Extract from 'On Mining and Minerals'
Sir Arvi Parbo
9 August 2001
The following text is a substantial part of a speech
which Sir Arvi Parbo AC gave to the Melbourne Mining Club on 9
Although he covered many issues, some of which are
included below, of greatest interest to the Lavoisier Group is
his commentary on the Kyoto Protocol.
Nothing is ever completely black or white, and there was a
great deal of merit in, for example, the concern for the environment
emerging in the early 1970s. It was, however, a gross exaggeration
to portray the minerals industry as incompatible with environmental
care. While there were some poor examples from the past, a number
of companies had already recognised the need to minimise and control
effluents and waste and restore and regenerate mined out areas.
On the positive side, the publicity no doubt encouraged these
companies to go further, and induced others to follow. Today,
Australian mining companies are world leaders in land rehabilitation,
helping to re-generate large areas of degraded farmland.
Failure to Understand
The reaction of most of us in the industry at the time, including
myself, was conditioned by the longstanding preoccupation with
mainly technical matters. We considered what the critics said,
made some adjustments to the way we worked, and concluded that
the rest did not make sense. Nonsense cannot be pursued far in
engineering, so we expected that it would also go away in the
public arena. We therefore took little action to counter the negative
views in public and got on with the job at hand.
We made the mistake of not understanding that in politics there
is no such thing as automatic rejection of what does not make
sense. Great empires have been founded on false ideas. Given enough
pressure by skilful activist groups, what does not make sense
has an excellent chance of becoming public policy. Some of it
has in recent decades.
Informing the Public
Subsequently the industry recognised that the very best technical
performance does not guarantee success if public opinion and public
policy are unfavourable. Much effort has been devoted since then
by industry associations and individual companies to both putting
our house in order, and informing the public. Sustainable development
has become a key concept. Companies are increasingly publishing
extensive reports on their environmental, occupational health
and safety, and community support activities in addition to financial
and operational reports. One important lesson learned from this
has been that it is essential to be open and honest, 'transparent'
in current jargon. The worst thing to do is to leave the impression
that one is trying to hide or gloss over something.
Today the stage has been reached where it is becoming important
to remember that the fundamental responsibility of private enterprise
is to create economic value. It is appropriate and legitimate
to ensure that all the various parties affected by a company's
activities are treated reasonably and fairly, and that any adverse
effects are made good. It is in the companies' interests to work
in a favourable community environment, but it is not the proper
role of private enterprise to become a community welfare agency.
The dividing line can become fuzzy and the pressures are always
for more involvement. Companies need to think very clearly when
defining their policies.
Inevitably, there are activist groups, the existence and continued
influence of which depends on exaggerating the issues they are
pursuing. In extreme cases the last thing such groups want is
finding a way in which their professed concerns can be met. Fortunately,
the public eventually sees through such tactics and the extremists
lose their public support.
Truth a Casualty
Regrettably, truth is not always an important concept in public
debates, as has been well explained by American climatologist
'We have to offer up scary scenarios, make simplified, dramatic
statements and make little mention of any doubts we may have.
Each of us has to decide what the right balance is between being
effective and being honest.'
The well known love of the media for a good story can aggravate
this. The current issue of possible climate change is an example.
I have been trying to keep an open mind on climate change,
listening to the arguments of both those who say there is a serious
problem and others who say there is not. It is therefore a matter
of real concern that a friend of mine who has been involved at
a senior level in the International Panel on Climate Change confirms
that the Panel's conclusions have been 'significantly misreported'
in the media. As to why the Panel does not correct such misreporting,
he says that they have tried, but failed.
Here we have a situation where much pressure is being put on
governments to take certain actions which would have profound
consequences for their citizens, while these citizens are being
misinformed. Worse than that, I am also told that the Kyoto protocol,
which is such a heated issue at present (no pun intended!) will,
if implemented, do very little to resolve the problem if there
is one. To stabilise the carbon dioxide concentrations would require
a reduction of about 80% in the present worldwide emissions (not
just by the parties to the Kyoto proposal) which is clearly not
possible. If carbon dioxide emissions cause climate change, the
world will to a large degree have to adapt to it.
