June 2025 Update on Groote Eylandt Issues

 

'twere a concealment
Worse than a theft, no less than a traducement,
To hide your doings; and to silence that,
Which, to the spire and top of praises vouch'd,
Would seem but modest.

Coriolanus Act one, Scene nine.

 

I have not published any posts on Groote or the Anindilyakwa Land Council (ALC) since February, when I published two posts on the inadequacies of the NIAA’s responses to previous Senate Estimates Questions on Notice (link here and link here) and a more general post explaining why pursuing an understanding of what has transpired on Groote, and how it has been allowed to occur, is important (link here).

Since then, several noteworthy developments have occurred or come to my attention.

Manganese sales. Perhaps of most significance in economic terms has been the resumption of sales of manganese ore by South32 subsidiary GEMCO (link here and link here) following the considerable cyclone damage to the Alyangula wharf last year. That damage disrupted sales and export of manganese ore from the GEMCO mine and led to a temporary halt to the flow of royalty payments to the Groote Eylandt Aboriginals Trust (GEAT), to the Anindilyakwa Mining Trust (AMT) and a halt in section 64(3) royalty equivalent payments from the Aboriginals Benefit Account (ABA) to the ALC for onward distribution to local corporations.

GEMCO legal action. In October 2024, the Supreme Court of the NT published a decision on a largely procedural matter relating to a longstanding dispute between GEAT and the ALC regarding rights to be paid royalties over yet to be developed mineral leases held by GEMCO on Groote Eylandt (link here). As an aside, that decision lays out a very useful account of the history of mining on Groote, including the prescient taking up of exploration permits by the Church Missionary Society which were then used to leverage a royalty payment from BHP and led to the establishment of GEAT and the payments of royalties based on that commercial agreement (and not Indigenous rights per se).

According to GEAT’s website (link here), GEMCO took legal action to clarify the required allocation of royalty payments to GEAT and the ALC derived from the new South and East mineral leases on Groote. The dispute has been ongoing since 2016. The GEAT website reports that following a mediation in February 2025, the parties to the litigation signed a Heads of Agreement, and that subject to the finalisation of some technical legal conditions, the dispute between GEAT and the ALC will be resolved. The terms of the mediation were to remain confidential. I am yet to see any confirmation that the resolution has occurred and on what terms. The GEAT Management Committee notes that the resolution of the dispute will be ‘a big step forward’ for GEAT and its beneficiaries and ‘a great outcome for the community’.

ALC staff changes. Following the termination for unspecified reasons of the former CEO, Mark Hewitt by the ALC in October 2024 (link here), the ALC appointed its Chief Financial Officer, Colin Wakefield, as Acting CEO. In April the ALC announced (link here) the appointment of Matthew Bonson, a former ALP member of the NT Parliament from 2001 to 2008. He served in several ministerial roles during that period (link here).

Winchelsea and Little Paradise EPA updates. The EPA website includes a detailed web page with a chronological listing of the initial application and all subsequent EPA decisions and proponent variations.

 Winchelsea Mining lodged its initial application with the NT Environmental Protection Authority in 2020, signed by Winchelsea CEO Mark Hewitt (link here). The initial proposal was accepted for consideration by the EPA in 2021 (link here and link here) where the EPA advised that an Environmental Impact Statement would be required. The proposal described the mine on Winchelsea Island and the supporting infrastructure:

To develop and operate an open cut manganese mine at Winchelsea Island (Akwamburkba) and Groote Eylandt, East Arnhem, about 600 km southeast of Darwin. Strip mining using free digging and rock breaking would be undertaken to extract ore and overburden. Mine infrastructure would include run-of-mine and ore stockpiling areas, a processing plant, workshops, haul and access roads, a product conveyor from the processing area to the wharf, a jetty and a boat ramp. Product would be direct loaded from the conveyor onto ships for export. Supporting infrastructure would be located at Little Paradise Bay on Groote Eylandt, approximately 6 km southwest of the mine site, and include a barge landing ramp and jetty, access roads, a logistics hub and a 100-person accommodation camp. The disturbance footprint is 659 hectares, and the mine life would be approximately 14 years (emphasis added).

Subsequently there were two significant variations made by the proponents (in 2021 and 2023) and subsequent consultation processes undertaken by the EPA. In October 22023, the EPA issued terms of reference outlining the required content of the necessary EIS. The proponent’s EIS was finalised in December 2023 (link here). It is an extensive document (the Executive Summary runs to 89 pages). Section Two of the Executive Summary titled Project Purpose places the proposed mine within its institutional context. This section makes clear that the proposed mine is seen as part of the ALC’s high level strategic objectives:

In response to the need for a self-sufficient and sustainable local economy following cessation of mining by GEMCO, and the desire for greater self-governance, the Anindilyakwa Land Council (ALC) developed the 15-Year Strategic Plan 2012- 2027 (ALC, 2012). In line with its Strategic Plan, the ALC entered into a series of agreed reforms with the NT Government to take over control of core services and functions for the communities and region. As part of the reforms, the NT Government and ALC established Local Decision-Making Agreements (LDMAs), with the aim of transitioning control for services and decision-making to the Anindilyakwa people, as the Traditional Owners of the Groote Archipelago. A key commitment by the NT Government in the LDMAs was the support and advice to Traditional Owners to conduct exploration and mining in the Groote Archipelago, in accordance with recognised rights of Traditional Owners to utilise their natural resources [page 14].

The Winchelsea Funding structure laid out in Figure E-3 [page16] makes no mention of Little Paradise. In section 8 headed Holistic Impacts, the Little Paradise development being progressed by Groote Holding Aboriginal Corporation (GHAC) is cast as ancillary to the mine and not part of it.

