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

 

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’.

 

 

 

 

 

 

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

                        Cassius: Did Cicero say any thing? Casca: Ay, he spoke Greek. 

Cassius: To what effect? Casca: Nay, an I tell you that, I'll ne'er look you i' the face again; but those that understood him smiled at one another and shook their heads; but, for mine own part, it was Greek to me.

Julius Ceasar, Act one, Scene two.

Estimates: On 7 June 2024, the Finance and Public Administration Legislation Committee convened to examine the financial estimates in relation to Cross-Portfolio Indigenous matters (link here). Senator David Pocock directed some sustained questions to both the NIAA officials and to the Anindilyakwa Land Council (ALC) and its CEO Mark Hewitt. Both the NIAA and ALC appeared quite uncomfortable with the scrutiny.

On these issues, the key takeouts from my perspective were as follows:

The core issues pursued by Senator Pocock were (a) the conflict of interest that the ALC CEO, Mark Hewitt has by virtue of holding simultaneous positions as CEO of the ALC, as an unpaid Executive Director of Groote Holdings Aboriginal Corporation (which funds infrastructure associated with the proposed mine) and as the co-CEO of Winchelsea Mining; and (b) the degree of disclosure made in relation to the October 2023 proposal from Mr Hewitt to the Anindilyakwa Advancement Aboriginal Corporation (AAAC) which owns 70 percent of Winchelsea Mining for him to be gifted ten percent equity in Winchelsea Mining.

NIAA confirmed that following the media revelations in early 2024, the Integrity Group has commissioned an ‘independent’ review of the implementation of the May 2023 ANAO audit recommendations by an accounting firm based in Canberra, Bellchambers Barrett. What they haven’t done is commission a forensic audit of the tangled web of influence and money flows between the ALC, and several local corporations providing funding to Winchelsea Mining and towards logistics infrastructure for the proposed mine. It is unclear how independent the reviewer can be given its business model is focussed on providing consulting services to government, it provided a ‘draft report’ to the NIAA before Estimates, and the terms of reference are extremely narrow.

NIAA failed to answer Senator Pocock’s question on whether the Minister had been briefed on Mr Hewitt’s conflicts of interest dating back to his involvement on both sides of the negotiation of a mining lease to Winchelsea in 2020. While formal recusal arrangements were put in place, it is unclear how they could work in practice, and whether the recusal arrangements also applied to the then ALC Chair and to his wife who I understand is also an ALC Board member.

When asked about why the CEO had not stepped aside, the NIAA responded that this is a matter for the ALC Board. However, as I have documented on this blog previously, there is a risk that individuals associated with the ALC exercise significant control over ALC Directors by virtue of the existence of a discretionary mechanism to provide former Directors with generous financial benefits (see the discussion of the Anindilyakwa Leaders Future Fund Aboriginal Corporation (ALFFAC) in an earlier post (link here). This is a matter that should be of concern to the Minister and the NIAA given their regulatory oversight responsibilities for portfolio bodies such as the ALC.

When the ALC appeared before the committee, the new Chair, Ms  Cherelle Wurrawilya stated unequivocally that the ALC Board was aware of the recent media allegations and stated that ‘the ALC board completely supports the work of our CEO, Mr Mark Hewitt. He has been our CEO for 13 years and is working hard to deliver the future that we, the Anindilyakwa people, want for our community.’ There was no reference to the 235 signatories to the Petition tabled before the previous Estimates Hearing.

Senator Pocock then asked the ALC CEO to outline how he dealt with conflicts of interest. The answers revolved around leaving the ALC Board discussion while Winchelsea matters were discussed; and leaving the Directors meeting of Winchelsea while ALC matters were discussed. Apart from the fact that this ignores the possibility of matters being discussed beforehand with key Directors in both settings, he did not make clear how the other two key management personnel within Winchelsea resident on Groote, the ALC Chair and Mr  Hewitt’s wife who is also a part time ALC employee dealt with conflicts. If all three recused themselves in matters affecting AAC or the ALC or Groote interests generally, that would only leave the two Directors from AUS China International Mining Pty Ltd (who  only own 30 percent of the joint venture) making the decisions. That this would be the actual situation defies belief.

Nor did Mr Hewitt discuss the fact that while AAAC owns 70 percent of Winchelsea Mining, no AAAC Directors sit on the Winchelsea board. Instead, AAAC is ostensibly represented within Winchelsea by the (former) ALC Chair and two ALC staff (namely Mr Wurramarrba, Mr Hewitt, and Mr Hewitt’s spouse). A more likely alternative interpretation however is that it is the ALC that effectively controls AAAC and the ownership of the equity stake in Winchelsea (see the discussion of the Corporations Act definition of effective control in my previous posts: link here and link here).

