Youth detention, incarceration, closing the gap, and who we are

 

Your dishonour

Mangles true judgement, and bereaves the state

Of that integrity which should become it.

Coriolanus Act three, Scene one.

 

According to ABS census data from 2021 (link here), one-third (33.1%) of Aboriginal and Torres Strait Islander Australians were aged under 15 years compared with 17.9% of non-Indigenous people in the same age group.  The median age nationally of the Aboriginal and Torres Strait Islander population was 24 years. While remote and very remote Indigenous populations comprise only 15 percent of the national Indigenous population, and two percent of the Australian population, they are amongst the most disadvantaged citizens across virtually every social indicator.

In recent months, there have been several articles focussed on the plight of remote communities; places where the demographic profile is heavily slanted toward those under 24.

In October, Daniel James, a Yorta Yorta man wrote a searing indictment of government policy in Central Australia in The Monthly titled Children of the intervention (link here). More recently in The Saturday Paper (link here), Ben Abbatangelo, a Gunaikurnai and Wotjobaluk writer wrote a searing — yet hopeful —  indictment of the situation in Wadeye titled  Yidiyi Festival returns hope to Wadeye. I have quibbles with both articles related to their focus on particular places thus de-emphasising the wider structural drivers of disadvantage across remote Australia generally, and their implicit choice of temporal perspectives. Both articles are nevertheless extremely powerful critiques of Government policy neglect and ineptitude, while not ignoring the complexity and nuance which bedevils any close analysis of these issues.

It was within this overarching policy context that the Joint Council on Closing the Gap met last week. The Joint Council includes every Minister for Indigenous Affairs in the federation plus representatives of the Coalition of Peaks. Their communique (link here) mentioned a number of issues, but focussed particular attention on one specific issue:

Joint Council discussed critical matters regarding youth justice and agreed that Target 11 of the National Agreement on Closing the Gap (the National Agreement) is an urgent priority that requires collective action across multiple government portfolios and jurisdictions to deliver on the ground results. Target 11, to reduce the rate of Aboriginal and Torres Strait Islander young people (10 – 17 years) in detention by at least 30 per cent by 2031 is not on track to be met. Joint Council agreed to escalate this urgent priority and progress work that will achieve improved accountability, coordinated jurisdictional actions and outcomes. It was agreed that Joint Council Co-Chairs write to First Ministers to seek details of how their governments are currently taking steps to meet Target 11, including consideration of remand, alternative accommodation and health and disability care and education in youth justice facilities.(emphasis added).

According to the Productivity Commission Closing the Gap dashboard (link here):  

Nationally in 2022-23, the rate of Aboriginal and Torres Strait Islander young people aged 10–⁠17 years in detention on an average day was 29.8 per 10,000 young people in the population (figure CtG11.1). The 2022‑23 rate is above the previous three years (from a low of 23.6 per 10,000 young people in 2020‑21) but it is a decrease from 32.1 per 10,000 young people in 2018‑19 (the baseline year). Nationally, the trend for the target shows no change from the baseline. This assessment is provided with a low level of confidence.

So while current levels of youth detention are less than the baseline, they have been rising in the last year.

The Joint Council response is entirely bureaucratic in nature, and reeks of going through the motions. It is unclear why they focus on youth detention and not also on incarceration more generally. Writing to First Ministers for information that should be in the Implementation Plans required by the National Agreement will take months, and as it turns out, if you dig deep enough in the Productivity Commission dashboard, half of the jurisdictions will be able to point to recent improvements and those that can’t will find some other bureaucratic formulation to describe their efforts as deeply committed and focussed on improving accountability and coordinated consultation to prioritise urgent action….or some such …

The real problem, which goes to the heart of the renegotiated targets under the 2020 National Agreement is that nationally, detention rates for First Nations youth are currently 28.8 per 10,000 compared to mainstream youth detention rates of 1.1 per 10,000. In Queensland, detention rates for First Nations youth are 46 per 10,000. Of particular interest is the fact that in Western Australia in 2010, youth detention rates were 79.7 per 10,000 and have dropped to 34.6 in 2022-23, a halving of the rates over twelve years (although still at levels above the national rate for Indigenous youth detention). I don’t know how WA have achieved that outcome, but that would be a question worth asking. It demonstrates that progress can be made. But the bottom line is that nationally, First Nations youth are 28 times more likely to be in detention than non-Indigenous youth. That is the real issue and the real tragedy. It should be cause for a national strategy to fully (not partially) close the gap, to bring Indigenous youth detention rates down to 1.1 per 10,000. It is worth remembering that these are point-in-time statistics; the levels of Indigenous youth that are placed in detention in any one year will be considerably higher. The current levels of Indigenous youth detention should be a national scandal. And it should be a focus for governments to commission detailed and independent analysis from criminologists, sociologists and anthropologists as well as their policy advisers.

