Chris Castle - Thu, 04 Jun 2015
The biggest irony with the Environmental Protection Authority declining Chatham Rock Phosphate’s marine consent application is that the project offers such valuable environmental benefits.
The decision has far wider implications than for one company. It has also:
1. Turned foreign investors off New Zealand resource projects.
2. Stopped a huge opportunity for farming to become far more environmentally sustainable.
3. Reinforced the view among business that Government continues to find ways to prevent rather than enable development.
Quite a lot has happened since the EPA’s February decision to reject CRP’s application to extract environmentally friendly rock phosphate from depths of 400 metres on the Chatham Rise seabed, two thirds of the way to the Chatham Islands.
The Government is taking (at this stage faltering) steps looking at how the Exclusive Economic Zone consent process can work so New Zealand benefits from projects such as ours while ensuring the environment is protected.
CRP is regrouping – evolving from its single project focus into a more diversified company, principally involving other phosphate projects, both on and offshore.
The fact virtually all of CRP’s overseas shareholders (representing about half the capital before the latest capital raising) failed to stump up with any cash speaks volumes. They simply lost faith with New Zealand as an investment option.
CRP’s decision to explore other opportunities recognises financing a re-application will be easier if investors don’t face the same binary EPA decision risk. Acquiring and developing new projects will be significantly easier by listing on a more recognised and liquid overseas stock exchange; Toronto is a leading market for mining and fertiliser stocks. Directors decided the most cost effective way is listing through a reverse takeover of TSX.V stock Antipodes Gold.
Meanwhile, looming large is the irony of EPA failing to consider the project’s huge environmental benefits, given few mining projects can make that claim.
CRP’s project to mine phosphate, an essential mineral for plant growth, is critical for our agricultural future. Annual supply of 1.5 million tonnes of phosphate could replace a large chunk of less environmentally desirable imports. It will also improve our security of supply - virtually all phosphate supplies now come from politically unstable regions, mainly in North Africa.
Farmers are criticised for their environmental footprint – especially causing fertiliser run-off into waterways. A key benefit of Chatham Rise phosphate (New Zealand’s only source) is that little leaches into streams because the product binds to the soil. That enables the fertility effect to last three years so both high country and fertiliser-saturated dairy land require less-frequent application, also reducing costs.
It also contains almost no cadmium, a heavy metal accumulating in our soil that can become a health hazard. The current Moroccan-sourced product has among the world’s highest concentrations. As a local product involving less transport and applied less often, it also has a much lower carbon footprint.
The EPA’s assessment of only modest economic benefits was unintelligible considering CRP is forecasting annual profits approaching $100 million before $34 million of royalties and tax - among New Zealand’s top profit earners. Expected dividends and capital growth would reward 950 shareholders who have so far invested $33.5 million.
Other economic benefits include the many jobs created in the port, on the mining ship, in the agriculture and hospitality sectors, on the Chatham Islands and undertaking environmental monitoring and scientific research.
Before we commit to a new application we want the EPA and the government to figure out how we can make the grade with appropriate safeguards – not setting an impossibly high bar. Permanently available people competent in relevant science, finance and economics would be a start - our decision-making committee’s skills in these areas were inadequate.
Our proposed area of operation must be put in context; we’re planning to mine 30 square kilometres a year, or 450 sq km over 15 years. Fishing damages 50,000 sq km a year through bottom trawling. Agriculture covers around 120,000 sq km.
The EPA had concerns around uncertain effects of our operations in the broader EEZ - particularly about where else stony corals might be - yet ignored the widespread damage to corals by fish trawling. We provided information about likely locations, and suggested how we could avoid coral communities, but uncertainty reigned, along with multiple counting of precaution.
The materiality of risk and uncertainty must relate to the 4 million sq km EEZ. That involves assessing how risks can be controlled, such as applying adaptive management as it works all over the world – by learning and adapting during the life of a project.
Most importantly, the government needs to deliver on the purpose of the Act - promoting sustainable management of the EEZ’s natural resources to enable resource development rather than only focusing on protection.
Chris Castle is Managing Director of Chatham Rock Phosphate