Senator Pocock then pursued details in relation to the proposal put to the AAAC and Winchelsea by Mr Hewitt for Mr Hewitt and his spouse to obtain an equity position in Winchelsea (which would have diluted the AAAC holding). In particular he sought details of whether the Minister was informed. It appears that she was not, despite the fact that in the ALC response to the ANAO Audit makes clear that Mr Hewitt and/or the ALC declared potential conflicts to both Minister Scullion and Minister Wyatt at earlier decision points.  Senator Pocock also sought clarification on whether the ALC had been informed and approved the proposal (the answer here was that it had been discussed, but it appeared that there was no formal decision). Further information was to be provided on notice in relation to these matters.

At an earlier stage in the Hearing, ALP Senator Ghosh asked the NIAA a couple of (clearly pre-planned) questions regarding the functions of the Integrity Unit. The answer provided by the head of the NIAA Integrity Unit – see page 19 of the transcript -  outlined the Integrity Unit’s program of proactive intervention to ensure ubiquitous probity across he portfolio. The response was clearly designed to conjure the impression that all is under control:

we have been taking and building a far more proactive approach to the detection and management of noncompliance and fraud. As you would appreciate, it's a continually moving environment within which we're working, so we have been working to put more systems in place so that we can identify and address potential issues of noncompliance and fraud earlier in the piece. Certainly, indications from the matters that we're now dealing with are that is being more successful. We are getting involved earlier in circumstances and intervening before things do become an issue.

I was reminded of the famous quote of Jo Bjelke-Peterson: ‘don’t you worry about that’! Senator Ghosh then asked about the ALC and was advised that: 

The minister referred the media reports and concerns that were publicised earlier this year to my group for review, the objective being that we would review the information and then determine if referrals to other authorities were required. As a part of the process, I have commissioned an independent review of the land council's responses to the issues and recommendations that were raised in the ANAO report on governance. You might recall that a number of the issues raised in that ANAO report were the core of the media reports and concerns being raised. That independent review is currently underway. We expect to have a report for it finalised by the end of next month, July. It is well underway. As part of the review, I accompanied the independent reviewer to Groote Eylandt last week. I was there for three days. We met with management and the board members of ALC to gather more information as part of the review's work. It is ongoing. Once we have the report, we will see what it says.

Nothing to see here! It will be interesting to see if the Bellchambers Review finds a way to address the October 2023 proposal by Mr Hewitt for an equity share in the mine, a proposal which of course post-dates the ANAO recommendations, and thus falls outside the remit of the review.

These issues were brought into sharp relief in the following exchange (on page 39):

Senator DAVID POCOCK: But in a period of what you describe as instability, you sought to gain a shareholding and you didn't think that—it seems pretty significant—warranted disclosing. You mentioned that you disclosed conflicts of interest to Minister Scullion. You didn't think that required disclosure?

Mr Hewitt: It was an internal discussion. I simply asked the question to the board. If I were to step down as the land council CEO and focus on these large projects and optimise their success, what would be the normal standard for any other Australian in that situation?

Senator DAVID POCOCK: But you're not any other Australian. You're employed as the CEO. So I find this quite extraordinary. In hindsight, now that the legal advice was 'This is highly irregular; don't do it', do you accept that it should have been disclosed?

Mr Hewitt: I'm talking as the CEO of Winchelsea. So there are two sides to the discussion here—

Senator DAVID POCOCK: And you're on both sides.

Mr Hewitt: I manage that conflict.

Senator DAVID POCOCK: It sounds like you managed it by trying to get a shareholding, to which the legal advice was 'No, you can't do that.' But you didn't even feel the need to disclose that you were doing that.

 

Commentary

For the third consecutive Estimates hearing, the issues around the involvement of the ALC CEO (and implicitly the former ACL Chair) in the Winchelsea mine proposal have been the subject of close attention. While the issues raised most recently revolved around conflicts of interest, it is important to bear in mind what lies behind the existence of such conflicts: there are certainly risks of fraud, or of breaches of legislative provisions; there are risks of poor management and decision making, and of inequitable or unethical allocations to individuals. However, of most significance from my perspective, there are risks of poor strategic decisions built upon sub-optimal  strategic decisions arising from the existence of conflicts of interest. For example, as I have pointed out in previous posts, the ALC allocates around $60m per annum in accordance with section 64(3) of ALRA to traditional owner corporations. Taking into account the negotiated payments to the Anindilyakwa Mining Trust ( a separate entity unrelated to the ALC, but with some overlapping members) there is about a billion dollars a decade in mining related payments flowing to the Groote population. To the extent that the ALC is not exercising independent judgment on the best use of these allocations because key decisionmakers are conflicted, there is a risk of significant commercial losses and a failure to preserve a long term capital base.  This is why eliminating (and not merely managing) conflicts of interest is so important.

