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Andrew Michelmore- MMG Limited- Melbourne Annual Dinner speech


ALABC 2016 MELBOURNE ANNUAL DINNER 

WEDNESDAY 3 AUGUST 2016

ANDREW MICHELMORE  SPEECH


Thank you to The Australia-Latin America Business Council for your invitation to speak here this evening.  

It is wonderful to have this opportunity to connect with such a diverse range of distinguished representatives which connect our two continents; Australia and South America.  

Latin America and Peru

As the CEO of MMG and also the Chair of the International Council on Mining and Metals, the ICMM, I am proud to be a part of the strongest trade link between Australia and Latin America – the mining sector.   

The ICMM brings together 23 mining and metals companies and 34 national and regional mining associations. It addresses the key challenges in sustainable development and sets the standards for sustainability wherever we operate in the world.  

This is a unique collective – now in its fifteenth year – representing over 60% of the world’s mineral production and dedicated to being a catalyst for change.  The ICMM is dedicated to improving the social and environmental performance of the mining and metals industry and 17 of the 23 member companies have operations in Latin America.  

 

Today, mining accounts for the largest share of Australia’s trade and the majority of the leading mining companies have a significant presence in Latin America. 

As a region it is blessed with a significant natural resource endowment, immense diversity in the minerals available; and the potential to translate this blessing into strong economic growth, improved living standards and infrastructure development to benefit future generations.  

Few countries have had a greater contribution from mining to their living standards than Australia.  
Melbourne, where we meet today, owes much of its wealth and architectural beauty to the gold rushes of the late 1800s and the ‘Collins house’ companies including BHP/CRA and WMC.  
Part of what has made us ‘the lucky country’ is this ability to attract mining investment through a stable regulatory regime, plentiful resources and low sovereign risk.  

Our Story 

Peru, our newest operating jurisdiction offers many of the same opportunities. It is also similar to Australia in its dependence on resources and the significant benefit it derives from foreign direct investment.  

It has diverse resources, a significant pipeline of future projects and balanced investment and regulatory settings.  

Our expansion to the region, through our acquisition of the Las Bambas copper project two years ago, has been transformational for MMG. It has significantly changed our production profile – we are now an emerging major copper producer.  

Our ability to grow during this commodity down cycle, when much of the industry is seeking to downsize, is thanks in large part to the support of our major shareholder China Minmetals Corporation, known as Minmetals.  

Together with Minmetals we share an ambition to build a global mining major and to be at the top of the mid-tier miners by 2020. 

MMG’s experienced management team combined with China’s funding potential provides for a powerful combination to drive growth and investment in Latin America. And we are on our way.  

On 1 July we announced the start of commercial production at Las Bambas following a successful ramp up and commissioning.  

Las Bambas is the largest copper mine to be built for more than a decade and represents a ten year, over $10 billion investment into the future wealth of the comparatively poor region of Apurimac in the Southern Andes.  

Its scale means that it will be a major contributor to Peru’s exports and tax contributions. It will deliver employment and development and create wealth for the community and shareholders.   

The Central Reserve Bank of Peru estimates that Las Bambas, and fellow mining development Cerro Verde, will contribute 2% to global copper production and increase the national GDP by 4%.  

Mining has contributed approximately 12% to Peru’s GDP since 2000 which translates to an enviable growth rate of more than 6% - the highest among Latin American economies. It is also the fastest growing export sector, accounting for 62% of the country’s exports. 

Where the industry’s largest impact is felt is in the regional communities.  A study from the Peruvian Institute of Economics estimates that the Apurimac region grew 31.6% between January and March of 2016 due to activity surrounding Las Bambas.  

The region’s economy is expected to double this year – this is consistent with the overall trend between the mining regions which reported a 12.4% growth rate in the first three months of 2016, and non-mining regions which reported a growth rate of 0.1%, excluding Lima.  

Undeniably, mining is a major catalyst for the rising standards of living in Peru and as an industry it has become increasingly sophisticated.  

Yet our industry struggles to attain broad acceptance. This is not a new struggle.  

While the challenges are unique they often mirror the same issues we see in more seasoned jurisdictions, including Australia.  

To date, over a billion US dollars has been spent on community infrastructure and social development in the region surrounding Las Bambas.  

The relocated town of Nueva Fuerabamba is a modern community in the Andes which would not look out of place in the suburbs of Melbourne.  
  
As is the case in most remote communities where mines are located, including the Australian Outback, an expectation is established for the company to take a leading and active role in the economic and social wellbeing of its neighbouring communities.  

As miners, we assume the responsibilities of delivering social, economic and health outcomes without having an elected mandate to deliver.  

