Directory UMM :Data Elmu:jurnal:S:Structural Change and Economic Dynamics:Vol11.Issue1-2.Jul2000:
Resources Policy 26 (2000) 199–210
www.elsevier.com/locate/resourpol
The internationalisation of the Australian mineral industry in the
1990s
Oliver Maponga a, Philip Maxwell
b,*
a
b
Institute of Mining Research, University of Zimbabwe and Mineral Economics Program, Western Australian School of Mines, Curtin
University of Technology, GPO Box U1987, Perth, WA 6845, Australia
Mineral Economics program, Western Australian School of Mines, Curtin University of Technology, GPO Box U1987, Perth, WA 6845,
Australia
Received 19 June 2000; received in revised form 18 September 2000; accepted 25 September 2000
Abstract
Overseas mineral exploration and mining investment by Australian companies increased dramatically from the early 1990s until
1997. In the wake of the Asian economic crisis and lower commodity prices it declined somewhat in 1998 and 1999. Reflecting
their international competitiveness, Australian resource companies were actively involved in projects in about eighty nations in
1999. This study assesses the extent of growth in exploration and mining operations, the distribution between large and small
companies and the changing regional focus which has been occurring. It also reflects on some of the key influences on this development. These include a strong domestic finance sector, supporting mining services provision, technological competitiveness, a growing
attractiveness of offshore locations and increasing structural impediments at home. 2001 Elsevier Science Ltd. All rights reserved.
Keywords: Internationalisation; Competitive advantage; Mineral exploration; Mining investment; Diversification; Structural impediments
Introduction
The minerals sector has played an important role in
the economic development of Australia. Since the Victorian and New South Wales gold rushes of the 1850s
there have been a series of other major discoveries which
have confirmed Australia’s standing as a world class
minerals province. Beginning with the 1960s resources
boom, and supported by a continuing series of major
project developments, the minerals and energy industry
has made a critical contribution to Australia’s recent
economic performance. Since the mid-1980s resource
extraction has annually contributed around four per cent
of Australia’s Gross Domestic Product. When basic
metal processing is added to this, the percentage almost
doubles. For the past three decades, mineral and energy
exports have annually averaged more than 35 per cent
of total export receipts.
* Corresponding author. Tel.: +61-8-9266-7757; fax: +61-8-92663764.
E-mail address: [email protected] (P. Maxwell).
Although their fortunes vary, Australian resource
companies also play a significant role in share markets.
In early 1998 for example, approximately 100 Australian
minerals companies made the top 500 list on the Australian Stock Exchange. Five Australian-based companies — BHP, WMC, MIM, Normandy and North —
have regularly appeared in the list of the world’s top
fifty mining companies in the recent past.
The expansion and continuing strength of Australian
mining since 1965 has occurred during an era when the
economic geography of the world’s minerals sector has
experienced considerable change. One notable trend has
been the absolute decline of Western Europe as a major
mineral region and the relative decline of the United
States. Stricter environmental legislation and relative
resource exhaustion have influenced this change. Structural changes in the world economy more generally have
also altered the direction of capital flows. Between the
mid-1960s and early 1980s there was major disinvestment from developing nations and some developed
nations in response to factors such as nationalisation and
foreign ownership restrictions.
In the 1960s, Australia, the United States, Canada and
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
South Africa received about 60 per cent of world mineral
exploration spending. This rose to 80 per cent during the
1980s. Over the past decade there has been a reversal
of this trend. By 1997 developing economies, particularly in Latin America, Africa and the Asia Pacific
nations were responsible for more than 60 per cent of
new mineral exploration and investment. Otto (1998)
notes that more than 90 nations have been working on
new mining legislation over the past decade. Many of
the new statutes have been supportive of foreign mineral investment.
The recent opening up of many nations to potential
mineral and energy exploitation has led to a dramatic
internationalisation of companies in traditional mining
nations. Australian, Canadian, South African, US and
some European companies have been prominent in this
movement. The focus of this paper is on Australianbased mining companies. Each year on average since
1995, Australian companies have participated in
resource projects in more than eighty nations. The
second section reviews some of the dimensions associated with this movement. Growth in exploration activity
and operations, the distribution between large and small
companies and a changing regional focus are areas of
particular note. Discussion in the third section reflects
on some of the factors, which have made Australian minerals companies internationally competitive. An assessment using the “Porter diamond” provides a useful way
of reflecting on these factors. Building on this foundation
in the fourth section, elements of foreign direct investment, internationalisation and diversification theories
furnish some insight into the emerging situation. Some
views on future trends in the industry appear in the concluding commentary.