This may be well understood by scientists but it certainly
is not understood by the public, who think that those who decline
to ratify the Kyoto protocol are condemning the world to something
dreadful which they could prevent. I did not understand it fully
until quite recently.
The explanation for not highlighting this important aspect
of the issue is that 'it would provide an easy excuse not to do
anything'. It seems that the Schneider logic of those in the know
being entitled to choose between 'being effective and being honest'
is being applied.
Similar less-than-truthful techniques are known to be used
by groups pursuing other issues. One famous example is the speech
attributed to Chief Seattle of Puget Sound Indian tribes in 1854,
referring in moving words to their ancient harmonious relationship
to the environment. Although subsequently admitted as being not
the words of Chief Seattle but written by a scriptwriter for a
TV documentary in 1972, the bogus speech became the basis of much
publicity and a widely distributed environmental book for children,
even after the scriptwriter had informed the publishers. It was
apparently another case of deciding that honesty did not matter.
It seems that the ideological and political aims of those promoting
various causes can become to them more important than the truth.
The World a Better Place
We are told every day that what we eat or drink is poisonous
or at least not good for us, the air we breathe is polluted, new
illnesses are attacking us, our jobs are unhealthy or too stressful,
and so on and so on. Disaster is in sight, and the end of the
world is approaching.
If this is so, why is it, then, that on the average people
now live longer and the average age continues to increase? In
Australia, the average age of men at the time of Federation in
1901 was 56 years; it is now 76 and continues to increase by one
year every five years. Women do even better; from an average of
58 in 1901 their average lifespan has increased to 81 years today.
If this continues, by the end of this century 100-year olds
will be as common as 80-year olds today. Together with the decline
in the birthrate in all countries with high living standards to
below the replacement rate, this introduces a real problem---the
ageing of the population and its economic and social consequences,
but this is another topic.
What we are told is clearly greatly exaggerated. It is easy,
and always will be, to be unhappy with many things that are happening,
but on balance the world is a better place to live in than it
ever has been. It just seems a pity that we can't all channel
our energies towards making it an even better and a more rational,
sensible, and truthful place as well.
Let me now ruminate on what might happen in the Australian
minerals industry in the future.
Looking back over the last fifty years, I have come to the
conclusion that my ability to predict the future is minimal, and
that virtually nothing is impossible. A story I recently came
across in one of the airways magazines illustrates the second
point rather neatly.
The rescued crew of a sunken Japanese trawler was reportedly
jailed after authorities disbelieved their incredible story. The
sailors claimed a cow had fallen from the sky, shattering the
ship's hull and causing it to sink in a matter of minutes.
Some time later, it is said, the crew of a Russian Air Force
cargo jet admitted to having 'apprehended' a cow which wandered
too close to the edge of a runway at a Siberian airport, loading
it aboard their aircraft. Everything was fine until the cow went
on a rampage in the cargo area, high above the Sea of Japan. To
save their own hides and the aircraft, crew members lowered the
aft cargo door and shoved the poor heifer out. So much for the
Predicting the future is not an occupation in which you would
wish to be paid by results, and predictions of the future of the
minerals industry have not been great successes. To mention just
two instances, the Presidential Commission convened by President
Truman in 1950 to assess the demand and availability of minerals
for the next 25 years took advice from the foremost experts at
the time. In the event, their predictions were well out in just
about every aspect of their report.
The well publicised Club of Rome report 'Limits to Growth'
in 1972, which gave great impetus to the extremists in the environmental
movement, predicted that the reserves of energy and minerals and
metals would be exhausted within a short time, some as early as
in the mid-1980s. The report was seen as having particular authority
through being one of the early computer studies. The authors may
have been experts in computers, but they certainly did not understand
the dynamics of mineral exploration and the nature of mineral
reserve estimates. After very substantial consumption in the intervening
years, the known reserves of all metals and minerals are greater
today than they were in 1972, while the prices in real terms are
In principle, the future of the Australian minerals industry
depends on the answers to four questions:
- Will there be a continuing world demand for the products?
- Does Australia have the mineral endowment to supply a part
of this demand?
- Will it be possible for the industry to explore for minerals
and, if successful, bring the discoveries into production?