Instead, governments have squibbed the issue by inventing an arbitrary target, with the aim of lowering the detention rate from 32.1 in the baseline year to 22.5 in 2031. Not only did they invent an arbitrary target, they have failed to articulate a coherent national strategy (and coherent state and territory strategies) to meet this arbitrary and inherently unambitious target. By their inaction, they are continuing to squib this issue day in and day out.

This is bad enough. But target 11 under the Closing the Gap process is just one of numerous targets which replicate the same strategy. Invent an arbitrary target that is reasonably achievable; shift the responsibility from the Commonwealth to nine separate jurisdictions each with their own policies and approaches, thus making real accountability impossible. Avoid developing coherent and realistic policy implementation plans by loading them up with hundreds of pages of bureaucratic flim flam, thus avoiding real political accountability.  And whenever an issue arises that emerges into the public consciousness, claim to be concerned and throw a few dollars at it.

So for example, there was no mention by the Joint Council of the challenges related to Target 10 which is framed as follows: By 2031, reduce the rate of Aboriginal and Torres Strait Islander adults held in incarceration by at least 15%. The baseline adopted in the National Agreement was from 2019 a convenient and almost surreptitious way of diminishing the magnitude of the trends that point to not only an extraordinary level of hyper-incarceration of First Nations citizens, but a substantial increase in indigenous incarceration rates vis a vis mainstream population rates over the past fifteen years.

Interrogating the dashboard reveals the following key data points:

• Nationally the level of mainstream incarceration in 2023 is 149 per 100,000. It has barely changed from 2009, when the national rate was 137 per 100,000.
• For Indigenous citizens, the national level of incarceration is 2235 per 100,000 in 2023, up from 1539 per 100,000 in 2009.
• In WA, the Indigenous incarceration rate is 3469 per 100,000 in 2023, up from 2817 per 100,000 in 2009.
• In the NT, the Indigenous incarceration rate is 3029 per 100, 000, up from 1700 per 100,000 in 2009.

The national indigenous incarceration rate in 2023 is thus 15 times higher than the mainstream rate. In 2009, it was 11.2 times higher.

While it is difficult to visualise the impact of these statistics, Ben Abbatangelo’s article includes a description of the internal community violence that sporadically breaks out, its consequences for the whole community, and notes, almost in passing, the extraordinary statistic that that today, around 5 percent of the Wadeye’s population is incarcerated.

What I find particularly frustrating is that the blatant hypocrisy of governments, laid out in plain view, fails to resonate in the public domain. Political Oppositions across the federation (whether progressive or conservative) find it easier to look away or pretend that the issue is being dealt with appropriately; after all they hope to be in government at some future date and don’t wish to have made commitments they don’t intend to make.

The media (with honourable exceptions mentioned above) largely doesn’t look beyond the scandals or antics of the previous week.

Indigenous citizens become inured to the normalisation of violence in their lives, much of it is lateral violence and fuelled by poorly regulated and controlled alcohol and drugs.

The Indigenous members of the Coalition of Peaks on the Joint Council appear to be unable to see a way to go back to basics and call governments out for their inaction. They fear (probably correctly) that if they were to criticise government too openly, and too directly, they would first be defunded, and ultimately the whole edifice of the National Agreement would be dismantled as it would not be serving its purpose. The risks however are that they will ultimately be tainted by their perceived complicity (link here). And eventually a future, more punitive government will just decide to dismantle the whole edifice wile blaming the victims for the ongoing catastrophe.

Notwithstanding the irony of my reliance on their data in this post, the Productivity Commission blithely compiles and updates a plethora of data and statistics, apparently oblivious to its role in diverting attention from the extent and depth of the real-world crises and challenges confronting First Nations citizens. The Commission’s appears focussed on compiling a profusion of data and statistics which have limited relevance to the lived reality of many First Nations citizens, and no relationship to either policy or the concerns of governments.

For our political class and elites, the whole edifice has become an elaborate exercise in convincing mainstream Australia that our democratically elected governments really do care about First Nations when the reality is that they do not give a fig about closing the gap. In their mistaken and fundamentally narcissistic view, it is just too hard.  

Closing the gap is as much about mainstream Australia as First Nations; it is about changing the way mainstream Australia operates and shares this continent. I don’t claim that there are simple solutions to these issues. They require hard policy work, substantive political commitment, visionary political leadership, an ability to see beyond simplistic ideological humbug, and a sense of empathy and understanding that is exemplified in Australian notions of mateship, concern for the underdog and for a fair go for all. What fundamentally concerns me, to the point of disconsolation, is the deepening realisation that we live in a nation where these ideas no longer reflect who we really are.

 

Addendum: for those who might be interested in a more academic critique of closing the gap that reflects the ideas outlined here, I refer you to a couple of Discussion Papers I wrote in 2021 (link here and link here).

 

 

20 November 2024

 

Update on the Winchelsea mine.

                                                             Th’ offender’s sorrow lends but weak relief

To him that bears the strong offence’s loss

Sonnet 34, 11-12

This post examines the current state of play in relation to the Winchelsea mine on Groote Eylandt.

