by News WeeklyNews Weekly
The $7 Billion Minerals Grab: The fight for control of Australian mining
, August 12, 2000
With almost no publicity, important parts of Australia’s minerals industry are in process of being sold off — while the Federal Government sits on its hands and does nothing.
The large British conglomerate, Rio Tinto, having swallowed large Australian-based minerals companies CRA and Comalco some years ago, has launched a $2.8 billion hostile bid for control of North Ltd, one of the two other iron ore producers in the Pilbara region of WA. (The other is BHP.)
The Rio Tinto bid for North Ltd has been trumped by the South African conglomerate, Anglo American, which has bid $4.20 a share, compared with the $3.80 offered by Rio Tinto.
Over the past year, Anglo American has also seized a controlling interest in several Australian mining companies, including Anaconda Nickel, Acacia (gold), Shell Coal mines in Queensland, and last week, the Ashton Mining Company, a key player in the Australian diamond industry.
The total estimated cost of these acquisitions will exceed $6 billion.
Japanese steel mills, clearly concerned at the effect of Rio Tinto’s takeover of North Ltd, have indicated that they fear that Rio Tinto will create an effective duopoly for the supply of iron ore to Japan.
Their concerns followed the announcement last year that BHP and Rio Tinto were investigating the establishment of a Pilbara joint venture.
Separately, several major Australian gold producers have been the subject of speculation of possible foreign takeovers.
What all this means is that British and South African interests are rapidly expanding their influence in the iron ore, coal, gold and diamond industries in Australia.
While foreign takeovers are supposedly subject to government supervision through the Foreign Investment Review Board (FIRB) and the Australian Competition and Consumer Commission (ACCC), there is little sign that either body is taking these developments seriously.
The effect of these takeovers, if completed, will be to further concentrate ownership of Australian industry in foreign hands.
This will have several consequences, including the worsening of Australia’s balance of payments deficit, due to the payment of dividends overseas; the further erosion of the company tax base, due to the fact that transnational corporations pay little tax in this country; while decisions on investment in plant and equipment will be made overseas.
These developments continue the gradual acquisition of ownership of Australian industries by overseas corporations. According to the 1998 Australian Year Book, in the five years to 1996-97, foreign equity in Australian businesses rose from 25 per cent to 29 per cent. There is little doubt that it would now be well over 30 per cent.
The Federal Government has done little or nothing to curb foreign ownership of Australian corporations, both on ideological and practical grounds. In light of its commitment to the free flow of capital into and out of the country, it does not believe in controlling foreign ownership of Australian businesses.
Additionally, the inflow of money from overseas creates the impression of prosperity in the Australian economy — much like that of a person who is selling off his assets or borrowing from a bank. This is the easy option, which will help the government’s re-election prospects
A government seriously interested in maintaining Australian control over its industries would tighten the conditions under which overseas-owned corporations purchase companies in Australia.
Until the 1980s, the Foreign Investment Review Board actively scrutinised foreign investment in Australia. However, since 1983, it has become little more than a rubber stamp for foreign investment — except in a few industries such as banking, newspapers and TV, where there has been an outcry over the consequences of foreign ownership.
A government committed to Australian ownership would also encourage the superannuation industry to return capital invested off-shore, to build the capital base for Australian businesses and industry. It has been estimated that some $80 billion has been invested by the Australian superannuation industry overseas.
In the absence of such action, the buy-out of key Australian industries will continue relentlessly.