I wrote to the Minister on 1 March 2024 recommending to her that she take early action to address these types of risk. In particular, I recommended a forensic audit that went beyond the narrow remit of the ANAO audit, and encompassed the network of interlinked corporations funded by the ALC. I recommended a number of other actions which I considered essential while such an audit was underway. Last week (over three months later), I received a response from the NIAA CEO which acknowledged that the scope of the current review does not address all the concerns I raised, but assures me that it will provide ‘information on the progress made by the ALC to better manage governance arrangements…’ The NIAA’s CEO’s response also specifically noted that it is standard practice for the NIAA to refer matters to the appropriate Commonwealth or state and territory entities for assessment and action. Needless to say, the response does not engender much confidence that the NIAA and the Minister (who are responsible for regulatory oversight of the ALC and its role in distribution of substantial mining related payments) are adopting a proactive approach to getting on top of the issues that are clearly in play. It is now over a year since the ANAO review was published, and the NIAA would have had earlier access to the ANAO’s draft report.

It is also worth noting that the Estimates Committee appears to be failing in its overarching responsibility as a key accountability mechanism for public policy in the Indigenous portfolio domain. In contrast to Senator Pocock, neither the ALP nor the Opposition Senators on the Committee evinced much interest in understanding what is occurring on Groote nor in finding ways to address the substantial policy risks I have identified previously on this blog and summarised in this post.

It is beyond the time when the Senate should undertake a rigorous review of the operations of Estimates Committees, and consider serious reforms to ensure that discussions are much more focussed and targeted than at present. Sitting through hours of hearings reminds me more of an extended primary school ‘show and tell’ session than a serious attempt to ensure funded agencies are up to the mark. In my view, Senators should be obliged to identify issues in advance, even table core questions, and Committee’s should utilise something akin to a counsel assisting to raises the questions that require attention. Why is it that our parliamentary representatives feel no sense of obligation to seriously focus on the job they are elected to perform?

 

21 June 2024

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

                                                 When we are born we cry that we are come

To this great stage of fools.

King Lear, Act four, Scene six.

 

I recently put up two posts on the Anindilyakwa Land Council (ALC) on Groote Eylandt in the NT, ALC and a murky set of inter-related issues based around the distribution of ABA monies (royalty equivalents) by the ALC and the proposed development of a new mine on Winchelsea Island off the northern coast of Groote Eylandt (link here and link here). These ‘royalty equivalent’ distributions are statutory functions of land councils ostensibly regulated by the Aboriginal Land Rights (Northern Territory) Act 1976 which is Commonwealth legislation.

  

On 11 May, the Sydney Morning Herald (SMH) published an article by investigative journalist Nick McKenzie, based on leaked documents emanating from within the ALC (link here).

 

Key revelations included a report that the ALC CEO Mark Hewitt in 2023 had sought to have up to ten percent equity in the Winchelsea Mining Corporation (WMC) granted to him by the TOs who own 70 percent of the company (the other 30 percent is owned by an Australian corporation with Chinese connections, Aus China International Mining Pty Ltd). The article suggests that the value of the proposed shareholding proposed to be transferred to Mr. Hewitt was significant, and based on internal ALC estimates was currently worth $13m (which places the current valuation of the corporation at $130m) but was potentially worth $50m (which would place the potential value of WMC at $500m). In my previous post I argued that the commercial feasibility of the proposed Winchelsea project appeared to be seriously problematic given the data WMC had provided to the NT Government as part of the EIS processes required for a mine. Nevertheless, it is not clear what other exploration titles WMC owns or might seek to obtain and how prospective they might be. There are suggestions that the seabed surrounding Groote is highly prospective for manganese, but the TOs currently oppose any exploration. This could conceivably change in the future, and if it did, an Aboriginal owned Corporation would be in the box seat.

  

The proposal for an equity transfer to Mr. Hewitt did not proceed after an ALC employed lawyer raised concerns (presumably around conflict of interest) which were confirmed in legal advice sought from an external lawyer Ron Levy. The ALC lawyer’s employment ended two weeks later. According to the SMH article, Mr. Hewitt acknowledged that he had informed the lawyer that his contract would not be renewed.  