I have previously discussed the mine and its ownership structure in a number of posts. I don’t propose to canvass in this post all the details previously discussed; instead I refer interested readers to those posts (link here, link here and link here).

AAAC and its subsidiary.

In summary, Winchelsea Mining is 70 percent owned by Anindilyakwa Advancement Aboriginal Corporation (AAAC) with the remaining thirty percent owned by Aus China International Mining Pty. Ltd. (AusChina). In their 2023 Financial Report dated 16 October 2023 (link here), the AAAC Directors stated:

The Subsidiary was established in 2018 and the mining project is part of a comprehensive economic strategy to enhance Groote’s Future Fund to maintain important economic, cultural and community programs for the island’s people permanently into the future. Winchelsea will be an Aboriginal owned and operated mining venture. 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 Subsidiary holds an Exploration License on ‘Akwamburrkba' (Winchelsea Island). The Subsidiary also holds a Mineral Lease on this site for a period of 30 years which was granted on 25 March 2022.

The Subsidiary is currently completing a Business Feasibility Study and progressing through various regulatory approval processes which is expected to be completed in 2024. Mine development should occur in 2024 targeting an operational start-up and manganese ore sales by 2025….

…. The Mining Project will see a large scale of infrastructure built on Winchelsea Island and the Little Paradise site on Groote Eylandt. Where possible, the buildings will be repurposed for future projects, such as multi use facilities and relocatable buildings. Beyond the life of the mine, it is intended there will be other various projects, including an aquaculture business, as well as other businesses such as tourism, timber mills and restaurants. There is a final project feasibility study being conducted which will detail a closure plan and mine rehabilitation including associated estimated costs for the specific site restoration costs [emphasis added] ….

…. Key management personnel of the Subsidiary [ie Winchelsea] during the year were as follows: Mark Hewitt (Director and Secretary, appointed: 18 June 2018); Dongfang Yu (Director, appointed: 1 September 2018);  Hui Yu (Director, appointed: 1 September 2018); Tony Wurramarrba (Director, appointed: 1 September 2018); Xiaoli Liu (Executive Assistant, appointed: 10 September 2018).

… The total remuneration paid to key management personnel of Winchelsea Mining Pty Limited during the year ended 30 June 2023 was $398,763 (30 June 2022: $485,885).

…. As reported in the 30 June 2020 financial statements, if the Subsidiary applies for a Mineral Lease, arising from the Groote Eylandt Tenements, the Subsidiary agrees it is obliged to pay a mineral lease payment of $10 million (plus GST if applicable) to Yukida Resources Pty Ltd as part of the consideration for the transfer to the company for the tenements. On 3 March 2021, the Subsidiary entered into a variation agreement with Yukida Resources Pty Ltd to revise the mineral lease payment from $10 million to $2.5 million. As part of this revision, an additional $6.25 million is payable upon achieving the first milestone, being the first shipment of product.

As I have previously noted both Mr Wurramarrba (now deceased) and Mr Hewitt were in receipt of full-time salaries from the ALC, a Commonwealth statutory body. Thus, any salary payments to them from Winchelsea would be in addition to those Commonwealth salaries (which are determined by the Commonwealth Remuneration Tribunal on the basis that the recipients are working full time). Ms Xiaoli Liu (also referred to as Ms Sophie Liu below) is Mr Hewitt’s spouse. She has at various times been involved in managing the ALC Royalty Management Unit, as well as her role as Operations Officer within GHAC and as Executive Officer within Winchelsea Mining.

This matrix of overlapping and parallel roles clearly creates a complex array of potential conflicts of interest. Further, as I have previously noted, it is somewhat strange that none of the Directors of AAAC are appointed as Directors of Winchelsea. In my view this reflects the fact that the ALC in effect controls AAAC by virtue of its control over virtually the entirety of its revenue, as well as the allocations for direct payments to unspecified ‘traditional owners’ that are made by AAAC. Finally, it is unclear at present whether Mr Wurramarrba has been replaced on the Board of Winchelsea and whether Mr Hewitt remains on the Board of Winchelsea following his dismissal by the ALC.

The 2022 financial statements report a correction to previous reports with the following effect: in 2019 the AAAC received $10 million from Aus China for the issue of 4000 shares (with AAAC holding 6000 shares). This ownership structure was further adjusted in April 2023 by the issue of a further 3,333 shares to AAAC at nominal cost. The current ownership structure is thus 70 percent AAAC and 30 percent AusChina.

The financial reports for AAAC for 2022 and 2023 and the ALC Annual Report for 2024 indicate that ALC has provided AAAC with $5 million in mine related s.64(3) payments in 2022 (and a further $1.35 million in TO payments); $5.38 million in mine related payments in 2023; and in 2024 just over $2 million (not broken down). ALC funding to AAAC over the past three years, primarily for the development of the Winchelsea mine, thus totals at least $12.3 million (in addition to the AusChina initial contribution of $10 million.