- Will the Australian minerals producers be competitive in
Demand for Minerals
Not long ago it was seriously suggested that a fundamental
change had occurred in world economic and business activity. It
was argued that the great advances in information and telecommunications
technology had created a new economy, and that industries in the
'old economy', including the minerals industry, were becoming
unimportant. The annoying economic cycles and constraints had
been abolished. Spectacular action on the stock exchanges where
fantastic fortunes were made overnight seemingly out of nothing
appeared to confirm that the inconvenient business of making a
living by actually producing something was out of date.
The equally spectacular crash of the dot-coms and the downturn
in the world economy in the last year or so have brought us back
to earth. The advances in information technology and telecommunications
are real and have certainly opened up vast new opportunities to
improve the way we live and work. They have created new industries
and are being used by the minerals industry and others to great
effect in making these industries more effective and efficient,
but they do not make minerals production redundant.
The demand for minerals continues to grow. While many people
in the developed countries may well be approaching a saturation
point in their standard of living, the majority of the world's
population---those less well off in the developed countries and
virtually the whole population of the developing world---have
a long way to go before reaching a living standard with which
they are satisfied. The population of much of the developed world
has reached a plateau and has started to decrease, but in developing
countries it is still increasing rapidly. All in all, there is
no doubt that there will be a growing demand for the products
of the minerals industry.
Australia's Mineral Endowment
There is also no doubt that Australia continues to be highly
prospective for the discovery of new mineral deposits. To turn
this potential into additional proven deposits requires exploration
success in greenfields areas, and to ensure the future of the
industry it must be possible to bring the discoveries into production.
It is in this area where the outlook is less certain.
Ability to Explore and Develop
The present production and further growth of the industry comes
largely from major deposits discovered many years ago, and their
extensions. Large mineral developments have very long lead times
from discovery, let alone the beginning of exploration, to production.
Australia should be now discovering the orebodies which will be
the main producers 20 to 30 years from now. In spite of continuing
improvements in exploration technology, this is not happening.
The reasons are complex and you should ask someone now active
in exploration to explain the problems, but it is essentially
a question of access to prospective land and assurance that any
discoveries can be developed into profitable production.
Restrictions on access to land with mineral potential in Australia
have coincided with increasing globalisation of the world minerals
industry. The markets for Australian mineral products have always
been international, with virtually no obstacles to trade across
national borders. In recent years national barriers to exploration
and production have also virtually disappeared. Many countries,
particularly in South America, Asia, and Africa, have areas of
high mineral potential and are now actively encouraging international
participation in their minerals industries.
While no country is free from problems and their attractiveness
for making such investments varies, Australia does have serious
competitors for the scarce resources available for exploration.
In general, Australia's minerals are at present competitive
in world markets. The low exchange rate of the Australian dollar
assists in this, although it is a double edged sword because it
also means that the market value of Australian companies in, say,
US dollar terms, has been reduced.
Maintaining competitiveness is, as we all know, an ongoing
battle. Our competitors in other countries are continuously improving
their productivity and efficiency and we must at least match them.
We can never relax.
Australia is in the forefront of exploration, mining, and minerals
processing technology, through to metals production and fabrication,
and a world leader in innovation. I am told that over 60% of the
world's mines today use computer software created by Australian
companies. Exports of minerals industry related intellectual property
in 1998-99 amounted to $1.2 billion, greater than the exports
of Australian wine in that year at $900 million. E-commerce is
being applied successfully to purchasing and international trading
One possible concern regarding future competitiveness arises
if something like the Kyoto protocol results in the introduction
of what is in effect a tax on energy in Australia.
A significant proportion of Australia's production of aluminium,
zinc, copper, and nickel is exported as highly refined metals,
consuming large amounts of energy. As I understand the Kyoto proposal,
Australia gets no carbon dioxide credit for producing metals for
use in other countries. Depending on the increase in energy cost
in Australia as a result of applying a tax on carbon, it may well
become necessary to do the refining in one of the developing countries
which are not affected by the Kyoto proposal. The carbon dioxide
emissions will be no less, the only change being that the metals
refining industry has moved from Australia to elsewhere.
Did I hear you say that this is just too silly and therefore
can't happen? Well, let us hope so.