The emerging Australian presence abroad
The extent of change
Before the early 1980s, the overwhelming focus of
most Australian minerals companies was on domestic
operations. A few large companies, including WMC
Resources, BHP and MIM, invested abroad. Their operations were in familiar terrain — places such as Papua
New Guinea and Fiji. Since the late 1980s, this has
changed to encompass other parts of Asia Pacific, Africa,
South America and Eastern Europe. The dramatic
upsurge in overseas activity began in the early 1990s
following the passage of Federal Native Title legislation,
and favourable changes in mining statutes in many geologically prospective developing nations.
Perhaps the best source of information on these trends
since the mid-1990s is a database developed by Minmet
Australia. This reports the activities of resource companies listed on the Australian Stock Exchange, but does
not include iron ore, or oil and gas offshore exploration
projects. Because several large foreign controlled mining
companies are listed on the Australian exchange,1 it
seems appropriate to exclude these from consideration.
The relevant data appear in Table 1. They show the
latter stages of the dramatic rise between 1995 and 1997
with new projects increasing by 119 in 1996 and 124 in
1997 to reach a peak of 715. This was followed in 1998
and 1999 by declines of 136 and 122 respectively. The
number of overseas projects at the end of 1999 stood at
similar levels to those in 1995. The increase in international focus (and the recent decline) by Australian
mining companies has been matched by similar trends
among Canadian resource companies.
The dramatic movements in the number of projects
are attributable in considerable part to changes in exploration activity. This shows up clearly in Table 2. The
number of exploration-based projects rose by 90 in 1997
to almost 500, before falls of 101 in 1998 and 118 in
1999. Movements in the number of projects in the operational phases — a rise of 34 in 1997, a fall of 35 in
1998 and a fall of four in 1999 were more modest.
An associated indicator of overseas mining activity is
the level of exploration spending. Annual surveys for the
Minerals Council of Australia since 1987 provide useful
data in this area for a constant group of member companies.2 They show a continuing rise in overseas spending
between 1987/88 and 1996/97. Overseas exploration
spending was static in 1997/98 before falling in 1998/99.
These data appear in Fig. 1. Of additional note is the
observation that the proportion of total exploration
spending by these companies overseas rose from 27 per
cent in 1986/87 to 45 per cent of their total exploration
budgets in 1998/99. Parallel surveys by the Australian
Bureau of Statistics since 1992 confirm this trend.
The rise in exploration spending by Australian companies until 1997 and the subsequent fall has occurred
more generally. Quoting data from the Metal Economics
Group, Allen and Waring (2000) find an apparently
larger decline in world mineral exploration in 1998 and
1999 in response to low mineral prices and poor mining
company profit levels. Given these more general trends,
the Australian commitment to overseas mineral projects
remains relatively strong. The peak of exploration
spending by Australian-based companies (and those
domiciled elsewhere) in 1997 seems a reflection of the
1
Of particular importance in this group are four North American
companies — Placer Dome, Homestake, Battle Mountain and Coeur
D’Alene. The large South African company AngloGold, was not listed
until the end of the period under observation.
2
Members of this organisation account for more than 80 per cent of
total exploration spending by companies operating in Australia. Some
member companies of the MCA have their head offices based outside Australia.
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Table 1
Offshore operations of Australian-registered and Australian-based mining companies 1995–1999a
Year
Australian-registered companiesb
Australian-based companiesc
1995
1996
1997
1998
1999
512
636
764
631
517
472
591
715
579
457
a
b
c
Source: Minmet Australia (various years) database, Register of Australian Mining.
Listed on the Australian Stock Exchange.
Listed on the Australian Stock Exchange with head office in Australia.
Table 2
The components of overseas activity of Australian-based mining companies 1995–1999
Exploration-based
Grass roots Prelim
Africa
1995
1996
1997
1998
1999
Asia Pacific
1995
1996
1997
1998
1999
Europe
1995
1996
1997
1998
1999
North America
1995
1996
1997
1998
1999
South America
1995
1996
1997
1998
1999
Total
1995
1996
1997
1998
1999
Change
1996
1997
1998
1999
Advan
Total
Operations-based
Feas. study Const
Total
Operats
Total
60
78
74
37
32
53
30
37
9
15
28
16
101
146
132
90
14
12
13
14
2
6
4
3
12
18
23
27
28
36
40
44
88
129
182
172
134
93
99
70
48
64
85
75
56
33
40
39
25
190
224
184
129
37
38
22
18
2
7
1
1
35
27
29
26
74
72
52
45
216
264
296
236
174
11
17
6
6
8
6
6
3
7
6
3
3
26
29
15
12
5
5
5
6
4
1
1
1
15
21
19
20
24
27
25
27
46
50
56
40
39
19
16
13
8
8
10
8
6
12
14
9
9
39
40
30
23
11
10
9
8
7
4
1
1
27
44
35
29
45
58
45
38
60
84
98
75
61
28
24
13
14
18
20
14
7
7
16
10
5
53
60
37
26
5
3
5
4
1
3
3
1
5
17
11
18
11
23
19
23
62
64
83
56
49
211
234
176
113
130
174
133
109
68
91
89
58
409
499
398
280
72
68
54
50
16
21
10
7
94
127
117
120
182
216
181
177
472
591
715
579
457
23
258
263
44
241
224
23
22
231
24
214
24
5
211
23
33
210
3
34
235
24
119
124
2136
2122
90
2101
2118
202
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Fig. 1. Exploration spending by Minerals Council of Australia Constant Group of Mining Companies 1987/88 to 1998/99 (at 1989/90
prices).
