The proposed Winchelsea mine on Groote Eylandt: a strategic opportunity?

                                                             Oft expectation fails, and most oft there

Where most it promises.

All’s Well that Ends Well, Act two, Scene one.

Introduction

This is the first of two posts dealing with the implications of the push to establish an Aboriginal owned manganese mine on Groote Eylandt.

 

It is technical and complex in parts and assumes a degree of contextual background knowledge. This blog has previously dealt with a number of important background issues relating to Groote Eylandt. The following posts provide useful background information on aspects of the situation on Groote:

 Dodge, dip and dive: eight data points on remote Indigenous policy,  1 May 2023, link here.

Typographical Errors: ANAO audits of the Tiwi and Anindilyakwa Land Councils, 1 June 2023, link here.

Looking beyond the ANAO audits of the NT Land Councils, 17 August 2023, link here.

Silent dissemblance: discussion of the ANAO report on the ALC in Estimates, 15 November 2023, link here.

The May 2023 ANAO report on the Governance of the Anindilyakwa Land Council (link here) is worth reading, and includes a very useful diagram (Fig.4.1 at page 68) which provides a schematic representation of the many of the issues discussed in these two posts.

 

In this post and the next, I have relied almost exclusively on publicly available documents on the website of the Registrar of Aboriginal Corporations, the ACNC, ASIC, the Australian Parliament, the NTG and the ALC.

 

This first post seeks to lay out the broad narrative promulgated by the ALC in relation to the proposed Winchelsea Mine without detailed critique. The second post provides a detailed critique of the ALC narrative, and attempts to draw out the policy ramifications arising from the ALC’s current strategy and the apparent reluctance of the Commonwealth Government to engage pro-actively with that strategy.

 

The ALC narrative

Winchelsea is a joint venture between the Anindilyakwa Advancement Aboriginal Corporation (AAAC) and AUS China International Mining Pty Ltd (ACIM). It is majority owned by the Traditional Owners of Akwamburrkba (Winchelsea Island) adjacent to the Groote Eylandt in the Gulf of Carpentaria. The project proposes to mine a manganese deposit on Winchelsea Island

 

The Winchelsea Mining website (link here) succinctly outlines the scope of the project and links to a comprehensive draft Environmental Impact Study which is currently subject to public consultation. It also lays out an extremely ambitious agenda:

The core vision of the project is to raise enough revenue to permanently support the economic and social future of all Anindilyakwa speaking clans of the Groote Archipelago.

 

The EIS is a good place to start for anyone interested in understanding the scope and detail of the project. It too confirms the ambitious aspirations of the local community:

It is important to also consider the purpose of this Project to financially support a sustainable economy in the local Groote Archipelago well beyond mining. The funds produced from the Project will be utilised for numerous long-term projects that will likely improve the independence and resiliency of Groote Archipelago residents to the impacts of extreme events (e.g., funding may support renewable energy infrastructure that is not reliant on fuel imports, housing that is rated for cyclonic conditions, accommodation for health service providers, marine infrastructure to increase accessibility). (Winchelsea EIS p.157).

 

A Fact Sheet on the Winchelsea Mining website notes that

The ALC through its “Royalty Development Unit” has assisted in creating Winchelsea Mining as an independent initiative and under its Commonwealth Government statutory NT Land Right Act (1976) functions, has entered into an exploration agreement with Winchelsea to comply with the NT Mining Act (1980) requirements.

 

A media article titled ‘Mine Nearly Ready to go’ dated 1 January 2021, republished on the ALC website (link here), refers to the traditional owners aspiration to increase their ownership stake from the then 60 percent to 90 percent, and to efforts to raise development finance from the North Australia Infrastructure Facility (NAIF).

 

In June 2019, the Anindilyakwa Land Council (ALC) signed an addendum to the 2018 Groote Archipelago Local Decision-Making Agreement between the ALC and the NT Government (link here).  The schedule outlines an implementation plan where the NT Government commits to supporting the ALC’s Future Groote Strategy. In clause 6(u), the NT Government commits to the provision of facilitated project support, in addition to DPIR’s normal regulatory function processes, for the Winchelsea Exploration and Mining Project and other larger scale and complex investments and enterprise projects made by the ALC or its partners. The Future Groote Strategy appears to have been replaced by the ALC Strategic Plan 2023-2033 (link here).

