Download to read offline
Uploaded byGrant Musgrove
Why are't you rich? You are in the resources industry after all...
This document outlines 7 reasons why people in the resources industry are not rich, according to the CEO of ACOR. It discusses issues like not being paid for positive externalities like carbon abatement; secondary resource prices not accurately reflecting costs; a one-dimensional focus on resource scarcity; pervasive imperfect information; the need to focus on total factor productivity; governments not prioritizing industry profitability and development; and the high costs of waste crime.
Why are't you rich? You are in the resources industry after all...
- 1. “Why aren’t yourich? You're in the resources industry after all… 7 reasons.. Grant Musgrove ACOR CEO E-mail: grantm@acor.org.au
- 2. Reason 1: Weare 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: Secondaryresource 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 scarcityis 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: “Imperfectinformation” 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 thirdsof 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: Governmentsare 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: WasteCrime 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
- 9. Reason 7: WasteCrime • Criminal elements: • Launder money (metals) • Stockpile/ Dump • Illegally export (international organised crime) • Effect: lower prices/unprofitability Market distortions govt subsidies
Editor's Notes
- #4 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
- #5 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