episodic nature of mineral exploration spending discussed previously by Eggert (1988).
Seniors and juniors
The foreign investment push included both large companies (often known as “seniors”) and small companies
(“juniors”).3 Twenty-five of the companies which had
overseas projects at the end of 1997 were large and 125
were juniors. (Resource Information Unit, 1998). The
attraction of overseas destinations was so strong that several new companies were listed on the Australian Stock
Exchange only to pursue foreign activities.4 Among this
group several large companies established junior subsidiaries to pursue international activities on their
behalf.5 A small group of junior Australian minerals
companies also listed on overseas exchanges to access
foreign equity. The Vancouver and Toronto Stock
Exchanges were particularly attractive listing destinations between 1995 and 1998.
Overseas assets and revenue now make a significant
contribution to the profile of many Australian resource
companies. Yet the extent of internationalisation varies.
3
In this paper we adopt the convention of market capitalisation
above $A 100 million in 1996/97 as the dividing line between senior
and junior companies.
4
In early 1998 this group included Tanganyika Gold, Ghana Gold
Mines, Leo Shield Exploration, and Equinox Resources.
5
In early 1998 examples included Astro Mining and Quantum
Resources (Gutnick group) and Metex Resources and Archean Gold
(Delta Gold) and Pacific Wildcats (Sons of Gwalia).
This is reflected in the entries in Table 3, which show
changes in the number of other countries in which large
Australian resource companies operated in the 1993/94
and 1996/97 financial years and in late 1999. Many of
the largest Australian resource companies have extensive
international activities. Yet some have maintained a
more domestic focus. In line with the decline in exploration activity throughout the world after 1997, the number of countries in which these companies operated fell.
Casual observation suggests that there is a positive
relationship between market capitalisation and the number of countries in which a company operates. Other factors such as the type of commodity extracted, company
age and the method of company formation also appear
to influence the situation.
During the 1990s, several Australian resource companies also had forced or voluntary de-internationalisation
experiences.6 Examples of forced de-internationalisation
included the Westralian Sands (now Iluka Resources)
departure from Vietnam and Consolidated Rutile from
Sierra Leone.
For many large Australian companies internationalisation has been a gradual process. In most cases, companies initially limited their activities to one or two countries within a specific region. They then spread interests
to other nations within a region, before finally moving
to other regions of the world.
As can be seen in Table 3, several Australian companies embarked on substantial increases in their international activities between 1993/94 and 1996/97. Prominent among the group were WMC Resources, North,
Normandy, MIM and Newcrest. Each more than doubled
the number of countries in which they operated during
this period. As argued below, these actions appear to fit
in with the so-called “Uppsala-model of internationalisation.” This evolutionary theory considers internationalisation as an incremental learning process leading to a
stepwise increase in commitment in foreign locations.
(Andersen, 1993).
While Australian junior companies have played a role
in exploration in several emerging mining nations, the
prominence of small foreign companies developing projects in these nations is less common. CRU International
estimated that juniors were responsible for an average
of 27 per cent of the world’s significant gold and copper
discoveries between the 1970s and the late 1990s.
(Anonymous, 1998). Their contribution was highest in
Australia, Canada and the United States. As can be seen
in Table 4, juniors made more than half of significant
gold and copper discoveries in Australia between 1970
and 1997.
6
Deinternationalisation includes contraction of overseas operations,
switching of modes of operation, sell-off or closure, reduction in ownership stake and, in extreme cases, seizure of operations by local authorities.