We also face the challenge of meeting rising expectations while contending with the perception that the industry does not contribute as much as it should. This results in often short term tax-based solutions which fail to offer sustainable benefits.  

We saw this in Australia’s proposed Resource Super Profit Tax which was replaced by the Minerals Resource Rent Tax.  

Similarly, in Peru a profit tax which aims to share the industry’s profits with frontline workers has led to unintended consequences including the growing income gap between mining and other sectors.  
Governments have a critical role in ensuring that the profits raised are used as a catalyst for industry-related development and growth, especially the provision of infrastructure. 

The debate should be less about how you slice the pie, and more about how you grow the pie. Access to plentiful natural resources is a competitive advantage that not all countries share. The challenge for Peru and Latin America is how you transfer this advantage into a competitive strength.  

Ensuring sustained, long term economic growth and softer landings during the downturn as we are experiencing now, is a joint effort between governments, civic society and of course the industry.  

Governments must offer stable regulatory conditions which support growth. The industry must showcase transparency and strong governance, and civic society must capitalise on the opportunities mining affords to improve education, increase employment opportunities and to raise living standards.  

I am encouraged to see that as a region Latin America has, after decades of political upheaval, emerged as a region championing governance reform. One example of this is Peru’s pioneering role in the Extractive Industries Transparency Initiative process - demonstrated by 11 years of publically reporting mining and oil and gas revenues. 

Conclusion  
There is also something unique in the character of Australians that make them very much at home in Latin America. It goes beyond respect for a good BBQ to a feeling of progress and promise. While both our continents are home to ancient civilisations, we share a feeling of opportunity and we don’t take ourselves too seriously.  

I have been a regular traveler to Latin America for many years – mostly to chase mining opportunities. For the last two years, I have become a much more frequent visitor and I have grown a better understanding and love for the region.  

Our investment in Peru has lived up to our expectations – as has the quality of Peruvian cuisine and the Argentinian and Chilean wines! I want to personally thank Jose and the Australia-Latin America Business Council for the tireless work in extending the Latin American and Australian relationships and for his advice to us at MMG in our own entry to Peru.  

And I should also mention the Victorian Government’s outstanding efforts to build trade and investment between the two regions. The opening of a new trade and investment office in Santiago, Chile later this year will provide a Victorian base in Latin America to extend this cooperation.  

Thank you 


Latam News 26-07-2016
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Featured this month: BHP Billiton’s latest expansion at Escondida MMG’s Las Bambas achieves commercial production Australian beef exports to China overtaken ALABC 2016 Melbourne Annual Dinner Peru’s new president to target infrastructure Educational reforms essential to Mexico’s future US travellers to Cuba incr... Sign-in to read

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Featured this month: Venezuela’s economic crisis impacts AMCOR Melbourne Annual Dinner BOOK NOW!!! PPK wins Presidential election in Peru Four Latin American hubs to launch a Start-Up Analysis: Full impact of Panama Canal expansion Peace in Colombia   Sign-in to read

Latam News 31-05-2016
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Featured this month: LADU 2016 showcases Latin America’s mining potential ALABC hosts dinner for Victoria’s Trade Minister ALABC 2016 Melbourne Annual Dinner Australia’s mining prowess on show in Chile Launch of LATAM airline’s new global brand The future of Brazil’s energy sector Peru bets on climate change ada... Sign-in to read

Latam News 28-04-2016
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Featured this month: Austrade’s Oil & Gas Mission to Mexico 25th anniversary of Minera Escondida Investors give Argentina resounding vote of confidence Peru to grow 4% in 2016 and 4.5% in 2017 ALABC Natural Resources Mission to Argentina Cuba’s panorama of economic evolution Ecuador devastated by earthquak... Sign-in to read

Latam News 31-03-2016
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Featured this month: Victoria forging links with Latin America New Ambassadors from Latin America $11bn required for Mexican infrastructure  Analysis: Asia and Latin America strengthen ties  ALABC Mission to Argentina Brazil downgrade won’t stop infrastructure projects Cuba’s Mariel port gains populari... Sign-in to read

LATAM News February 2016
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Features this month include: Petrel Energy raises capital for Uruguay projects  Australia and Colombia strengthen oil and gas ties  Beadell turnaround on course  Oro Verde and Newcrest accelerate in Nicaragua  Australia’s first trade mission to Cuba  Australia’s new ambassador to Brazil ... Sign-in to read

LATAM News January 2016
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Features this month include: MMG ships first copper from Las Bambas  LATAM Airlines strengthens Oneworld alliance  Pacifico Minerals to commence drilling in Colombia  Pacific Alliance bloc to liberalise trade Analysis: Impact on Latin America of slowing in China Peru expanded product offering in tour... Sign-in to read

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