Why are't you rich? You are in the resources industry after all...
1. “Why aren’t you rich?
You're in the resources industry
after all…
7 reasons..
Grant Musgrove
ACOR CEO
E-mail: grantm@acor.org.au
2. Reason 1: We are creating positive
“Externalities” and NOT being paid for it!
• E.g. Carbon abatement, finite resouce
recycling
• The ERF may bring hope following ACOR
representations, (but unless you’re
organisation is an ACOR member I’m not
going to tell you how :)
3. Reason 2: Secondary resource prices are NOT
telling the truth- they are too Expensive!!
• P- price
• Q – quantity
• D- demand
• MPC – marginal
production cost
• regulatory cost–
marginal cost from
regulating a resource
as a waste
• Regulation should be
risk x probability
basedD
MPC
MPC
+Prescribed
waste cost
P
Q
4. Reason 3:Resource scarcity is Multidimensional
but the focus has been One dimensional
Physical
Not accessible
Decline of ore
grade
Depletion of
reserve
Economic
Price volatility
Profitability
metrics and
markets
Skill supply/
shortage
Geopolitical
Resource
nationalism
Political
stability
Regional
conflicts
Technological
Supply
bottlenecks
Lack of
innovations
Environmental
Social license
to operate
Climate
change
Environmental
standards
5. Reason 4: “Imperfect information” is
pervasive
• Focus of government strategies has been on
increasing the quantity of Recyclate VS Landfill
• Need to refocus on profitability through quality
recyclate (e.g. ACOR’s material specifications in
packaging across other streams)
• Markets “fail” through lower prices/profitability
for fear/risk of receiving contaminated/ variable
feedstock
6. • Two thirds of manufacturing costs are
materials.
• The productivity debate has been
dominated by labour productivity
• Lets take the agenda back to
business, not ideology
Reason 5: Need to focus on “total factor
productivity”
7. Reason 6: Governments are not
focussing on sector profitability and
industry development
• Levy revenue that does not go back to industry
development is a tax on the resource recovery
industry via residuals to landfill
• Commonwealth Product Stewardship schemes
have been policy and commercial failures
because they are not focused on industry
sustainability (eg TVs and Computers)
8. Reason 7: Waste Crime is costing governments
and the community up to $1 billion per year
through:
• Levy avoidance
– waste “disappears”
– high value recyclables waste re- classified as low value waste exported or gets
dumped
– waste sent out of jurisdiction
– illegal dumping & stockpiling
• Tax avoidance
– Cash transactions, GST avoidance
• Market distortion
– E.g. lower prices, jobs lost
• Money laundering
– Metal theft and metal being traded in cash in black market
• Illegal exports
– Breach Basel Convention, e.g. e- waste, used oil, used batteries
• Environmental degradation
Market failure which does not take into consideration marginal social costs of packaging in order to internalise this market failure price needs to contain marginal social , economic and environmental cost including the cost of recovery and recycling
Declining ore grades– zinc, lead and particularly copper and nickel will be affected, as will precious metals such as gold and platinum, rare metals already running out
Low hanging fruit — the high quality large deposits have already been found, lower economic attractiveness of new projects, cost inflation
Price and currency volatility
Market restrictions - a number of emerging economies such as Indonesia have either imposed or are considering new export restrictions on a variety of metals
High risk – greenfield projects located outside traditional mining countries face multiple challenges. Citigroup suggests that a quarter of these may not be developed before 2020, with a further 40% at risk.
Increasing interdependence of resource systems - closely interlinked on the local level and increasingly on the global level
Access -Supply bottlenecks for much needed and scarce equipment
Lack of innovation and technological advancements
Environmental group and labor risks, mining unrest — lack of a social license to operate, incredibly difficult and lengthy permitting processes
Climate change, accidents and natural disasters