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Table 3
International presence of the largest Australian resource companies — 1993/94 and 1996/97a
Company
BHP
RioTintoc
Woodside Petroleum
WMC Resources
Santos group
North Limited
Normandy Group
Pasminco group
MIM Holdings
Gutnick Group
Iluka Resources
Newcrest Mining
Sons of Gwalia
Acacia Resourcesd
Novus Petroleum
Delta Gold
Western Metals group
Resolute Limited
Goldfields Ltd
Ashton Mining
Ranger Minerals
Ross Mining
Total
a
b
c
d
Market capitalisationb
A$ million
No. of countries
1993/ 94
1996/ 97
1999
31,960
16,613
6738
5773
4311
3006
2802
2214
1433
930
732
566
556
504
420
412
411
386
338
320
234
159
80,818
40
17
1
6
5
3
5
7
7
1
4
4
5
1
3
1
1
1
1
5
1
1
120
50
25
2
16
9
7
19
7
16
1
6
10
5
1
6
2
2
2
2
8
4
2
202
21
40
2
13
4
9
11
6
6
2
3
2
1
1
9
4
3
4
2
8
2
2
155
Source: Resource Information Unit (various years) (1994, 1997), Company Annual Reports
At end March, 1998.
Though technically based in London, RioTinto is included in the list because of its large Australian shareholding.
AngloGold took control of Acacia in 1999.
Table 4
Junior companies share in significant gold and copper discoveries
between 1970 and 1997
Region
Share of discoveries by
Juniors — percentage
Australia
Canada
United States
Asia
Chile
Other Latin America
Other
Average
51
38
30
8
5
22
26
27
While foreign direct investment by junior mineral and
energy companies grew during much of the 1990s, similar trends have also been apparent in other industry sectors. (see UNCTAD, 1997). Many juniors have opened
new frontiers ignored by large companies for reasons
related to economic, political and social risk. In late 1998
some junior Australian mining companies were active in
as many offshore countries as their larger counterparts.
Companies such as Leo Shield Exploration, Equinox
Resources and Aquarius Exploration operated in more
than five countries. The increased overseas activity of
junior Australian mining companies mirrors the experience of Canadian companies reported by Harper et al.
(1998).
The regional focus
The Asia Pacific region and Africa were the first
“new” investment destinations for Australian companies
following the renewed resources boom of the 1980s. The
“new” frontier expanded to include South America and
Eastern Europe later in the decade. Though Australian
minerals companies remain active in the traditional
foreign destinations of Canada, the United States and
Western Europe, their presence in the new environments
grew particularly strongly between 1993 and 1997. Some
details of the recent regional focus of Australian-based
companies appear on Fig. 2, which has been derived
from Table 2 above.
The situation in Africa illustrates the changing situation reasonably well. O’Neill (1992) reported that in
1985 Bridge Oil was the only Australian minerals company operating in Africa. There were fifteen Australian
minerals companies active on the continent by the end
of 1992. A review of the Australian Mines Handbook
(Louthean Publishing, 1998/99) and company annual
reports indicates that seventy-five Australian minerals
204
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Fig. 2. Overseas resource projects of Australian-based Mineral Companies 1995 to 1999.
Argentina had become notably more popular during the
period. Chile and Bolivia seemed less popular.
The increased preference for “new” geological
environments in Africa, Asia Pacific and South America
is also a reflection of international developments. As
noted above, the Metal Economics Group reports similar
trends on a world scale. Collected for companies responsible for over 80 per cent of world exploration spending,
their studies show an increase in proportion of world
exploration going to Asia, Africa, South America and
the Pacific from 34 per cent in 1990 to around 60 per
cent by 1999. Exploration spending in Canada, Australia
and the United States declined during this period. Australia had similar exploration spending levels to Africa
in 1997. In 1991 it received more than twice as much
as Africa did.
The competitive advantage of the Australian
mineral industry
companies were operating in thirty African countries in
late 1997. They were involved in more than 180 projects.
The decline between 1997 and 1999 to 134 projects was
due overwhelmingly to reductions in exploration-based
activity.
The Asia Pacific, with 38 per cent of overseas projects, and Africa, with 29 per cent, were the two most
preferred regions by 1999. Europe had about eight per
cent, North America thirteen per cent and South America
eleven per cent. Since 1995 Africa’s share of projects
had been rising, while the share of the Asia Pacific group
of nations fell.
Exploration spending data from both the Australian
Bureau of Statistics (Catalogue 8412.0) and the Minerals
Council of Australia (2000) since the mid-1990s also
show increasing preference for Africa and South America. According to the Minerals Council of Australia
Industry Survey for 1998/99 there was a dramatic
decline in spending in the Asia Pacific region in 1997/98,
with some recovery in 1998/99.
Within the broad regions bunching-up is evident in
certain countries. This is a reflection of factors such as
geological prospectivity, geographical proximity, familiarity with systems of government, previous commercial
or political links, and perceptions of sovereign and country risk.