There is no publicly available information on the arrangements between AAAC and AusChina for contributions to mine development, though one might speculate that Aus China are not required to pay any further contributions given the quantum of their initial investment. The fact that the April 2023 increase in AAAC equity (from 60 to 70 percent of Winchelsea) appears to have involved no additional investment from AAAC beyond a $60 payment raises the question: why did Aud China agree to it? What did they get in return for their consent?  In this context it is worth remembering that this transfer occurred after the ALC had a draft copy of the ANAO Audit report.

Little Paradise

As noted above, the Winchelsea mine will involve infrastructure development at the Little Paradise site. Investment in infrastructure for Little Paradise has been primarily channelled through Groote Holdings Aboriginal Corporation (GHAC). As noted in the 2022 GHAC Financial statements (link here)

Groote Holdings Aboriginal Corporation was established to primarily focus on delivering the foundation assets and business – skill development programs necessary to support development of the Winchelsea Mining project in the short-term and the Aquaculture export- industry in the longer – term.

The financial statements for GHAC identify the following ALC investments in GHAC. In FY 2021, $4.6 million; in FY 2022, just over $27 million; in FY 2023, just over $16.6 million; and in FY 2024, $15.4m. The vast bulk of these funds, which total $63.6 million, relate to potential Winchelsea project related infrastructure and/or payments to TOs. Given that Little Paradise is described as multi-purpose, and in the absence of any detailed accounting for mine expenditure, let’s assume the Winchelsea related expenditure amounts to around $50 million. When we add in the AAAC expenditure, we have an investment to date of around $60m (compared to AusChina’s initial $10 million). To date, it appears that the TO’s on Groote have provided over 80 percent of the funds expended on developing the Winchelsea mine, yet only own 70 percent of the equity in the company. It is difficult to reconcile this apparent outcome with the ALC’s role in protecting TO interests on Groote. Unfortunately, the situation gets worse.

Both the Winchelsea Mini Development and the Little Paradise Development have been subject to assessment by the NT Environmental Protection Authority.

In a report to the NTEPA prepared for GHAC dated July 2024 (link here), consultants CDM Smith Australia state (inter alia)

1.2 Proponent Details. …. GHAC is moving quickly but diligently to realise the vision of achieving a perpetual Future Groote Cultural Economy and controlling the destiny via strategic investments and partnerships. The initial investments in infrastructure are targeted towards assets that will facilitate the ongoing economic development activities on Groote Eylandt.  With income streams from the Winchelsea Mining Pty Ltd, a joint venture (JV) between Anindilyakwa Advancement Aboriginal Corporation “AAAC” (Bara/Jaragba Clan owned) and AusChina International Mining Pty Ltd.  Seed capital can be invested into developing Little Paradise enterprises.  (page 3).

Figure 1-3 on page 23 provides the GHAC Organisation Structure. It shows that the Executive Director is Mark Hewitt, and that amongst the seven Direct reports are ‘Governance and CFO’ provided by ENMARK and the Operations Officer is Sophie Liu who has responsibility for Operations and Development, Traditional Owner Clan Business Support, Marketing and Procurement, Winchelsea JV partner liaison, and human relations.

Beyond the Traditional Owners, consultation with various Government, community and industry stakeholders has been completed. A partial summary of the consultation is as follows: ….

Commonwealth Government (Minister for Indigenous Australian) – On 11 March 2022 the ALC submitted a request for consent regarding Section 19(4A) and 27(3) of the Land Rights Act. As part of that submission, ALC provided a comprehensive overview of the Little Paradise Project in documentation attached to the consent request letter.

The report confirms that the initial function of the Logistics and Base Camp will be to provide logistics support for the Winchelsea mine, and that this is to be developed in year one of the five-year implementation schedule for Little Paradise (see section 2.3.3 and table 2.7).  

According to the NTEPA website (link here) in June 2023, the EPA suspended assessment of the Little Paradise development at the request of GHAC. In November 2023 the GHAC Little Paradise referral was withdrawn from the environmental assessment process by the proponent. This is likely linked to the EPA decision on Winchelsea (see below).

The information outlined above documents the scale of the investments to date in developing the Winchelsea project, the vast majority of which have been sourced from section 64(3) payments which under the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA) , a land council is required to pay to Aboriginal Corporations for the benefit of residents and TOs. It also confirms the potential influence and likely control exercised by the ALC over GHAC by virtue of the ALC CEO being a GHAC Director and the GHAC CEO (Executive Director). This is apparently an unremunerated role, and adds complexity to the overlapping links between the ALC and Winchelsea Mining. And finally, the information confirms that the former Minister, Mr Wyatt, and NIAA were apprised of the ongoing developments at Little Paradise (and presumably of their relationship to the Winchelsea mine project) in March 2022.

Winchelsea Mining Pty Ltd

In May 2023, Winchelsea Mining CEO Mark Hewitt notified the EPA of a variation in the Winchelsea development project and submitted a Notice of Significant Variation (NOSV) of proposed action under s51(1) of the Environmental Protection Act 2019 (link here) to the EPA.