Public consultation on the Draft EIS took place in the first half of 2024. In July 2024, the EPA issued a Direction to include Additional Information in relation to an extensive list of matters (link here) and required that a revised EIS be prepared and submitted within two years. Two issues caught my attention: first, the EPA concluded that the draft EIS did not demonstrate how the claimed transformational residual economic benefits the Groote Archipelago and Indigenous residents and directed the proponents to more specific details [item 25]. Second, the EPA also noted that the EIS did not provide adequate information in relation to the proposed 50-person accommodation camp and other supporting infrastructure to be developed by a separate entity [ie GHAC’s Little Paradise development] and directed that it be included in the EIS.

The EPA website also includes details of an application lodged by GHAC in relation to the Little Paradise marine and logistics hub in August 2024 (link here). According to the proposal (page i), the project is designed to support the long-term economic and social future of all Anindilyakwa clans of the Groote Archipelago, and includes a marina facility, associated biosecurity compounds, logistics camp and aquaculture facility. The development is a key component of GHAC’s plan to secure a sustainable long-term economy for the Anindilyakwa. According to GHAC’s Little Paradise Development Report:

GHAC was formed as a commercial entity to support Traditional Owner commercial activity on their land that accords with the governance requirements in section 23 of the Land Rights Act. GHAC was initiated in the 2012 ALC 15-year Strategic Plan — a plan driven by Community Elders to reverse the decisions made over the last 100 years and reassert control over Anindilyakwa destiny. In line with its Strategic Plan, the ALC in 2018 entered a series of agreed reforms with the NT Government to take over control of core services and functions….

…The mandate of GHAC is to support and progress major projects and hold in-trust major infrastructure and assets as well as provide services for social and economic development of all Traditional Owners. ALC and GHAC are actively working to establish projects that deliver a living cultural economy providing inter-generational opportunities to participate in the learning and delivery of both contemporary pursuits and culturally significant traditional practices

The EPA website indicates that on 25 March 2025, the GHAC proposal for a marine infrastructure development at Little Paradise was withdrawn (link here). No reasons were given.

Senate Estimates Committee Hearings. The most recent Hearings were held on 28 February 2025. The transcript (link here) is rather desultory reading; not helped by the fact that the Committee has no effective process in place to efficiently manage what is an extensive agenda spanning the Indigenous policy domain.

The Chair, Senator Pratt, invited the land councils to make extended opening statements which conveniently serve to limit the time available for serious questions. The ALC Chair, Cherelle Wurrawilya limited her pre-prepared comments (at page 39) to good news:  ‘We have made strong changes and will make more changes to continue what is best for the Anindilyakwa people’. She mentioned that recruitment of the new CEO was underway without commenting in any way on why the Council had terminated the former CEO. She mentioned progress in establishing the Groote Archipelago Regional Council: ‘A local council is what we always wanted for our people to ensure we take back control for our local services’. She reported that construction for the boarding school at Milyakburra will commence this year, with the bilingual school system to begin operating in 2026. Finally, she noted ‘It is a new year and the ALC board is committed to look forward, not backwards, to determine our future. We will be getting on with the important functions of the Anindilyakwa Land Council and delivering for the Anindilyakwa people…’ No mention of an ongoing National Anti-Corruption Committee Investigation into the ALC and/or its former CEO. No mention of the GEMCO litigation and the ALC’s dispute with GEAT. No mention of the progress (or lack of progress) of the Winchelsea Mine which the ALC has allocated tens of millions of dollars in section 64(3) payments (see below). No mention of the progress (or lack of progress) of the Little Paradise infrastructure hub which previously had been touted as central to the ALC’s economic strategy for Groote, and which within a month would seemingly be placed on the backburner (see above). Nothing to see here.

The rather lame Committee members were seemingly oblivious to the extent to which they were being taken for a ride, nor of their Panglossian complicity in gaslighting the public at large that all is now well in this best of all possible worlds on Groote Eylandt.

Senator Nampijinpa Price (at page 41) asked about the ANAO’s audit recommendations, and in particular which recommendations remain outstanding, the action taken to implement the recommendations and a timeline for implementation. The acting CEO’s response was a virtuoso display of technical and process-laden verbosity. Senator Price moved on to ask whether Mr Hewitt had been involved in the selection of the ALC Board [a strange question given that no-one to my knowledge has ever suggested that he had been]. The Acting CEO responded: ‘Not to my knowledge, no. It goes through a process as set out in the ILUA [sic: should read ALRA]. The clans nominate their representatives to represent them, the 14 clans on the board, and that process takes place. If there are more than the number of nominees, it goes through the normal NT election process.

In response to a question from ALP Senator Ghosh, seeking information from each land council on their most promising programs, the Acting CALC CEO stated (page 50):

At ALC, we distribute 64-3 royalty money to many corporations. We receive funding applications to be considered by a finance committee based on how the project will benefit our Anindilyakwa people and how it falls in line with local decision-making and aligns with our ALC strategic plan. So we go through that process. Ultimately, funding decisions are made by the ALC board.

Narrowly factual and succinct. No mention however of how the ALC handles the vexed issues of conflicts of interest. No mention of the millions invested in the ALC backed agenda for a mine on Winchelsea. No mention of the governance changes made since the termination of the former CEO.

All in all, the Estimates Hearing was hardly a forensic tour de force by the Senators present. Labor Senators only wanted to hear the good news; the Opposition spokesperson Senator Price, consistent with her previous approaches to the accountability concerns with the ALC (link here and link here), did enough to allow her to claim in the future that she had not ignored the issues being investigated by the NACC while not pursuing anything of substance. The officials present delivered a sophisticated exercise in ensuring the Parliament, the media and the public at large remain in the dark by proactively avoiding any issues of contention or involving defective accountability.  

NACC status. In early 2024, the National Anti-Corruption Commission (NACC) received several complaints, including from the NIAA in May 2024. At some point thereafter they initiated an investigation into unspecified matters involving the ALC and potentially other corporations based on Groote Eylandt. Multiple media outlets reported that they had visited the ALC’s Offices on 16 October (the same day that the ALC terminated the appointment of the former CEO Mark Hewitt). There have been no subsequent statements from the NACC relating to these investigations. While rational assessment would suggest it is a fool’s errand to predict when the investigation might be finalised, the odds of this occurring over the next six months must be increasing.

