How the resources sector is managing the COVID-19 crisis



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Leaders in the Australian resources sector convened for a CEDA livestream panel discussion about the impacts that COVID-19 was having on the sector and their plans for navigating the crisis.

Lynas Corporation Chief Executive Officer and Managing Director, Amanda Lacaze, said that while it feels like news about coronavirus was never ending, we had to be prepared for the future.

“COVID-19 will surely end and the efforts that you put in in the early days bear fruit later.”
Ms Lacaze reflected on the lessons she has learned through previous crises.

“On a corporate level I have led four corporate turn arounds. In the early stages, it has the same hallmarks as the challenges from the pandemic. It is essential to make decisions each day. It is essential to keep a focus on the future and form a clear view of when you should shift from crisis management to a more normal management mode. Crisis can be very seductive. When every decision seems critical and life is moving at a fast pace it is only human to feel special and really important.”

Ms Lacaze said that the resources sector is “uniquely prepared” to implement relevant measures.

“Health and safety are already top priorities in our industry. Companies like Lynas have well established safety systems which allow us to effectively roll out new policies and requirements. I am proud that the industry has stepped up and put in place strict COVID-19 health and safety protocols to not only protect our people but also our families and our local communities. This has been a coordinated national effort with excellent leadership in our industry bodies, in particular the Minerals Council of Australia and the Chamber of Minerals in WA.”

She discussed some of the measures that Lynus was taking to manage the pandemic.

As is often the case when forced to take a zero-based view of activities, there are some changes we’ve made that have made us go “of course, why didn’t we do that one earlier?” One of my favourite sayings is ‘never waste a good crisis’ and it is a very good catchphrase as we review our activities.”

Ms Lacaze then spoke about Lynas’s plans through 2025 and how the unfolding situation was shaping their outlook.

The Chamber of Minerals and Energy of Western Australia, Director – Policy and Advocacy, Robert Carruthers said that the resources sector had so far handled the crisis admirably.

“It has been an unprecedented event, but it has also seen an incredible collaborative response from industry and across the resources sector. It feels like, and I’m an optimist at heart, that we are getting to the end of the beginning in the sense of that urgent rapid response and we are now in the new abnormal.

“It is really a question mark as to how long we will remain here. For us its about making sure we focus on health and safety first and foremost, ensuring business continuity across the board as we continue in this semi lockdown, and having an eye to the future, making sure that we can really seize on the opportunities that will come at the other side of this. It is undoubtedly the resources sector that will be at the forefront of that.”


 
Neometals Chief Executive Officer and Managing Director, Christopher Reed, spoke about his current priorities during the crisis.

“The physical and mental well being of our employees and stakeholders is at the front of our mind right now. I think the mining industry is very powerful and we move at a good pace in terms of developing and operating. I think to take one of Amanda’s comments, we shouldn’t waste this opportunity to pause and get ourselves positioned or what will be the breakthrough at the other side of this crisis.”

Speaking on her own priorities, Ms Lacaze said that maintaining continuity was key.

“My priorities are ensuring that we are financially sound and that we are continuing to improve our position. How do we get a good forecast on the demand on the other side and how do we right side our operations?

“Our second duty to our people is to make sure they go home safe every night. Our third duty is to ensure that they have more skills when they leave the company than when they join. We have the opportunity here to stop and think and update.” 

The panel speculated on how export markets would be affected by the crisis.

In export markets we are between two great friends with the US and Asia, and our markets continue to be strong on the Asian side. The majority of our iron ore is going to China and our LNG is spreading across Japan and Korea,” Mr Carruthers said.  

“One of the positives out of this, if there is a positive out of the last couple of months in terms of responding from a health and economic perspective, is that we haven’t seen any tapering off of demand, and shipments into those Asian ports have been unaffected.

“It is important that we focus on that and capture any additional demand that comes out the other side of this. For me with the US, access to capital for that next round of major projects will be key to our ongoing activities so the US will be crucial for us moving forward.”

We are planning for depressed demand coming out of the current crisis and I think that what is really important for business to do is to create operating models that allow you to dial up and down reasonably quickly,” Ms Lacaze said.

“I don’t think any of us know exactly what is going to happen but what I do know is it will not be what I expect. Therefore, I need to create muscle in the organisation and an operating platform that gives us room to respond quickly to changes in market conditions.”

Mr Carruthers reflected on the policy changes he would like to see to foster capex expansion in the resources sector.

“This is really fertile ground for reform. Reform that has been spoken about for a long time,” he said.

“In terms of a government response, we would like to see policy settings that adapt and remove non-essential regulatory and compliance burden, particularly in that recovery phase. There were a number of reforms on the way prior to the COVID-19 crisis at both federal and state levels. Some of these are very capable of being delivered in the short term.

“Things like reinstating a bilateral improvements arrangement for environmental approvals between Western Australia and the Commonwealth. This is something that has been in place previously that could reduce time frames, while still ensuring the same level of environmental stewardship and rigor. “Projects on the other side of this could be reduced by six to 18 months purely by going down that path, which was well advanced before the crisis.

“I also think it’s this cumulative effect – the death by a thousand cuts scenario. The various layers of regulatory oversight and fiscal fees and charges, not just at a state and federal level, but at all the way down to local government. These are not things that are easily responded to and government is going to need a capacity to respond after this crisis. I think we have really fertile ground to be outcome-focused on what needs to be assessed and what is critical, versus being focused on process and compliance that doesn’t add value or respond to particular risk factors.

Ms Lacaze agreed with Mr Carruthers.

“The critical path for us delivering our project is approvals. The great risk coming out of COVID-19 is that we have a lot of civil servants who are distracted and therefore our approvals process, which is already long, gets even longer. The ability for us to start to spend big licks of money is about the approvals process. That is really what we think is crucial. How can they assist the public service to get back to work in an efficient fashion?”

Watch the full event here