That document included the following assertion:

  With Winchelsea Mining being a private company registered by the Anindilyakwa Advancement Aboriginal Corporation, which is managed by the Anindilyakwa Land Council (ALC), the ALC board is constantly informed of the Project and status of the proposed revision. The board consults more broadly on the Project changes with a broader group of up to 240 Traditional Owners representing Anindilyakwa’s two clan groups. As such the revised mine plan is authorised by the Traditional Owners of Winchelsea Island. [emphasis added].

The variation submission also confirms that the Winchelsea project is based on mining a resource of around 11.8 million tonnes of ore. I previously attempted to assess the value of this resource and concluded that the projected revenue would not be adequate to cover the cost of the projected infrastructure being developed for the mine. In reviewing this assessment, I have now concluded that my previous post (link here) substantially underestimated the value of the Winchelsea resource. This was due to an error in my calculations, in particular, my failure to take into account the concentration rate in the Winchelsea ore. I apologise to readers and have added a correction to my previous post. My previous post stated:

According to the sampling undertaken by Xenith, the total proved and probable ore reserves (as at October 2020) were 11.8 million tonnes with an average manganese concentration of 26%. Xenith estimated the costs of extraction and processing (Table 8.1) and this led to the estimation of net ore prices for the various categories of ore (Table 8.2 at Appendix E). Estimated FOB prices varied between A$5.68 and A$1.74 dmtu (dry metric tonne unit). 

The price of manganese ore has risen over the past year, and it is currently in the region of A$6 per metric tonne. It is unclear what Xenith’s estimated net FOB prices would be today. However, if we assume a resource of 11.8 million tonnes and an average ore price of A$6 per tonne times 26 (to take into account the average concentration of 26%) then the gross value of the Winchelsea Resource would be A$1.8 billion. Crucial to mine profitability would be the costs of extraction and transport to market and of course the future price of manganese ore. Notwithstanding my earlier calculation error, it remains unclear in my view whether Winchelsea Mining, which has no previous experience in bringing a major project into operation, has the commercial capability to raise the capital required to develop the resource, and if so whether it can overcome the numerous financial risks (such as exchange rate risk and an uncertain trade policy environment) and the increasingly uncertain environmental and climate challenges in a cost-effective manner. The ultimate profitability of the project and the financial benefits for the traditional owners of Winchelsea Island and the Groote archipelago generally are in my view far from certain.

Moreover, and importantly, there is no transparency over the structure of the Joint Venture arrangements between AAAC and AusChina. The risk here is that the TO’s who have effectively given up access to alternative and less risky uses for the s.64(3) payments in favour of investments in the development of the mine will not not receive an equitable share of profits and/or financial transfers as the mine’s development and operation progresses. Another important issue is that it is far from clear that the social and environmental costs of the mine on the broader Groote population (including Groote’s Aboriginal residents) are adequately understood in the wider community and will be adequately factored into the calculus underpinning mine development. The major concern in my view is that the role of the Land Council in protecting traditional owner interests has been compromised by the complex array of systemic conflicts of interest that have been established, the impact of which continues to this day.

One obvious and in my view concerning issue is the disjunction between the rhetoric promulgated by the ALC that the development of the mine will be in the interest of all traditional owners on Groote, and the legal ownership structure which vests 70 percent of mine ownership in AAAC owned by the representatives of just two clans. In the event that the mine is successfully developed, this disjunction will likely become a source of serious conflict. It represents in my view a failure by the ALC in its core statutory function, a failure which can be directly traced to the conflicts of interest built into its governance.

In July 2024, the NT EPA responded to the Winchelsea’s Notice of Variation with a document titled Direction to include additional information in the supplement and form and manner to publish the supplement  (link here). The Direction listed 30 areas which required more information or analysis. Apart from a range of environment and cultural heritage related information, the EPA made the following comment/request:

Comment: The draft EIS states that as the proposed 50-person accommodation camp and other supporting infrastructure will be located on Groote Eylandt and developed by a separate entity, and it is not considered in the EIS. Due to the dependency of the proposed action on this supporting infrastructure, consideration of this development is required in the EIS. Limited information is provided in the referral regarding the usage of Bartalumba Bay wharf in the construction phase of the project. This activity may cause an indirect impact to stakeholders / other users of the wharf.

Information required in the supplement: Provide an assessment of the potential social and economic impacts on the Groote Eylandt community from the development of supporting infrastructure (including accommodation camp) and from the use of Bartalumba Bay wharf [emphasis added].

The alternative ‘separate entity’ referred to in the supplementary direction from the EPA is clearly GHAC and its Little Paradise project.

Conclusion

A media article dated 1 January 2021 which is still up on the ALC website is headed ‘Mine nearly ready to go: Traditional owners on Groote Eylandt hope to start mining manganese on their own land by mid-2022’ (link here and link here). The article lays out the strategic vision for the mine and mentions in particular that Winchelsea is working with the Northern Australian Infrastructure Facility (NAIF) to lend it $100 million to develop the mine. Clearly the discussions with NAIF have so far come to nought (no public explanation has been provided by the ALC or Winchelsea), and the optimistic timelines have clearly blown out. The recent EPA decision suggests that there could be a further two years wait just to obtain the relevant environmental approvals.

