Owen Hegarty: It’s time to become the clever country

Australia is regarded as “the lucky country” because it has the minerals in the ground to extract. From a national perspective, there is some truth to the view. Soaring iron ore and coal prices, triggered by heavy demand out of China, have greatly contributed to Australia’s relative economic health at a time when the global financial crisis was laying low most developed economies.

But in other ways, the claim is misleading. The mining industry is globalised and Australia has the capacity to be a world leader irrespective of where the resources are located. Moreover, the industry is not a low-technology sector. Mining involves complex service provision and manufacturing. If Australia wishes to become “the clever country” the way to do so already exists. Yet this is poorly appreciated.

That is the view of Owen Hegarty, non-executive director of iron ore miner Fortescue Metals Group, chairman of new international mining company, Tiger Realm Minerals, and executive chairman of gold miner G-Resources Group. He was the founder and chief executive of base metals miner Oxiana, which merged with Zinifex to create OZ Minerals.

“We have a wonderful opportunity to be very much a leader (in the global mining industry),” Hegarty tells LeadingCompany. “Whether it is technical capability, technology, investment, social licence, and capability generally. All the way from financing, social licence, engineering, design to construction. “

Hegarty cites, by way of example, mines in Laos and Indonesia. The engineering and design is undertaken out of Brisbane or Perth. Financing comes from the big banks or the equities market in Australia. Australian expatriates train up the locals. Equipment is made in Perth or Brisbane. Supplies, especially cyanide, come from the Australian manufacturer Orica.

“Our project up in Russia (with Tiger Realm) is managed from here where we do all the site engineering. You need coal washeries and the best place to design them is in Australia. When it comes to infrastructure, you would do your design and construction here, but you would get it [construction] done out of China because it is closer. We have got a really fabulous opportunity to be intimately engaged and that is why I bang on about that stuff all the time.”

An example of the globalised nature of the mining industry is the locally-listed company China Yunnan Copper Australia, which is 21% owned by China Yunnan Copper (Australia) Investment Development Company, a subsidiary of the Chinese aluminium giant Chinalco. Jason Beckton, managing director of China Yunnan Copper, says the Chinese are attracted to Australian expertise. The company has international operations, with sites in Chile, Laos and Queensland.

“The Chinese are interested in the long term, especially when it comes to exploration,” says Beckton. “With this company they are involved, in effect, with the research and development and business. Historically, they have never done that. They have always had mines.”