Concluding comment

This overview of recent developments, most of which have received little or no coverage in the media nor in the public statements emanating from the ALC and the Minister, provide a partial insight into the complexity of the wheels within wheels that are currently revolving on Groote, in the ALC offices in Groote, Cairns and Darwin, in the Board rooms of South32 and GEMCO, in various agencies of the NT Government in Darwin, and in various agencies of the Federal Government in Canberra. What is easily forgotten is that the lives of some 1500 people on Groote, and the opportunities of their descendants, are impacted for better or worse by the decisions reached as those wheels continue to revolve.

Over the past decade, a series of developments have occurred which raise serious questions regarding the quality of regulatory oversight over the actions of the ALC and its staff. The decision of the ALC to in effect engage directly in commercial activities, and particularly mining has been highly problematic. Its involvement was funded largely by the allocation of royalty equivalents to corporations which it appears to effectively control and was based on a ministerially approved agreement which was fundamentally compromised by the fact that the key individuals involved simultaneously sat on both sides of the negotiation. Where was the regulatory oversight as all this was set in train and continued?

It is my considered assessment that the quality of regulatory oversight by successive ministers for Indigenous Australians and the agency that serves them, NIAA, has been an egregious disaster. The case for greater transparency as a counterbalance to the vested interests in play, and as a guarantee that the Minister will ensure public accountability and the ALC will protect the interests of its constituents (which is its fundamental statutory raison d’etre) is inarguable.

In a forthcoming post, I consider the outcomes of some recent FOI decisions in relation to the operations of the ALC and its rather nebulous relationship with the NIAA.

 

 23 June 2025

 

Nothing to See Here: NIAA’s answers to recent Senate Questions related to Groote

Let’s talk of graves, of worms, and epitaphs,

Make dust our paper, and with rainy eyes

Write sorrow on the bosom of the earth.

Richard II, Act three, Scene two.

The NIAA has provided answers to a series of Questions on Notice lodged By Senator David Pocock following the last Estimates Hearings in November 2024 (link here). The questions related to the ongoing situation on Groote Eylandt, the status of various issues within the Anindilyakwa Land Council and the NIAA’s actions throughout this rather sorry and complex saga.

Given that there appears to be few external parties taking an interest in these issues (apart of course from the ongoing NACC investigation which may not report for months), I feel it is incumbent upon me to provide some commentary if only for the record. For the larger context, I recommend readers look at my previous post and in particular, the article I co-authored with Bill Gray in the Mandarin (link here).

In this post, I have focussed on those answers which I consider to be inadequate. In a subsequent post, I will address the issues raised by the answer to Question #8.

I have italicised the questions and the NIAA answers and indented my comments in relation to each answer.

 

Senator Pocock Question #1

Will the Minister initiate an independent, comprehensive, forensic audit into the administration and operations of the ALC and of those Aboriginal Corporations that received funding determined by the ALC, so that the new Board of the ALC can move ahead in confidence to regain the trust of the Anindilyakwa community and other key stakeholders, and achieve the standard of governance that will ensure the ALC can properly represent its people and achieve its mission? If not, why not?

NIAA Answer #1

The former Minister for Indigenous Australians, the Hon Linda Burney MP referred concerns regarding Anindilyakwa Land Council (ALC) governance and operations to the National Indigenous Australians Agency (NIAA) for review and action as required. In response, the NIAA commissioned an independent review of the ALC’s responses to the Australian National Audit Office (ANAO) governance audit and has subsequently been overseeing the ALC’s actions to improve its governance, transparency and accountability.

The NIAA has and will continue to refer all relevant matters to law enforcement and other agencies as required. 

Comment mcd #1

A preliminary and more general point: The NIAA is under the direct control of the Minister. Both she and her agency have regulatory responsibility for the ALC (and for the Registrar of Aboriginal Corporations who is the regulator for CATSI Corporations who are the beneficiaries of section 64(3) payments). Any shortcomings of the NIAA are ultimately the responsibility of the Minister. Any failure to answer questions asked are a failure of the Minister as well as her agency.

The Minister/NIAA have not answered the question regarding the forensic audit. The so-called ‘independent’ review commissioned from BellchambersBarrett was constrained in its terms of reference and focussed only on the formal ANAO recommendations and not on the wider issues which were identified by the ANAO in its fine-grained analysis. The NIAA and the ALC were involved in finalising the BellchambersBarrett Report, and for this reason it was clearly not independent. The answer refuses to contemplate an independent forensic review and fails to provide any assurance that this is covered off in some other way. The deeper question this raises is why? Why won’t the Minister initiate the action required to get to the bottom of what has transpired on Groote? Why doesn’t she want to the public to know?

Senator Pocock Question #3

Can the Minister confirm that the conflicts of interest identified by the ANAO in May 2023 and again more recently in the BellchambersBarrett review of August 2024, have now been addressed to the satisfaction of the Minister and NIAA?  If not, what are the issues still outstanding?

NIAA Answer #3

The ALC has developed a schedule of activity to address the ANAO and Bellchambers Barrett recommendations, including those associated with conflicts of interest management. The NIAA has been overseeing the ALC’s performance of those activities and is satisfied that implementation of acceptable arrangements for conflict of interest management will be progressive over the forthcoming months. The conflicts of interest noted in relation to the former ALC Chief Executive Officer (CEO) have been resolved following the termination of Mr Hewitt and his removal from positions in all associated entities. The current ALC Board Chair does not hold any of the positions that gave rise to the conflict of interest concerns in relation to the former Board Chair.

Comment mcd #3

The question has not been answered. The answer makes clear that the Minister is not yet in a position to be satisfied (“acceptable arrangements for conflict-of-interest management will be progressive…”), yet they have not gone on to identify the issues that remain in progress.

The unqualified assertion that the termination of Mr Hewitt and the election of a new Chair addresses the conflicts of the past is problematic. It ignores the complex web of influence previously exercised by the former CEO and his spouse, and the inevitable expectations on Groote that the benefits flowing form those prior arrangements will continue. The current status and oversight of the various positions and financial interests previously held by Mr Hewitt’s spouse remain completely obscure.