 

The Strategic Plan deals with the Winchelsea project at pages 36 to 38. It includes the following description of the ALC role:

 The role of the ALC in relation to Winchelsea mining is to carry out the ALC’s functions under ALRA S23(ea) and to support TOs of the Groote Archipelago to pursue commercial activities, which includes resource development. The ALC’s role has been to consult with TOs and to support TOs to pursue the commercial opportunity in line with their wishes, to distribute royalty monies to support standing up the project, to support TOs to establish the commercial arrangements, regulatory and government approvals and enter into the ALC and Winchelsea Mining Agreement (emphasis added).

 

While the overt optimism of the 2021 media story mentioned above is absent, the narrative is overwhelmingly buoyant:

Winchelsea mine is positioned as a future Groote enabling project with a core vision to raise enough revenue to permanently support the economic and social future of the TOs of the Groote Archipelago. … The mining venture will provide annual fixed payments to impacted clans, provide guaranteed payments into the Anindilyakwa Mining Trust and surplus profits will be reinvested into major projects for the benefit of TOs.

 

The ALC Strategic Plan 2023- 2033 is an ambitious document (link here). It is 173 pages and identifies 18 individual areas of focus for the decade ahead conveniently listed on page 3.

 

Underpinning this strategy is the realisation that mining on Groote will not continue forever, and that the current Groote economy is heavily reliant of the substantial royalty flows from the GEMCO mine that is likely to cease operations within a decade. Thus on page 5, the Plan notes:

By taking a strategic holistic perspective captured within the Strategic Plan 2023-33 the ALC enhances the administration and decision making relating to the distribution of ALRA S64(3) royalty monies which forms a significant function of the ALC. The Strategic Plan 2023-33 seeks to maximise the economic opportunities available while mining is taking place on the Groote Archipelago by resource companies South32 and Winchelsea Mining Pty Ltd, and to utilise the royalties received to stimulate and grow a diversified, culturally informed, and environmentally sustainable post-mining economy.

 

In relation to economic development on Groote, the Plan states (at page 25):

The outcome sought through economic development is a viable, culturally rich and sustainable two stream (diversified) economy on the Groote Archipelago, not dependent upon mining royalty income, which is controlled by Anindilyakwa people. Three principles guide the investment choice the ALC makes when allocating funds for economic development: i. To create local capacity to run local services in the communities; ii. To employ Warnumamalya; iii. To achieve complete financial safety by end of mine closure….The Aboriginal Corporations operating on the Groote Archipelago, whose members are TOs, will be the drivers of economic development of the Groote Archipelago.

 

In relation to the Winchelsea mining project, the Strategic Plan states (at pages 34-5):

The ALC’s role has been to consult with TOs and to support TOs to pursue the commercial opportunity in line with their wishes, to distribute royalty monies to support standing up the project, to support TOs to establish the commercial arrangements, regulatory and government approvals and enter into the ALC and Winchelsea Mining Agreement…

… Winchelsea mine is positioned as a future Groote enabling project with a core vision to raise enough revenue to permanently support the economic and social future of the TOs of the Groote Archipelago… The mining venture will provide annual fixed payments to impacted clans, provide guaranteed payments into the Anindilyakwa Mining Trust and surplus profits will be reinvested into major projects for the benefit of TOs.