The recent dismissal of Mr Hewitt from the ALC for reasons that have not been made public raises the fundamental questions: where to now for the Winchelsea mine proposal? The fundamental question in my view is for the land council on behalf of all Groote Traditional owners to independently reassess the project’s commercial viability and the fairness of the mining agreement that the land council presumably agreed to while its CEO (and key proselytizer for the project) was simultaneously the Executive Director of Winchelsea Mining. Yet the capacity of the land council to undertake this task while the myriad compromised and conflicted structures identified in the ANAO report are still in place, and while the National Anti-Corruption Commission is continuing its investigations, is clearly doubtful.

In my view, the case for the minister to step in and ensure that the ALC (and the GHAC and AAAC Boards) have access to independent and commercially astute financial advice in relation to the future of the Winchelsea project appears incontrovertible. Ongoing delay will only serve to further complicate the issues in play.

Apart from the possibility of commercial failure, a failure to act will increase the risk that AusChina, the minority interests in the Winchelsea Joint Venture, will decide that its interests will be best served by conjuring up a proposal to sell their equity in the putative mine to Indigenous interests on Groote for a price beyond its real worth.

 While I don’t rule out the possibility that the mine should ultimately proceed, such a possibility is only feasible if its ownership structure, its prospective commercial viability, and the economic, social and cultural viability of the pathway to development of the resource is thoroughly investigated by an independent and commercially experienced person.

We need look no further than the Ayers Rock Resort to find an example of a ‘good idea’ that has served as a sponge soaking up millions of dollars that might have been spent more wisely to benefit Indigenous Australians across the whole country (link here). In that case, the proponents were commercially experienced members of the board of the Indigenous Land Corporation, a Commonwealth statutory corporation, who pursued a course of action which led to financial disaster. The ILSC is still seeking to escape the millstone around its neck, and the losers have been the myriad Indigenous corporations that might have been supported by the ILSC and have not been. The resonances with Winchelsea are crystal clear. If the worst comes to pass, the sorrow of Ministers who were complicit or failed to act when they might have will be ‘but weak relief’.

 

 

 

 

 

 

Proactive disengagement: where to next for the ALC and Groote Eylandt?

 

I conjure you by that which you profess—

Howe’er you come to know it—answer me.

Though you untie the winds and let them fight…

… Even till destruction sicken,

answer me to what I ask you.

Macbeth Act four, Scene one.

 

Three weeks ago, on 16 October, the NIAA and NACC visited Groote and according to media reports met with the Anindilyakwa Land Council (ALC). Following the visit, the ALC board decided to dismiss their longstanding CEO, Mark Hewitt (link here). This follows an ABC news article on 10 July (link here) which quoted a spokesman for the NACC as confirming that it had received a referral from the NIAA and was assessing the referral. It appears (but is not certain) that the NIAA referral followed the May Senate Estimates hearings where Senator David Pocock questioned the ALC CEO about his dual roles as ALC CEO and as a Director of Winchelsea Mining, and summed up by commenting that Mr Hewitt’s dual roles were a "pretty egregious conflict of interest". According to the 10 July ABC news article, the Estimates Committee was advised that some $16m in royalty [equivalents] were directed to supporting the proposed Winchelsea mine.

Following the CEO’s dismissal, there appears to have been a conspiracy of silence from all involved. The ALC website has expunged all mention of Mr Hewitt but provides no explanation for the Board’s decision. The NACC continues its policy of complete silence until the results of its investigations are published. Minister Malarndirri McCarthy appears to have issued no media statement apart from her comments to the ABC (link here):

"I received a letter from the ALC chair informing me that at its meeting on October 16, the ALC board resolved to terminate the employment of the ALC CEO," Senator McCarthy said in a statement.

"Without the trust of the Anindilyakwa people and other key stakeholders, the ALC cannot properly achieve its mission of serving and advocating for the interests of the Anindilyakwa people."

All we can take from this is that the ALC Board lost trust in the CEO, but on what basis? The question is important because it goes to the nature of the issues that were of concern to the NACC and perhaps NIAA, and thus to the steps that need to be taken to remedy those issues.

Ever since the ANAO report into the ALC was published on 31 May 2023, the Government, Indigenous Australians Ministers Burney and subsequently McCarthy, and the NIAA have sought to downplay the issues which the ANAO report raised (for example by always focusing on the recommendations of the ANAO report rather than the myriad critical findings embedded throughout the report). They have also sought to slow down any proactive engagement, and thus avoid taking action to ensure the ALC was fulfilling its statutory obligations. In doing so, the Government has allowed the ALC, heavily influenced by its former CEO, to continue to pursue policies which are demonstrably at odds with normal standards of accountability, and which inevitably disadvantage the land council’s constituency, the traditional owners of the Groote archipelago.

To facilitate this proactive disengagement, the Government has adopted a strategy of intentional non-transparency. When interrogated, it invariably resorted to obfuscation, opacity and has hidden behind justifications which do not stack up under close scrutiny.

