-driven disruptions to operations elsewhere. Iron ore is
considered to be most at risk because Australia accounts for more
than half of the world's trade in the commodity by sea.
"This could be a watershed moment for the Western Australia
mining industry and could impact Western Australia iron-ore
production, and possibly other commodities, in 2021 and beyond,"
Goldman Sachs said.
Already there are tensions between miners and some investors
following the report into the loss of the Juukan caves, which
contained a trove of artifacts that indicated they had been
occupied by humans more than 46,000 years ago.
Fortescue Metals Ltd., the world's fourth-largest iron-ore
exporter by volume, rejected the idea of a voluntary moratorium on
new heritage consents. "We do not believe that this is either a
feasible or practical solution," Elizabeth Gaines, Fortescue's
chief executive, said.
Fortescue said it had worked with indigenous groups to protect
and avoid nearly 6,000 heritage sites threatened by its mining
activities.
Miners must balance the need to replace the ore that they
unearth with respecting the interests of indigenous groups.
Fortescue pointed out that the iron-ore industry has been a pillar
of Australia's economy as it emerges from a first recession in 29
years.
"A moratorium would unnecessarily stall mining, infrastructure
and other activities for an unknown and possibly extended period,"
said Tania Constable, chief executive of Minerals Council of
Australia, an industry group.
Still, many investors feel the industry needs to do more, and
have pushed for leadership changes when standards fall short. Rio
Tinto Chief Executive Jean-Sébastien Jacques and two other
executives were ousted after several investors criticized the
company's initial response to the caves' destruction because no one
had been held accountable.
Hesta, an Australian pension fund for health-care workers, said
it strongly supports the recommendation that companies with
existing heritage approvals, known as Section 18 permissions,
suspend related works until they can verify consent by traditional
landowners.
"The inescapable findings of the inquiry are that Aboriginal
heritage sites remain vulnerable to destruction," said Debby
Blakey, Hesta's chief executive. "It would be unacceptable to
investors that boards of mining companies are not actively and
transparently seeking to understand their exposure to this
risk."
Kim Christie, an iron-ore analyst at Wood Mackenzie, said a
near-term squeeze on commodities supply from Australia isn't
likely. The final report from the inquiry won't be finalized until
next year. Still, there is a risk of higher mining costs and delays
to expansions or new mines later as miners sharpen their focus on
heritage issues and consultation with traditional owners, she
said.
"Certainly moving forward if there is going to be that greater
level of tightness [in supply] it could support prices higher than
we otherwise would have thought," Ms. Christie said.
Scrutiny will especially fall on Rio Tinto. A moratorium on new
heritage consents could affect up to 12 projects that Rio Tinto has
planned over the next five or so years to maintain its iron-ore
production at current rates, Goldman Sachs said. That means there
is a risk that Rio Tinto won't ship 327 million tons of iron ore
next year as the bank had earlier forecast.
Rio Tinto said it is reassessing its mining operations in places
with identified heritage sites that could be affected over the
coming two years.
"I think Rio Tinto would rather forgo a few tons than their
reputation," said Ms. Christie, of Wood Mackenzie.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
December 10, 2020 06:04 ET (11:04 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Rio Tinto (ASX:RIOCD)
Historical Stock Chart
From Mar 2024 to Mar 2024
Rio Tinto (ASX:RIOCD)
Historical Stock Chart
From Mar 2023 to Mar 2024