The number of projects in the top countries each in
Africa, the Asia Pacific and Latin America in 1995, 1997
and 1999 appear in Table 5. Although there was a peak
in 1997 and a subsequent decline, there were more projects at the end of the period than at the beginning for
each of the countries listed. This contrasted with the
main Asian Pacific nations. Papua New Guinea, China
and Fiji each had fewer Australian-controlled mining
projects in 1999 than they had had in 1995. Among the
major South American mineral investment destinations,
The internationalisation of any industry depends on
it establishing and sustaining a competitive advantage.
Appreciating the sources of this competitiveness underlies an explanation of the subsequent overseas movement
of companies operating in a previously domesticallybased sector.
Initially one can argue that Australia’s mineral industry competitiveness is a function of its control over
scarce mineral resources. Yet it is clear that other determinants are important. Applying Michael Porter’s well
known “diamond analysis” provides a useful taxonomy
of these influences. He sees factor conditions, demand
conditions, related and supporting industries, and firm
strategy, structure and rivalry as the key influences
which promote or impede the creation of competitiveness. Favourable government policy and chance supplement these to establish national competitive advantage for extended periods.
Factor conditions
Porter identifies human resources, physical resources,
knowledge resources, capital resources and infrastructure in his list of factor conditions. In addition to favourable geology, each of these other factors has influenced
the competitiveness of the Australian resources sector.
The country has had a mining tradition since the 1850s.
In developing a strong human resources base to support
the industry the public sector initially established a comprehensive framework for the training of mining professionals and workers through a school of mines system. While the minerals sector languished during the first
half of the twentieth century, minerals education
remained viable at both university and technical college
level. It re-emerged after 1960 in a resilient way. The
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Table 5
The major destinations of International Investment of Australian Mining Companies in 1995, 1997 and 1999a
Country
Africa
Ghana
South Africa
Namibia
Guinea
Ivory Coast
Tanzania
Asia Pacific
Indonesia
Papua New Guinea
The Philippines
New Zealand
China
Fiji
South America
Peru
Brazil
Chile
Argentina
Bolivia
a
Number of Projects in
1995
Number of Projects in
1997
Number of Projects in
1999
24
12
4
6
2
2
51
15
8
13
13
13
30
20
18
8
9
20
+6
+8
+14
+2
+7
+18
50
40
19
47
12
14
81
37
57
23
13
13
51
27
26
21
5
3
+1
213
+6
226
28
210
9
4
15
7
9
10
13
23
13
7
8
6
10
13
5
21
+2
25
+6
24
Change 1995 to 1999
Source: Minmet Australia (various years) Database (1999).
nation’s stock of other knowledge resources developed
through research institutes (in the Universities and the
CSIRO), data collection agencies such as the Australian
Bureau of Statistics, and trade associations such as the
Minerals Council of Australia, State Chambers of Mines
and related bodies, has supported this framework.
In the area of capital resources Australia has
strengthened its role in finance provision for resource
projects particularly since the 1980s. Large financial
resources arising from equity and debt during the stock
market boom were partly responsible for this. The formation of the Australian Stock Exchange in 1987 from
the amalgamation of state stock exchanges encouraged
local and foreign companies to list. The Exchange has
since matured into a significant source of equity for the
resources sector, especially for medium sized projects
for both local and overseas companies. By early 1999
over 450 Australian-based and twenty foreign-based
resources companies were listed. The deregulation of the
Australian financial sector also made a positive contribution.
From the mid-1980s, the financial viability of Australian gold mining companies was also enhanced by
increased profits from emerging techniques of forward
selling. Producers of other minerals have subsequently
used these techniques. Between 1985 and the late-1990s
many companies successfully used hedging as a renewable source of finance. By closing hedge books when
appropriate, they also raised profitability and increased
the supply of internal resources for further investment.
Demand conditions
Porter (1990, pp. 86–97) emphasises two dimensions
of domestic demand as important influences on competitiveness. These are its composition and its size. He
argues that “a nation’s firms are likely to gain competitive advantage in global market segments which represent a large or highly visible share of home demand
but account for a less significant share in other nations”
(p. 87). Sophisticated and demanding buyers at home
additionally make a nation’s firms more able to compete
internationally. There are mixed arguments about
whether a large home market is good or bad for competitiveness. While large local markets enable domestic producers to reap economies of scale, small markets will
encourage them to export if they are to reap such economies.