One important but unintentional revelation of this answer is the reference to Mr Hewitt’s ‘removal from positions in all associated entities.’ How was this achieved? Did the Minister and NIAA give Mr Hewitt and his spouse some kind of ultimatum to resign (and if so what was the quid pro quo) or did the ALC direct the ‘associated entities’ to dismiss him, thus confirming that they in fact exercise control over these entities? The public interest requires that clarification and answers to these questions be provided.

Senator Pocock Question #4

Has the Minister/NIAA approved any arrangements for the management of the conflicts of interest that were identified in the ANAO and Bellchambers Barrett reports? If so, will the Minister please table those arrangements.

NIAA Answer #4

Formal approval of the ALC’s conflict of interest arrangements is the responsibility of the ALC Board in consultation with the ALC Audit Committee and ALC management.

Comment mcd #4

The implication is that the Minister and NIAA have not approved any arrangements for the management of conflicts of interest. The ALC has been riven with actual and potential conflicts of interest for at least six years; this Blog has previously identified and discussed many of them. Without ministerial engagement and approval of the actions being put in place, there is no guiderail in place to prevent the re-emergence of conflicted influence over decision-making in the future. Moreover, without a forensic audit, it is unclear whether the pre-existing conflicts of interest led to misallocation of funding and resources (with detrimental impacts on individuals and corporations on Groote), and whether there is remedial action required to rectify such misallocations. The laissez-faire approach of the Minister and NIAA is patently inadequate and represents in my view a serious lapse of ministerial responsibility. The minister has numerous and far-reaching powers under ALRA to play a direct role in the ALC’s administration for however long it takes to establish a new set of watertight operational procedures.

Senator Pocock Question #5

Can the Minister confirm that the Aboriginal residents of Groote Eylandt have not been subject to predatory commercial behaviour and financial losses arising from the actions of the former CEO, his spouse and the former Chairman of the ALC? If not, what action is she taking to ascertain the extent of the potential losses to the community?

NIAA Answer #5

As previously noted, the former Minister referred concerns regarding ALC to the NIAA for review and action as required. The NIAA has and will continue to refer all relevant matters to law enforcement and other agencies as required.

Comment mcd #5

One obvious problem with this answer is that not all commercially predatory behaviour will be illegal or corrupt. If it is the case that legal and non-corrupt predatory behaviour has occurred, the question becomes: is the Minister prepared to allow the officers and staff of agencies within her portfolio to engage in such behaviour, and more directly, why was she not prepared to take action within her regulatory powers when she became aware of such activities rather than hiding behind the convoluted and time-consuming processes of law enforcement agencies?

Given the deliberate policy of minimising the disclosure of relevant information, we do not know if the issue of potential predatory commercial behaviour was even of concern to the Minister or her predecessors, nor whether it is of concern to her today.

What were the concerns that she referred to the NIAA and onwards to law enforcement? When were those concerns formally referred to the various agencies? Which agencies received referral? How long transpired between the Minister and her agency becoming aware of the concerns and referrals being made? Why won’t she indicate the general nature of those concerns? I am sure the people who are the subject of any investigations understand that investigations are underway. Why keep the public in the dark? What has the Government got to hide?

The bottom line is that the answer to this question is deliberately designed to hide crucial accountability information. This is not in the public interest.

Senator Pocock Question #6

According to the ALC website, in the period 2019 – 2023, the ALC distributed $361m of s64(3) monies to various corporations and organisations on Groote Eylandt. Can the Minister/NIAA confirm that these distributions were determined by the ALC in compliance with the provisions of the ALRA, including s23(3) & s23 AA of the Act?

NIAA Answer #6

Distributions were determined by the ALC in compliance with the provisions of the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA).

Comment mcd #6

This answer exudes unwarranted confidence. In my view it is both misleading and wrong. Section 23AA requires the ALC to undertake its functions inter alia, in a fair manner. The ANAO identified a series of payments to corporations where the ALC CEO played a major role in the application and/or was on the Board or had a conflict. The obverse of this favouritism is unfairness to the traditional owners who might otherwise have been beneficiaries.

The ALC’s effective control of associated corporations (in my view implicitly acknowledged in the actions taken by the NIAA to have Mr Hewitt vacate all his positions on associated entities) is itself an effective breach of the legislative requirement that land councils pay 64(3) payments to (independent) corporations and not to an entity it controls.

The provision (s.23(1)(ea)) that allows land councils to assist local corporations has a rider that such assistance must not cause the land council ‘to incur financial liability or enable it to receive financial benefit’. The ANAO found instances where the ALC could not demonstrate that this was the case. More substantively, where a land council effectively controls a corporation, then the liabilities of the corporation are those of the land council. This inevitably leads to a breach of section 23(1)(ea).

In a grave error of judgment, the NIAA and Minister appear to have lost sight of both the first and second Laws of Holes (link here). They should stop digging, and the Aboriginal citizens on Groote are still in a deep hole.

Conclusion

The answers to the questions above are in my view deliberately obfuscatory, are incomplete and by failing to provide the full story have the effect of misleading the Senate. In some cases, they are just wrong. This is a continuation of the approach adopted from the first day the ANAO tabled its performance audit in May 2023, which is best described as a policy of ‘nothing to see here!’ At best, this involves putting the political interests of the Government above the public interest. At its worst, it is much more serious than that. It erodes trust in Government and diminishes the quality of our democracy.

The failure to get to the bottom of what has transpired on Groote (not all of which will necessarily meet the definition of corruption, or criminal behaviour) will lead to ongoing and deep-seated disadvantage to the Aboriginal population of Groote Eylandt and may have wider implications for the viability of the core institutions established by the Commonwealth’s NT land rights legislation. These disadvantages will certainly be political, and financial, but most importantly they will also have social consequences for the fabric of community life on Groote. This is the tragedy that is unfolding.