By deliberately not saying anything except when it has no choice, it has sought to minimise media attention by starving the issue of oxygen notwithstanding the fact that every time an ALC rock is turned over, a scorpion emerges. It has deliberately ignored the multiple concerns raised by numerous individuals including the 235 signatories to the Parliamentary petition tabled in February 2024, the issues raised in the SMH by Nick McKenzie and in the Saturday Paper by Ben Abbatangelo & Rachel Hoffman, and by me in two detailed letters to the ministers. This strategy has only worked because the Opposition has similarly adopted a studied position of policy insouciance. The Opposition Shadow Minister, Senator Jacinta Price has simultaneously argued for greater accountability of the land councils, unsuccessfully moving to establish a parliamentary inquiry into land council accountability, but failing to pursue in any substantive way the egregious issues that have emerged at the ALC (link here).

To date, the Minister appears to be continuing with her strategy of proactive disengagement. Meanwhile, while the NACC is focussed on determining whether there has been corrupt conduct by any individuals (inevitably a highly legalistic and thus narrowly focussed exercise), the potential for significant and ongoing financial losses and/or financial harm to the traditional owners on Groote remains unaddressed. These are two separate issues, and while they might overlap, it is unacceptable in my view for the Minister and NIAA to use the NACC investigation as the reason for doing nothing to mitigate the likely financial harms arising from the convoluted lattice-work of conflicts of interest that the ANAO uncovered in May 2023. Where is the public interest in waiting?  

Of course, the Government might argue that it set up the ‘independent review’ undertaken by BellChambersBarrett. This was sheer diversion to cover up inactivity. Ministers and the NIAA persisted in claiming the review was ‘independent’ notwithstanding that its recommendations were negotiated with and approved by the ALC (and implicitly its CEO Mr Hewitt who is now implicitly not trusted by the ALC and presumably the NIAA), notwithstanding that’s its drafts were commented upon and thus influenced by the NIAA Integrity Unit (and by implication the Minister), and importantly, notwithstanding that its terms of reference were limited to the implementation of the narrowly framed ANAO recommendations, and did not canvass broader or more recent issues. And of course, the ANAO report was itself limited by the ANAO’s remit to the operations of the ALC per se, whereas the complex flows of royalty distribution finance extend beyond the ALC to at least 12 corporations established under the CATSI Act, and over which the ALC exerted considerable influence if not actual control, thereby bypassing the intent of the Land rights Act to place individual distributions and investment decisions outside the purview of the land councils. The CATSI legislation itself falls under the Minister’s responsibilities.

Taking the commentary above as context, I propose to make some high-level observations on likely future developments and the necessary next steps in relation to the ALC.

The first set of observations relate to the case for undertaking a truly independent and transparent forensic audit of the ALC’s distribution of royalties and royalty equivalents. The ALC has leveraged these processes to allocate substantial (but as yet unquantified) financial resources to (a) retail outlets which do not appear to be independent of the ALC and its staff, and which may be shifting significant amounts of money to private individuals; (b) to request the Anindilyakwa Mining Trust (AMT) to transfer $41m to ARAC, a CATSI corporation which appears to have been effectively controlled by the ALC, but whose financial statements do not record the receipt of the payment which the AMT made; and (c) to effectively subsidising the infrastructure and other associated investments necessary to establish the Winchelsea mine which was / is effectively controlled by private investors and the former Chair and former CEO of the ALC (it is not clear if the Directors Winchelsea Mining have changed since the death of the former Chair and the dismissal of the ALC CEO; if they haven’t, then this in itself is a problem). The import of this subsidisation is in effect to grant funds to the interests which control Winchelsea Mining; yet analysis of the ALC’s own submission to the EIS suggests that the proposed mine will not be commercially viable (link here).

Even were these alleged financial misallocations to be found to involve corrupt conduct by the NACC, it would not fix the problem. What is required is a forensic audit to understand where the funds have been allocated and on what basis as the precursor to taking action to methodically unwind the arrangements that have been established to facilitate the misallocations. A forensic audit is thus the essential first step towards both addressing the conflict of interest and other problematic issues that have been allowed to develop within the ALC and to understanding whether it will be possible to recoup any misallocated funds. Moreover, delays will inevitably lead to an increase in the quantum of funds at risk of misallocation.

Perhaps more importantly, a forensic audit is an essential step in redesigning the ALC’s strategic financial strategy for the medium-term future given that the South32 mine is scheduled to close sometime in the early 2030s, with the almost immediate cessation of what is a significant financial flow to the Groote community. The sheer magnitude of these flows — which emanate from Commonwealth appropriations — to what is a relatively small population, which as has been previously pointed out (link here and link here) is paradoxically suffering from extraordinary levels of disadvantage, suggests that the Commonwealth itself has a responsibility to put in place a transition strategy of some kind. Again, the first step in doing so would be to understand just where the royalty and royalty equivalent financial flows have been allocated. It should not need to be said, but I will repeat it: the mere undertaking of a forensic audit is essentially a core regulatory oversight task, and it will not inevitably and adversely impact any ongoing investigations. Indeed, the reverse is more likely to be the case: it is likely to assist the investigation of potential legislative and accountability breaches, and it is possible that new lines of investigation in relation to corruption or criminal behaviours will emerge.