Because of the generally small Australian domestic
market for minerals, the growing demand by companies
in Asia has been important for Australia’s mineral producers. Representatives from Japanese, Chinese, Taiwanese and Korean heavy industry must purchase iron
ore, coal, natural gas and other key minerals. They are
sophisticated and demanding in their requirements. Australian producers must maintain a competitive edge to
meet their needs.
Related and supporting industries
An important recent source of Australian mineral sector competitiveness has come from the emergence of a
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
major mining services sector. This has occurred against
the backdrop of the rise of the services sector more generally and the growing international trade in services. In
its publication, Australian Mining Industry 1996/97, the
Australian Bureau of Statistics (1998) reported estimates
of more than $A3 billion for contract, sub-contract and
commission work for Australian mining establishments.
Australian mining service providers have also been
actively operating in other nations. Mining service provision has emerged as an important export industry.
While the ABS does not yet produce annual estimates
of mining service exports, a survey of member companies of the government-supported industry organisation,
Austmine provides useful information on this issue. Its
115 member companies reported export sales of more
than $A 1 billion in 1996/97. Both sets of estimates seem
likely to understate the current strength of the mining
services sector.
The extent of services provided to the mineral sector
is broad. It covers core areas which have become highly
specialised. These include mineral exploration, geochemistry and geophysics, satellite surveying, mine and
plant design, engineering and construction, environmental management, human resource management, legal services, accounting services and information technology
provision. Larger companies often employ professionals
in these fields but smaller companies are more likely to
engage contractors.
There has also been a so called “de-integration” trend
to entrust the provision of non-critical service activities
to outside contractors, even if the services can be performed equally as well within a company. This often
involves work in areas where is it hard to recruit, retain,
or supervise employees. Advances in information technology have improved the ability of service sector firms
that can now reap considerable cost advantages from
specialisation. Areas such as drilling, open cut and
underground mining contracting, laboratory services,
transportation of staff to mine sites, transport of minerals
and recruitment of staff come to mind.
Competition and focus have been important influencing factors. A large domestic minerals industry operating
in a competitive environment provides incentives to raise
productivity and boost quality. Creating such incentives
for service providers within companies is more difficult.
Porter (1990 p. 246) notes that “specialised service providers can often hire and train people better, employ better methods, use better equipment and perform the service cheaper and better”.
Firm strategy, structure and rivalry
Australia is a significant producer on a world scale of
several minerals. These include bauxite and alumina,
iron ore, gold, nickel, copper, lead, zinc, coal, diamonds
and titanium minerals. Within each of these sectors there
have typically been small numbers of producers who
have been competitive with one another. This has led
to a continuing competitive situation driven in part by
domestic rivalry but also influenced by global rivalry and
competition more generally.
While most long-term producers of these minerals
(except perhaps in the gold industry) have typically been
medium to large companies, the ownership system of
mineral rights has allowed smaller companies also to
play a role in exploration and promotion of new projects.
The ability of smaller (often exploration) companies to
enter various sectors of the mineral industry has played
a positive role in stimulating the competitive domestic
environment in Australia. Similar competitive environments exist in few other nations.
Chance
Following Porter (1990, pp. 124–125) chance items
includes acts of invention, major technological discontinuities, surges in world or regional demand, discontinuities in input costs such as oil price shocks, shifts in
world financial markets or exchange rates, political
decisions by foreign governments and wars. Some of
these factors have positively influenced the competitive
fortunes of the Australian minerals sector during the past
two decades.
Australian mining companies have developed technological advantages in exploration, mining methods and
minerals processing. Notable recent applications of technological innovations include things such as satellite
imaging in mineral exploration, carbon-in-pulp leaching
of gold, pressure acid leaching of lateritic nickel deposits
and advances in block caving. These are a small portion
of a much longer list. Slater (1996) has argued that technological innovation is an area where Australian gold
mining companies have recently had an edge over their
US counterparts. Premoli (1998) identifies the ability to
develop small mines to operate profitably as particular
areas of strength and sources of competitiveness.
The strong growth of the nearby Asian economies has
been a fortunate development as well. Even though the
“Asian economic miracle” of the 1970s, 1980s and early
1990s gave way to the “Asian economic meltdown” of
the late 1990s there has been a net positive impact on
the fortunes of many Australian mining companies.
In the development of Australian financial markets,
exchange rate levels have also been important. By following an effective exchange rate policy Australia maintained low inflation rates after the mid-1980s
accompanied by sound economic management in other
policy areas. During the first part of the 1990s, the Australian dollar fell against several of the major Asian currencies. The “commodity currency” effect, often attributed to the Australian dollar, shielded the minerals
sector during the Asian economic crisis.