 

In section 6-14 dealing with Financial Analysis and Modelling, the Strategic Plan notes the current stream of negotiated royalties from GEMCO’s operations flows into the Anindilyakwa Mining Trust. These royalties derive from the mining agreement, and are separate to the section 64(3) royalties which derive from the statute. It then asserts that:

The inflow of funds into the Anindilyakwa Mining Trust will substantially increase when the Winchelsea Mining operations commences in 2025. The Anindilyakwa Mining Trust functions as a future fund for the benefit of the TOs that will replace some of the royalty income lost when GEMCO mining ceases in approximately 10 years. Current financial modelling forecasts that the Anindilyakwa Mining Trust must generate approximately $40 million in investment returns each year to sustain the current community and cultural programs post mining. This requires the Anindilyakwa Mining Trust account to hold approximately $650 million by the time GEMCO mining ends…

 

The Strategic Plan then asserts that modelling of future royalty flows and planned housing investments leaves a shortfall of approximately $62 million, and goes on to note that:

The Winchelsea mining operations has been purposefully structured to provide transfers from its profits into the Anindilyakwa Mining Trust to address this shortfall.

 

The ANAO Governance report on the ALC also deals with the adequacy of consultation related to the mining agreement at paras 3.58 to 3.76, but does not address deeper issues related to the substantive appropriateness of the Agreement notwithstanding it involves a structural conflict of interest.

 

There is minimal public information available in relation to the mining agreement. Section 45 of the ALRA requires that the Commonwealth minister must approve the grant of a mining interest on Aboriginal land. An event notice on the ALC website indicates that it was signed on 21 April 2021 in the presence of the NT Chief Minister Michael Gunner and Minister Selena Uibo. The note (link here) states inter alia:

This is actually a very big deal and will change a lot of things for us all. The Bara and Jaragba Mob are going to share all the profits from their own mine with all Community.

 

In a Senate Estimates Hearing on 16 February 2024 (link here), the ALC projected a tone of assured optimism. In the transcript below, the emphasis has been added:

[At page 41] Mr Hewitt:  I welcome the opportunity to appear. I just want to say there are some important points I'd like to put out straightaway and correct on the record. I'm not a co-owner of the Winchelsea mine at all—not at all, in part or completely. I'm not silly. The mine is owned by a 70 per cent share with the Bara and Jaragba clans and they represent themselves through Anindilyakwa Advancement Aboriginal Corporation, whose directors comprise senior TOs for that island, where that resource is held. I think also I need to say that the work I undertake with Winchelsea and other major projects are because there are certain big things we need to do before the GEMCO mining operation closes. The biggest piece of it all is the mining project, because the revenue for that will enable all these other important things to occur—in particular, getting our mining trust up to a figure which can sustain valuable, important cultural and community support programs and things of that nature…

…The other thing I need to say is that the work that I do as the CEO is governed by the ALC board and by our 15-year strategic plan, which has just been updated. It's squarely within the ALC's remit and statutory functions required under section 23(1)(ea) of the Aboriginal Land Rights (Northern Territory) Act—that is, to assist Aboriginals in the area of their land to carry out commercial activities, including resource development. It's in the land rights act. The recent ANAO audit is the first one we've had since 2008. We've welcomed its recommendations to improve the documentation of our policies and procedures. We've grown very rapidly in the last 12 years to plan for the closure of GEMCO.

Finally, I would just like to make a comment that the fact that I have two hats—in fact, three—was openly discussed and consulted with Minister Scullion back in 2018 and also with Minister Wyatt and the department. That's referred to in the governance audit on page 86…

… [At page 47] Senator NAMPIJINPA PRICE:  I appreciate the clarity around the reporting with the Winchelsea mine. I note that you stated that 70 per cent of the mine is owned by traditional owners. Does that then leave 30 per cent ownership that's part of a Chinese company? Is that correct?

Mr Hewitt:  No, it's an Australian proprietary limited company. The history there, if you wish to know, is that back in 2016 the chairman and I travelled as part of a trade delegation to China led by the Chief Minister. It was the biggest in Territory history. We met a lot of businesspeople there, and we both met an Australian permanent resident who was attending the conference—he's Chinese. We talked about things, and he said he'd like to come down and see what we're doing on Groote. He came down with a few business people. Nothing really came out of it for a few years until a company came to the ALC and offered: 'We've got the licences for Winchelsea, other sea country and various islands. We'd like to work to do a joint venture with you.' So we talked to Mr Yu about the project. He said that he'd like to invest, so he put the money in for exploration, which was, all up, $11 million. He actually took the risk; we provided the consent—or the traditional owners provided consent—for the project to go ahead. To this day, he has diluted and the percentage to the traditional owners has grown. Originally, it was, I think, 40 per cent; it's now 70 per cent. That money came from him selling a property in Sydney. It didn't come from China.