The second observation relates to the potential consequences of the current royalty distribution arrangements on Groote unravelling. There is more at stake here than an issue of whether an individual or group of individuals associated with the ALC have engaged in criminal activities or corrupt conduct. Notwithstanding the rhetorical hype that is often promulgated, the population on Groote are among the most disadvantaged citizens in Australia (link here). The reasons are complex and are not merely a matter of access to income. What is clear however is that the complexity and artificiality of the current financial arrangements on Groote are such as to exacerbate the risks of seriously negative social and cultural impacts from an erratic and haphazard unwinding of the current royalty distribution arrangements. The possibility of violence cannot be discounted. The implementation of any reform process will need to be managed. This is a task that will inevitably require external support. As a coda to this observation, I should emphasise that the risks of an unmanaged unwinding of current financial arrangements are higher if the Commonwealth chooses to remain inactive and disengaged. In my view, the Commonwealth now has no choice but to engage with the complexity its lack of regulatory oversight has unleashed (see below).

The third set of observations relates to the responsibilities of the Minister (and her predecessors) and NIAA to oversight the operations of statutory corporations in her portfolio. The scale and breadth of apparent maladministration; the quantum of the funds that may have been misallocated; the complexity of the financial arrangements involved; the convergence of public investment and private commercial interests, the sensitivity of the social, environmental and economic issues involved, and the extraordinary way in which much of this has developed and taken place in plain view indicates that there has been an extraordinary and substantial regulatory failure by the Commonwealth over a period going back to shortly after the former CEO Mr Hewitt was recruited. To provide just one example, the advice he gave to a previous Estimates Committee Hearing that he had a conversation with former Minister Scullion where he advised him of his dual roles on the ALC and Winchelsea Mining and assured him that there were arrangements in place to manage the conflict is (if true) an extraordinary revelation. Mr Hewitt claimed the subsequent Minister, Mr Wyatt, was also advised of the arrangement. These conversations in themselves appear to be significant watersheds in the development of the current royalty administration crisis, and yet appear to have elicited not one iota of concern within the Ministers’ Offices, nor NIAA (assuming of course that they knew of it; if they didn’t, what did NIAA do when they did become aware of the conflicted roles?).

Fourth, and finally, I make the observation that the current policy of proactive disengagement has meant that there is absolutely no information in the public domain regarding the current state of management of a key statutory corporation within the Minister’s portfolio. There are numerous legitimate questions that remain unasked and thus unanswered. To take some at random: what is the status of Ms Liu, Mr Hewitt’s spouse and a former employee of the ALC, who is /was actively engaged in the Royalty Shoppa scheme, in the ALC Royalty Management Unit (and thus a range of associated CATSI corporations), and in Winchelsea Mining? What is the status of the Chair of the ALC Audit Committee? How is it that the Audit Committee failed comprehensively over many years to identify and recommend the necessary changes to prevent the crisis that has emerged? For that matter, where was the NAIA Audit and Risk Committee in this whole process? Does the minister see these lapses as a problem and if so does she intend to do anything about it?  What is the current status of the proposal for a mine on Winchelsea Island?  Who are the Indigenous members of the Winchelsea Board following the dismissal of Mr Hewitt and death of the former Chair? Why did AAAC, the corporation which owns 70 percent of Winchelsea shares not have a single Director on the Winchelsea Mining Board? Has that been remedied recently?

More fundamentally, why has the current Government pursued a deliberate policy of proactive disengagement in relation to the operations of the ALC? How can the public and the traditional owners of Groote be reassured that the Government itself is not complicit in some way in what has transpired here?

The ALC and its associated recipient CATSI corporations are in a state of crisis. A crisis that no one wants to acknowledge, let alone seeks to fix. An apt metaphor would be a commercial corporation operating while insolvent. The risk is that it will seek to trade its way out of its financial crisis, and in the process, go bankrupt with even greater losses. The solution is for the shareholders to appoint insolvency specialists who can make an independent assessment and address the underlying issues.

In the present case, it is the Minister to whom this responsibility falls. To date, she has given absolutely no indication that she is cognisant of the risks or prepared to take the necessary action. She should immediately take action to appoint a highly experienced independent administrator to the ALC with the authority to oversee an independent forensic audit and to develop a pathway out of the current crisis. This process will require full transparency to minimise the risks of societal conflict on Groote, to ensure that those responsibility for getting the ALC into its current morass are held accountable, and importantly to maximise the chances that those who will be found to have suffered financial losses or disadvantage are recompensed. This responsibility goes beyond one individual and the possibility at some point in the future of a limited finding of corruption or misfeasance in public office.  And it goes beyond the ALC and its employees.

 

5 November 2024