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Government
State and federal government policy has played an
important encouraging and supporting role in influencing
the four key determinants of national competitiveness for
the Australian resources sector. States are the major
players in implementing mineral policy. Some states
have been more influential than others. The positive contribution of the Western Australian government is particularly notable but it can be argued as well that the
Queensland and South Australian governments have
played a strong supportive role. Population density, climate and the resultant greater environmental sensitivity
appear to have held back pro-mineral development policies in New South Wales, Victoria and Tasmania.
Using the limited range of powers available to it in
the natural resources area, (particularly with respect to
offshore oil and gas exploitation), the Australian Federal
government has generally taken a position which is not
adverse to mineral development. There are, however,
two areas where this has not happened. The effects of
the High Court’s findings in the Mabo judgment in 1992
and the subsequent Native Title legislation, passed
initially in late 1993, has increased the perception of
increased structural impediments at home being erected
by government. The Native Title situation has been subject to further High Court decisions and amendments to
Federal and State land use legislation. Growing community expectations with respect to environmental quality issues have also affected the minerals and energy sector and legislative requirements in this area.
Relative to the governments of nations at similar
stages of economic development, government action and
policy implementation in Australia has been favourable
to resource exploitation and export. It has achieved this
by supporting and promoting Porter’s four determinants
of national advantage.
Explaining internationalisation
Against this background, the foreign direct investment
and internationalisation literatures also provide useful
foundations for considering the growing international
presence of Australian mining companies. Within this
field it is instructive to consider two broad themes. First,
there is a process of strategic diversification and globalisation occurring within a mature and competitive
minerals industry. Second, the emergence of a range of
structural impediments has influenced the situation.
Growing impediments at home, combined with more
favourable operating conditions abroad, have pushed
Australian mining companies towards other geologically
prospective nations. In this discussion we reflect briefly
on the reasons for, and process of, internationalisation
207
which follows the establishment of a nationally competitive industry.
Models of internationalisation
At least two approaches offer useful insights into what
has been occurring. First there is the so-called Uppsala
model of internationalisation, proposed initially by
Johanson and Wiedersheim-Paul (1975). This provides
the foundation for later innovation-related stages models
of internationalisation. Andersen (1993, 1997) provides
a useful review of this literature associated with the first
group of models. Another interesting perspective
emerges from the eclectic framework advocated by Dunning (1988).
The first group of models are based on the behavioural
theory of the firm and the theory of growth of the firm
(Johanson and Vahlne, 1990). They grew out of empirical research on the international growth of Swedish
manufacturing firms. They view international expansion
as a gradual process. Experimental knowledge of overseas conditions (tacit commercial experience) results in
incremental international involvement. This theory, often
referred to as the stages model, (Andersen, 1997), suggests that firms enter markets with successively greater
“psychic distance”. Psychic distance depends on differences in culture, language and political systems. When
applied to manufacturing, the model progresses from no
export, to export via independent representatives, to
sales through subsidiaries and eventual to manufacturing
offshore (Andersen, 1993).
An incremental model of this type has some relevance
to the internationalisation of Australian mining companies. The argument by Johanson and Vahlne (1990) that
firms start by “invading” neighbouring markets is relevant. As experience, knowledge and confidence grows
they move to more distant markets. Initial offshore
activities in Fiji and Papua New Guinea prior to the
1980s, the rise in activities in Asia and the exponential
increase in exploration and mining investment in Africa
can be explained by tenets of the stages model. The minimising of psychic distance is apparent in Australian
activities in Africa. Most are concentrated in countries
whose official language is English and those whose legal
system has its origins in the English Common Law.
Despite its attraction as an internationalisation theory,
the stages model has difficulty explaining the motivation
for internationalisation and also in incorporating International New Ventures (INV). In the minerals sector
these are the junior mining companies which are international from inception (see Oviatt and McDougal,
1997). Dunning (1995) attributes the increasing participation of small and new firms in globalisation to changes
in the attitude of multinationals. He contends that most
small companies are arms of multinationals — they represent an entry mode into international operations.
208
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Dunning’s eclectic approach also provides insights
into offshore investment in the minerals industry. Its
emphasis on competitive advantages is particularly useful. In the eclectic paradigm factors which influence
internationalisation originate from inside and outside
organisations. They include ownership factors (O) specific to each firm, location-specific factors (L) and
internalisation attributes (I), which make it profitable to
operate within a firm rather than to rely on external markets.
Ownership advantages may arise where firms have a
technological edge over competitors, from access to or
control of raw materials, political influence or ability to
obtain competitively priced finance. Brouthers (1995)
argue that ownership advantages are both unique and
sustainable and provide firms with a competitive advantage in entry mode selection. Location factors
encompass issues such as transport costs for raw
materials, a country’s tariff system and taxation regime,
and also the issue of political stability. Internationalisation gains can arise from effective management within
a firm that brings economies of scale and reduces uncertainty associated with dealing with other firms. If a firm
is to invest abroad each type of condition must be fulfilled.