 

21 February 2025

 

 

 

 

Eleven posts foretelling calamity and tribulation on Groote Eylandt

 `                                         As thick as hail

Came post with post…

Macbeth, Act one Scene three

 

 Set out below are links to eleven previously published posts on this blog dealing with policy issues on Groote. It seems clear that concern regarding the issues on Groote is becoming more widespread, though where it will all land is as yet unknown. IN any case, I thought readers might find it useful to revisit some of my earlier analyses, so I have collected them below, starting with the most recent, and ending with a 2016 post on police infrastructure upgrades.

Groote developments: NACC referral by NIAA

Discusses the referral of unspecified issues related to the ALC to the NACC by Minister Burney.

10 July 2024.

 

“Don’t you worry about that”: a further Groote issues update

 Discusses the Senate Estimates Hearing on 7 June 2024, including Senator Pocock’s robust cross examination of the ALC CEO.

21 June 2024

 

Groote Eylandt recent developments

This post discusses a number of issues including the impact of the recent cyclone on royalty flows to Groote, the decision of the former ALC Chair to step down from the ALC, governance issues related to Groote, including the silence of the Minister in relation to these. 4 June 2024

 

Slow walking towards disaster: new revelations regarding the proposed Winchelsea mine on Groote Eylandt.

This post discusses the 11 May article in the SMH by Nick McKenzie which revealed that the CEO of the ALC had sought to be granted a ten percent equity in Winchelsea Mining. THe post also discusses the slow pace of the Ministers actions in response to the various allegations that are in play related to the operations of the ALC.

13 May 2024

 

ANAO 2024/25 draft work program

While primarily about the ANAO draft work program, this post argues that the ANAO should focus attention on the Aboriginals Benefit Account since it is well past time that an independent oversight body undertook a close look at the distribution of royalties and royalty equivalents.

4 April 2024

 

The proposed Winchelsea mine on Groote: the commercial and policy risks are pervasive

This post discusses the substantial risks inherent in the ALC’s publicly released strategic policy framework, including a critical analysis of the commercial feasibility of the Winchelsea manganese deposit.

16 March 2024

 

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

This post outlines the ALC strategic plan and policy framework, based on using the development of the Winchelsea mine to build a sustainable capital fund into the future.

16 March 2024

 

Silent dissemblance: discussion of the ANAO report on the ALC in Estimates

This post discusses the unsatisfactory discussions related to the ANAO audit reports of the NT Land Councils including the ALC in the November 2023 Estimates Hearing, and suggests the Minister take proactive action to investigate what is actually happening on Groote, and identifies a need for a wider review of the Indigenous commercial sector.

15 November 2023

 

 Typographical errors: ANAO audits of the Tiwi and Anindilyakwa Land Councils

This post reviews the ANAO audits of the TLC and ALC and suggests that a forensic audit is required as well as a wider review of the regulatory framework within which the NT Land Councils operate.

1 June 2023

 

 Dodge dip and dive: eight ‘data points’ on remote policy

Data point two summarises the results of an ANU study into the socioeconomic conditions n Groote Eylandt.

1 May 2023

 

Moral hazard and police services on Groote Eylandt

This post discusses the deeper implications of a pre-election funding announcement by the NTG and the Commonwealth to upgrade the police presence on Groote.

1 July 2016

  

12 July 2024

 

 

The proposed Winchelsea mine on Groote: the commercial and policy risks are pervasive

                                                     Something is rotten in the state of Denmark.

                                                Hamlet, Act one, Scene four

Introduction

In the previous post (link here), which I strongly suggest that you read before this reading this post, I laid out the background to the Anandilyakwa Land Council’s (ALC) pursuit of the Winchelsea mine project, with high level support from the NT Government, and an apparent lack of proactive engagement by the Commonwealth. At the end of that post, I indicated I fundamentally disagreed with the narrative being promulgated by the ALC. This post explains the reasons for my concerns and argues that there are three high level problems with the ALC narrative in relation to the future of Groote.

 

The first relates to endemic conflicts of interest between the ALC and a number of associated corporations in receipt of royalty payments from the ALC, conflicts that extend to the individuals involved and which have the potential to adversely impact millions of dollars in royalty allocations. The second relates to commercial feasibility of the proposed mine (noting that I do not claim particular expertise in this matter, and there is a risk I may be mistaken). The third relates to the ALC’s royalty allocation strategy designed to facilitate the development of the mine.

 

The Commonwealth Minister for Indigenous Australians has regulatory responsibility for oversighting the Aboriginal Land Rights Act in the NT, and the various land councils established by that legislation. The land councils are thus Commonwealth statutory corporations, and (in theory) subject to the normal accountability and regulatory requirements applicable to all Commonwealth entities. Former Minister Ken Wyatt was responsible for approving the Winchelsea mining agreement on Groote in accordance with section 45 of the Act.

 

I should state up front that I readily acknowledge that the NT land councils are complex cross-cultural institutions and confront considerable challenges merely in undertaking their daily business. This is particularly so for a small land council representing just 14 clans on a remote archipelago. Yet the fact that the effectiveness of the NT Land Councils are so important to the achievement of Aboriginal aspirations makes it even more important that they should be held to standard accountability requirements, both to their constituents and to the community at large. Once they lose the trust of the wider community, and their own constituency, they will lose the capability to protect Indigenous interests, let alone advance them. The ALC is particularly vulnerable to financial risk insofar as it manages upwards of $50m per annum in operational expenses and royalty distributions.

 

At its core, the institutional architecture oversighting Aboriginal land held under ALRA title in the NT is simple. Land Councils have a function of negotiating on behalf of traditional owners with persons seeking to obtain an interest (such as an exploration or mining licence) over Aboriginal land. Aboriginal land is owned by a Land Trust which must act on the direction of the relevant Land Council. The Land Council in turn must consult the traditional owners (TOs) for the relevant land to ascertain their wishes and must be satisfied they understand the proposal and as a group consent before directing a Land Trust to agree (or not) in relation to any decision related to dealing in the land. See section 23 of the ALRA.