Senator NAMPIJINPA PRICE:  Thank you for clarifying that for me. In the financial year 2021-22, what was the value of the dividends paid by Winchelsea Mining to the ALC?

Mr Hewitt:  It is not a producing mine. It is still right at the top of the bell curve in that it has now proven to be a bankable feasible project. We are now engaging with the private sector and the big four banks, NAIF and other parties to finance the capital construction of the project, which we hope will start this year after EPA approval.

Senator NAMPIJINPA PRICE:  So, it is envisioned, then, that Winchelsea will provide dividends?

Mr Hewitt:  Yes. Under the mining agreement with the land council, the profits flow into our Anindilyakwa mining trust, which is shared with the 14 clans. There will be two purposes. As I think I mentioned earlier, one will get our mining trust up to where we need it to sustain important programs forever, and the second part will be to build that seafood export business….

… [At page 49] Senator THORPE:  For the Anindilyakwa Land Council, what are the $25 million in royalties given to Winchelsea being used for and how do you make sure that the allocation of funds from mining royalties adhere to the principles of free, prior and informed consent? 

Mr Hewitt:  We have many steps to go through in the process of developing Winchelsea. First of all, it's whether there's a resource or not... Then we entered into the second phase, which was where we had to go through approvals… Our final bankable feasibility study was 1,149 pages…  We have a very viable mine, so we're very fortunate. It's also gone ahead very fast. We have to get approval from ourselves, and so that consent essentially is in-built in what we're doing. They own the project. They're the proponents to mine on their own land. … Bradley, behind me, is chair of AAAC. He's now working for us… We're now on the next stage, where we're actually starting to construct the mine….

 

As an aside, and further to my post on the previous Estimates hearings (link here) where I observed that neither the Government nor Opposition Senators were seriously focussed on pursuing the shortcomings identified in the ANAO report of May 2023, I will note once again that the Committee (with the exception of the Senator Thorpe) appeared to have adopted a strategy of acknowledging the ANAO findings, but were content to merely elicit a denial (‘the audit was mostly administrative and procedural’), and then move on.

 

Interim conclusion

There seems to be a bipartisan consensus that there is nothing to see here. I fundamentally disagree. Part of the reason for that bipartisan consensus is that they appear to be persuaded by the ALC’s strategic planning narrative. No doubt, there are also electorally salient political considerations in play.

 

The ALC have successfully promulgated a narrative of Indigenous self-determination and assiduously courted politicians and the business community in the NT and nationally. Notwithstanding a highly critical ANAO report, and more recently a Parliamentary Petition (Petition No. PN0579) tabled on 12 February 2024 and signed by 235 citizens expressing concern about the actions of the ALC, Senators were content to allow the ALC to promulgate its rhetorical narrative without any serious interrogation. The fawning and un-critical treatment meted out by politicians from both major parties to the ALC representatives in the last two Senate Estimates Hearings are indicative of a wider and deeper bipartisan consensus aligned with the economic development rhetoric emerging from the ALC.

 

In this post, I have laid out the background to the proposed Winchelsea mining project on Groote, and have focussed particularly on the arguments and rationale that have been articulated by the Anindilyakwa Land Council for moving forward with this development. It is an extraordinarily  positive vision, framed as a strategic response to the forthcoming cessation of the GEMCO manganese mine on Groote, and the concomitant cessation of the very substantial royalty payments that have flowed to the traditional owners and the whole community on Groote.

 

The high level aspirations articulated by the ALC have real merit. I support them if they can be afforded. The strategies being adopted are however deeply flawed, and in my view will likely lead to a disastrous financial meltdown on Groote at some point in the next five years. If this occurs, the socio-economic ramifications will entrench further disadvantage and possibly lead to the unravelling of social cohesion on the island.

 

I lay out the detailed arguments for my position in the following post.

 

16 March 2024