 

 

The article also mentions that a complaint had been made to the Commonwealth Ombudsman in relation to the share transfer matter and that the Ombudsman had requested the relevant agency (presumably NIAA) investigate.

  

There are several implications that emerge or arise from the SMH article and its revelations. The first is the discrepancy between Mr. Hewitt’s comments to the Estimates Committee and the latest revelations that demonstrate not only that he came very close to being granted ten percent equity in WMC, but that he had indicated that he only agreed to forgo the offer until he stood down as ALC CEO. In the Estimates committee hearing in February this year Mr. Hewitt  stated:

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

  

While these comments are factually correct, they fail to mention his previous proposal for a transfer of ownership of ten percent of the mining company to himself. In effect, the Committee was misled by omission (although to be fair, as I previously argued, the Committee exhibited an excessive degree of credulousness). Moreover, Mr. Hewitt also failed to mention his plan to take up the offer of a future ownership transfer once he transitioned out of the ALC CEO role.

  

A second, and in my view much more salient implication of the SMH revelations was that in his comments to the SMH justifying the ownership transfer proposal, Mr. Hewitt has made crystal clear his role as the primary architect and most active proponent of the overarching agenda being pursued by the ALC, central to which is the development of the Winchelsea mine. This is the agenda which I was particularly critical of in my previous posts, and for which the Land Council members must be held ultimately responsible. Among the questions that emerge from this implicit admission is how does it coexist with the commitment he gave former Minister Scullion in September 2018 to recuse himself from land council dealings on the mine venture? The SMH has apparently seen the letter making this commitment. It is patently clear that in terms of the substantive issues that the land council has responsibility for, his role as CEO places him in a situation where it would be structurally impossible for him to completely recuse himself. This is the deeper import of the conflicts of interest identified by the ANAO in their May 2023 report.

  

The third and perhaps most serious issue raised by the events outlined by the SMH is the possibility that the degree of control exercised by Mr. Hewitt over the ALC Board (as identified in the ANAO report) may have established a network of reciprocal obligations between key Anindilyakwa TOs and Mr. Hewitt. Such control would be facilitated by the level of control that the ALC holds over the Boards and decision making of associated corporations as discussed in my previous post (link here). Both these outcomes are enabled by the inter-connected memberships between the ALC and the various associated corporations in receipt of royalty equivalent payments from the ALC. If such a network of reciprocity exists (a factual matter yet to be formally determined), it may make it extremely difficult for individual TOs to say ‘no’ to proposals put forward by Mr. Hewitt.  The key issue would then become, are such proposals in the interests of the Anandilyakwa people generally. These are issues that are both philosophical in nature yet also require tangible real-world decisions to be made.

  

The Aboriginal Land Rights Act establishes the system of land trusts and Land Councils to determine these issues in the real world, however imperfectly. Yet the independence of the land council on Groote has potentially been compromised and successive Ministers responsible for ensuring that the governance standards and normal checks and balances are maintained have dropped the ball. While there is an extraordinarily strong case for shining an accountability spotlight on what is happening on Groote, there is also a much more fundamental case for holding Ministers to account for their unwillingness to take appropriate and timely action to ensure strict compliance with the statutory framework in place.

  

The case for action is strengthened by the fact that prima facie, the facts as we now know them are potentially consistent with public officeholders (which could include ALC staff, the Minister and NIAA staff) being involved in two of the four types of corrupt conduct which exist under the National Anti-Corruption Commission Act, namely, breach of public trust and abuse of office.

 

 I wrote to the Minister for Aboriginal Australians ten weeks ago recommending several actions be taken based on a detailed analysis of what has transpired on Groote. Inter alia, I recommended an immediate forensic inquiry extending beyond the implementation of the ANAO report, and immediate action to resolve the conflict of interest held by the Chair and CEO of the ALC who are both directors of WMC. To date I have received no reply.

 

 Last week I lodged an FOI request for various documents including for copies of the report referred to in the Minister’s comments cited in the Canberra Times article. I was advised by the NIAA that following preliminary inquiries with the relevant business area of the agency, it appears that the NIAA does not hold any documents matching my request. There are potentially several alternative explanations for NIAA not having such a report in its possession. However whatever the reason, in the light of the SMH revelations regarding Mr. Hewitt’s September 2023 attempt to be gifted an equity holding in WMC, and its referral to the Ombudsman, who in turn referred it to NIAA, it is difficult to avoid the conclusion that the Minister is slow walking the investigation of these allegations, and delaying taking any action to address what are clearly significant issues both for the Aboriginal population of Groote Eylandt, and for effective and responsible public administration.

  

All I can say is that the longer the Minister delays taking action, the more foolish she will ultimately appear.

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