 

The Land Councils also have a function to assist in commercial development. Section 23(1)(ea) provides that a function is:

to assist Aboriginals in the area of the Land Council to carry out commercial activities (including resource development, the provision of tourist facilities and agricultural activities), in any manner that will not cause the Land Council to incur financial liability or enable it to receive financial benefit…

 

Subsection 23(3) provides that in carrying out its functions a Land Council should not give or withhold consent in relation to a proposal unless it is satisfied that the TOs ‘understand the nature and purpose of the proposed action and, as a group, consent to it’.

 

The difficulty in relation to the proposed Winchelsea mine is that the TOs of Akwamburrkba (Winchelsea Island) own (via the Anindilyakwa Advancement Aboriginal Corporation) 70 percent of the equity in Winchelsea Mining Pty Ltd, the proponent. On its own, this creates a structural potential conflict of interest. Yet the cross directorships, cross employment arrangements, personal conflicts and cross consultancy arrangements create an extraordinary network of conflicted loyalties that are difficult to comprehend in any effective governance structure, let alone one involving a Commonwealth statutory corporation.

 

According to Mr Hewitt in his evidence to the Estimates Committee, the TOs did not make a financial contribution (the ANAO states it was a mere $60), but instead agreed to provide their consent. In fact, a number of Aboriginal Corporations based on Groote provided loans to Winchelsea (AAAC $11.6m; ARAC $4m) which supplemented the ACIM contribution of $10m plus a loan of $1.6m). Moreover, AAAC has no CEO, and only 8 staff, and the majority of its revenues are the result of discretionary grants from the ALC which according to its 2022 Financial Statements (page 14) are provided for specific purposes related to the Winchelsea Project. The Financial Statements report also states that future funding from the ALC is contingent on progress reports and project performance.

 

While Winchelsea Mining is a subsidiary of Anindilyakwa Advancement Aboriginal Corporation (AAAC), a registered charity. The AAAC’s six Directors include three ALC Directors. The ALC Chair, the ALC CEO and his spouse are three of five Directors of Winchelsea (the other two are representatives Winchelsea’s other owner, AUS China International Mining Pty Ltd). There is no representation on the Winchelsea Board of any AAAC Directors.

 

Given these complex conflicts of responsibility, it is difficult to see how the ALC could have objectively and neutrally undertaken the consultations necessary for it to meet its statutory functions in negotiating a mining agreement between TOs and Winchelsea Mining Pty Ltd. It is also difficult to understand how a Minister, if properly advised, could approve a proposed mining agreement without initiating further investigations to ensure there were no accountability or policy issues requiring specific attention in the Agreement. One option available to the Minister would have been the appointment of a mining commissioner to watch over the negotiations. Given the current structures in place, it seems unlikely that the then Minister in fact undertook any of these precautionary measures.

 

Problem One: ALC effectively controls key Aboriginal corporations in receipt of royalties.

While the ALC has a statutory function to assist Aboriginal Corporations such as AAAC and GHAC, it seems unlikely that this power extends to cases where the ALC is exercising effective control of the corporation. See for example sections 23AA (3) and (5) of the Aboriginal Land Rights Act.

 

Section 910B of the Corporations Act 2001 provides inter alia in relation to the meaning of control that ‘control’ includes:

having the capacity to determine the outcome of decisions about the body corporate's financial and operating policies, taking into account: (i) the practical influence that can be exerted (rather than the rights that can be enforced); and (ii) any practice or pattern of behaviour affecting the body corporate's financial or operating policies…

 

It is clear that the ALC’s influence over AAAC’s budget and expenditure and its role in controlling the operations of its subsidiary Winchelsea prima facie meets this definition.

 

Similar arguments can be made in relation to the other corporate entities operating on Groote with significant involvement in aspects of the Winchelsea mine proposal:

 

Groote Holdings Aboriginal Corporation receives significant royalties from the ALC to support the development of the Winchelsea mine, particularly its logistics infrastructure. GHAC’s funding is 99 percent from the ALC. Its six community based Directors include the ALC Chair and four other ALC Directors, and the three Independent Directors include the ALC CEO, and whose Chief Operating Officer is the ALC CEO’s spouse.  The Chief Financial Officer (CFO) of GHAC is undertaken by ENMARK, the firm operated by the Chair of the ALC Audit committee.

 

The Anindilyakwa Royalties Aboriginal Corporation whose primary role is to receive and disburse section 63(3) payments has nine Directors, including five ALC Directors (including the ALC Chair) and of the remaining four independent Directors, at least two are or have been in receipt of consultancy funding from the ALC.

 

The Anindilyakwa Leaders Future Fund Aboriginal Corporation (ALFFAC)is a further example of the ALC exercising control and influence over a corporation, albeit with its purpose fo benefitting ALC members in plain sight. The ALFFAC Board and membership is comprised entirely of Directors of the ALC, whose funding of $1.5m in 2021/2022/2023 was entirely from the ALC (listed as a section 35 grant) and whose purpose is entirely focussed on providing voluntary and extremely generous lifelong ‘recognition and protection’ packages to former ALC Board members and staff (albeit with a discretionary element). While a case can be made for arrangements such as these, they are virtually unknown amongst Commonwealth statutory corporations and the potential downside is that they may constrain the exercise of independent judgment by ALC Board members who may fear they are placing a future income stream at risk if they question the ‘accepted wisdom’ on investment decisions involving millions of dollars.

 

To sum up, it is one thing to argue, as the ALC does, that its involvement with the various corporations supporting the proposed Winchelsea mine is consistent with its statutory function to assist distinct and autonomous corporations in its region to engage in commercial activities. It is quite another thing to engage with corporations where the ALC is prima facie exercising effective control in its own right in relation to the decisions being taken. Such an outcome is not consistent with the fundamental intent of the checks and balances that are built into the architecture of the Aboriginal Land Rights Act in the NT. In particular, the provisions of section 35 which are clearly designed to ensure land council accountability for its payments to corporations of section 64(3) royalties. This accountability constraint is undermined and subverted if the corporations are not independent of the Land Council. This would not be just a technical breach, but leaves open the potential for poor decision-making to occur without any of the normal checks and balances being engaged. The key intent of these checks and balances is to protect traditional owner interests. As a result, the likelihood increases that land council interests (or in a worst case scenario, the interests of a clique within the land council) are pursued to the disadvantage of TOs generally.

 

Problem Two: the financials for the Winchelsea mine project do not stack up.

Correction 13 November 2024: see the post Winchelsea Update dated 13 November 2024 for an explanation of an error in the anlysis below. My calculations of the value of the resource fialed to factor in the average concentration levels of the ore and thus underestimated the overall value of the resource.

The key documentary sources I relied on in assessing the economic impact of the project are documents included in the Draft Environmental Impact Statement (EIS) for the project submitted by Winchelsea Mining (link here and link here). The EIS is currently open for public comment. Key chapters are Chapter Four (4.3.2 Ore Estimation), Appendix E JORC Reserve Estimate Report undertaken by Xenith, a specialist resources consultancy and Appendix X Social Impact Assessment undertaken by CDM Smith (4.1.14.10 Project Labour Requirements and 4.1.14.11  Project Economic Contribution).

 

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). I requested Chat GPT to analyse the relevant information in the report: ore reserves, current manganese prices and extraction scheduling data (table 4.3-5) to obtain a total revenue figure for the projected 11-year life of the mine. That request elicited a current valuation of estimated total revenue for the project of A$33.6m. Xenith undertook a Net Present Value analysis of the orebody and the costs of production/processing (Section 8.5 Financial Analysis page 30). They state without any further information: ‘Financial analysis of the mine schedule showed a positive NPV of the project’. They do not expand however on the assumptions adopted including the relevant discount rates.

 

In a case study of the Winchelsea project on the Xenith web site (link here), Xenith commented:

The outcome of the study confirmed the project was technically viable. It demonstrated targeted export manganese ore product quantities and grades could be achieved based on the waste removal, ore mining, ore processing and associated support infrastructure and services, including product export facilities.

We concluded the project demonstrated positive economic returns with respect to cashflow, NPV and IRR, however the final determination of the project’s economic feasibility remained subject to financing and certain regulatory approvals in control of, and to be determined by, Winchelsea Mining.

 

I take this conclusion at face value but note that it does not appear to take into account the costs associated with the purchase of the mining tenures involved from Yukida Pty Ltd, the previous owners of the exploration licences. In particular, according to the 2020 AAAC Financial Statements, Winchelsea is committed to paying Yukida $6.25m immediately upon the first shipment of manganese. Nevertheless, noting that the total value of the ore resource will be subject to variations in the price of manganese, even were we to assume that manganese prices doubled over each the projected eleven year life of the project, the net value of the resource would be around $70m and the potential profit would be substantially less than that figure. I should add a caveat here that I am not an expert in project feasibility studies and was extremely sceptical when I first made my own rough calculations of the limited likely value of the ore reserves. However, I took some confidence from having my rough estimates confirmed by ChatGPT’s assessment of Winchelsea’s EIS data.

 

We can get a sense of the financial challenges arising from the low valuation of the available ore body by calculating the costs of employing the average of 83 mining staff identified in the EIS over the 11 year term of the mine. See Chapter 4 of the EIS, section 4.4.14.1. which describes the proposed workforce for the mine (link here). A quick internet search reveals the average mining salary in Australia is over $105k per annum (link here and link here). Adopting a conservative approach, and assuming the average salary at Winchelsea is say $95k per annum, then the cost of 83 staff over 11 years totals $87m. If the Winchelsea resource is valued at $70m, then the projected employment costs produce a $17m deficit without any further assessment of the costs of the capital investment required for the mine, the necessary operating expenditure, the contracted payments to Yukida Pty Ltd of $6.25m arising from Winchelsea’s acquisition of the mining tenure, and of course the repayment of the ‘loans’ of $15.6m already provided by AAAC ($11.6) and ARAC ($4m). Clearly, on the available information provided by Winchelsea, far from being commercially viable, the Winchelsea project faces huge challenges to avoid incurring substantial losses.

 

Reinforcing this rather dire assessment, the EIS also estimates the contribution of the project to the local, NT and international economy. In Appendix X, Table 4-22 the consultancy firm CDM Smith (presumably engaged by Winchelsea) estimate the anticipated capital expenditure associated with the mine in the 12 months from 2024 as $224.6m. In Table 4-23, they estimate the operational expenditure of the mine over a period of 14 years from FY 2025 as totalling $448m (presumably in 2024 dollars). That is in total, the EIS estimates capital and operational expenditure of $672m over the life of the mine. Yet the total current value of the manganese resource currently identified is somewhere between $30m and $70m.

 

There is a part of me that still cannot come to terms with these calculations. Yet they are drawn from Winchelsea’s own documents and commissioned research. The figures would be laughable except that the mine is apparently proceeding, albeit slowly and incrementally, and with apparent support amongst political elites in Darwin and Canberra. While the prospect of a viable mine continues to have currency and be talked up (see the Estimates transcript quoted in the previous post), the risk will be that the ALC and Winchelsea will contrive to direct more and more royalty flows to Winchelsea (via the corporations listed above) to seek to demonstrate that the possibility of a commercially viable mine is more than a mirage. The inevitable losers in such a process will be the Anindilyakwa families and children who could have been supported by sensible and more risk averse royalty distribution policies.

 

Problem number three: the Future Groote Strategy is hot air.

As I noted in my earlier post, 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. I am not seeking to provide a comprehensive critique of the document here, and readily acknowledge that many of the proposed priorities and initiatives would have enormous merit if they could be funded.

 

In relation to the Winchelsea mine and the concomitant implications for royalty distributions, the ALC strategy is to use the Winchelsea mine 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…

 

I see two separate issues with this strategy.

 

First, as outlined above, it seems far from certain that Winchelsea will make commercial profits, and to the extent that it makes losses that are made up or offset from royalty flows through the ALC and its associated corporations, the ALC post mining strategy outlined in the Strategic Plan will be a complete failure.

 

Second, even if my financial analysis were to be misconceived and the mine was financially viable, it is not clear to me that the opportunity cost of the necessary financial commitments towards the mine from royalty distributions do not outweigh the benefits. This is essentially a value judgment, or to put it another way, a policy issue. However, it seems to me that in a situation (as outlined in the  ANU socioeconomic data report published on the ALC website link here) where there is a significant outstanding housing need, where education outcomes are woeful, and where health and substance abuse are ongoing challenges, the policy choice is clear. The current path of prioritising a major commercial investment with limited employment opportunities for local people, and the potential for substantial financial losses, is in socio-economic terms extremely high risk.

 

An alternative strategy based on low key and straightforward investments in housing, preventative health and education would likely create more certain and widespread benefits. While the ALC would argue that they are in fact investing in these priorities, the reality is that the quantum of funding projected to flow into the mine will inevitably stifle the amounts available for these more basic strategies.

 

The bottom line here is that the aspirational rhetoric in the ALC Strategic Plan is both ultra-ambitious, and it fails to adequately consider the choices and trade-offs between the numerous priorities that the ALC is promulgating. Moreover, while the Plan (which appears to have been drafted to a management consultant’s template) mentions risk, its substantive terms ignore the very real risks embedded in the overarching approach being adopted.

 

The present policy direction will likely not lead to a profitable mine, will negate the opportunity for spin-off economic opportunities, and will be unlikely to lead to the achievement of the balance of $650m in the Anindilyakwa Mining Trust that underpins the ALC’s post-mining vision for Groote Eylandt.

 

Conclusion

For the reasons outlined above, I consider the current policy approach of the ALC, which is built around a complex and wide-ranging strategy of utilising section 64(3) royalty flows to effectively underpin the development of the Winchelsea mine, to be deeply flawed.

 

The May 2023 ANAO audit was focussed entirely on the ALC and its governance, and it identified a range of serious issues. The ANAO remit did not extend to the associated corporations in receipt of ALC funding. Yet a wider analysis encompassing the corporations funded by the ALC suggests that the ALC is using its financial heft and extensive cross-directorships to exercise effective control over these corporations. In the process, very real conflicts of interest have emerged which fundamentally undermine the policy architecture laid out in the ALRA for protecting the interests of TOs.

 

Those structural conflicts of interest are endemic in the decision-making related to the distribution of section 64(3) royalties on Groote, and to the decision-making regarding the granting of consent to Winchelsea Mining Pty Ltd to develop a mine on Groote. The ALC has not published its assessment of the commercial viability of the project, and nor is the mining agreement between the ALC and Winchelsea Pty Ltd in the public domain. Critiques such as that offered here are thus based on inherently incomplete information. Nevertheless, there is more than enough smoke in the public domain to justify calling the fire brigade.

 

It is unclear how Minister Wyatt saw his way clear to approve the agreement given that the ALC Chair and CEO also sit on the Winchelsea Board. Assuming that there was no fraud involved, we can be confident that the ALC’s narrow interests were protected in the mining agreement, but it far from clear that the wider long term interests of the TOs on Groote were protected. In particular, there is very real risk is that royalty funds that could assist in reducing endemic disadvantage across Groote will instead be allocated to an investment in a mine that appears not to be commercially viable. In the worst case, royalty funds will be allocated to subsidising and/or concealing financial losses, and may vanish. In such a circumstance, it is unclear who the beneficiaries will be, but it is clear that they won’t include the general Groote Eylandt community. Moreover, in the worst case scenarios, when the community on Groote realise what they have lost, the recriminations will be severe and the implications for social cohesion will be significant.

 

There has clearly been a comprehensive failure to comply with generally accepted governance standards within the ALC. The Directors collectively must share responsibility. The senior levels of the bureaucracy, particularly NIAA, also share responsibility insofar as they have a responsibility to clearly and firmly advise Ministers when existing institutional frameworks are clearly not operating as intended or designed.

 

The NT Government and CLP Opposition must have a sense of what is going on, but both appear to be entirely focussed on their internal dysfunction and the forthcoming election. So too must members of the Senate Estimates Committee who appear to have been blithely blind to what is going on. However, the most serious failure must be sheeted home to the successive Commonwealth Ministers who have looked away when they should have asked questions and taken action. This is not just an issue about ensuring strict accountability or making technical adjustments to processes, it is about Governments stepping up and taking the hard decisions to assist the wider Groote community to take control of its future.  It is about prioritising the pursuit of good policy over playing politics.

 

I recently wrote to the  current Minister for Indigenous Australians recommending she take proactive action to ascertain what is occurring on Groote in relation to royalty management. In particular, I recommended inter alia that she initiate an independent forensic audit of the whole royalty allocation system on Groote. If the concerns outlined in this post are confirmed, and if she does nothing substantive, she too will own responsibility for whatever transpires over the next five years on Groote.

 

Finally, it strikes me that it is time that the Commonwealth commissioned a comprehensive and independent review of the operation of the Aboriginal Land Rights Act in the NT focussed on the effectiveness of the current policy architecture. In two years’ time the legislation will have been in place for fifty years. Much has changed in that time, in communities, in the NT, in Canberra, and beyond. Without regular review, the institutional arteries that permeate the legislation become sclerotic, institutional risks increase, deeper responsibilities are overlooked, and the various stakeholders involved may lose sight of the opportunities inherent but unrealised in the institutional structures legislated almost fifty years ago. The issues on Groote are likely replicated to a greater or lesser extent elsewhere.

 

A visionary minister and government would adopt a proactive stance, and not bury their head in the ground. Reform, whether deep change, or just a regular tune up, is best undertaken by those sympathetic to the aims of the policy structures in play, not by those fundamentally opposed.

 

16 March 2024