Companies diversify to exploit firm-specific advantages. They increase returns to shareholders as a result
of industry-competitiveness and location advantages.
Profits, growth and survival are the key goals in following such a strategy. To internationalise successfully a
company must control its establishment and operating
costs in foreign locations. In achieving this it must hold
a range of specific advantages. A mature company
operating successfully within an internationally competitive domestic industry is more likely to possess these
attributes. The maturity of Australian minerals companies seems to explain a significant part of their success
in internationalising. Though evolving to this position
over 150 years, they have particularly developed a range
of industry-specific advantages in the past thirty years.
As noted in the previous section, the specific advantages of Australian-based resources companies include
technological competitiveness, access to suitable project
finance and to a wide range of other mining services.
Firm-specific advantages have developed particularly
with high levels of expertise in exploration and mining
technology. By moving to geologically prospective
regions with more friendly operating environments than
one or two decades ago, Australian resources companies
are exploiting location-specific advantages abroad as
well as at home. Firm and industry-specific advantages
are important in this process.
In terms of the OLI approach one might list such factors for resource companies as follows:
Ownership: Technology, management, access to
raw materials (abroad), political support (abroad),
access to favourable finance (at home),
Locational: Geology, transport costs, labour costs,
tax policies of host country, political stability of host
country, environmental policy of host country,
Internalisation: Avoiding uncertainty, reaping
economies of scale, maintaining control, retaining
technological edge.
The success of juniors as international new ventures
The internationalisation of junior Australian mineral
companies does not fit into the normal diversification
process proposed in the mainstream foreign direct
investment and traditional internationalisation literature
for several reasons. First, they generally have a much
smaller capital base. Second, many juniors do not have
any domestic operations to use as a springboard in internationalisation. Third, they do not have much international experience as companies and they are much
“younger” compared with conventional international
investors.
One of the important reasons behind increased international activities of junior companies in the 1990s lay
in their access to sources of finance. A reliance on speculative capital has meant that they usually seek highly
profitable deposits and take greater risks in search of
high returns by going to “virgin” countries where probabilities of finding bonanza deposits are higher.
The search for quick returns partly explains their bias
towards gold projects until 1997. The activities of junior
companies are much more market-driven because they
lack strong working capital. Their exploration programs
emphasise rapid discovery and progression to delineation drilling in order to generate interest from larger
investors. They usually apply lower hurdle rates in
investment assessment and take greater risks. The risktaking mentality of executives is a source of competitive
advantage in internationalisation.
Competitive overseas conditions and structural
impediments at home
The movement overseas of Australian minerals companies has also been a natural response to a changing
environment for minerals sector investment around the
world. Large geopolitical movements have occurred over
the past thirty years. Many developing nations were previously unattractive for foreign investment because of
social instability, sovereign risk, foreign-investment barriers and other regulatory constraints. In the past decade
their policy makers have rewritten their investment
codes, introduced market reforms and embraced democracy and transparency in pursuit of growth (see Otto,
1998; Naito et al., 1998). These changes have opened
209
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
profit opportunities and affected the flows of international capital. Internationally competitive Australian
mining companies and investors have responded positively to the change. Some indication of what has been
occurring appears in Table 6. This contains a summary
of changes in mineral investment conditions in nine
selected and representative nations — three in Asia,
three in Africa and three in Latin America. The shifting
of concentration of mining activities also reflects relative
resource depletion in Australia.
The decline in levels of structural impediments abroad
has been accompanied by perceived increases in structural impediments at home. As noted in the previous section there is greater community awareness of environmental quality issues. Resource companies operating in
Australia are facing higher operating costs and greater
challenges in obtaining environmental approvals for
newly proposed projects. Native Title issues have also
played a much more prominent role. Although business
objectives motivate investment decisions, less competitive domestic conditions arising from a changing balance
of structural impediments have also clearly influenced
the internationalisation process.
Where structural impediments at home continue to
grow and those abroad decline, the process is set into
motion for the emergence of nationally competitive minerals industries in other nations. The further emergence
of nations such as Chile, Ghana and Russia may place
them in strong leadership positions in their respective
regions. This may challenge the strong present competitive positions of Australian, Canadian and South African
companies. A dynamic perspective of the “Porter diamond” might see an eventual decline in the international
competitiveness of Australian mining companies in such
a scenario.
Some concluding comments
The dramatic internationalisation of Australian mining
companies since the late-1980s is a reflection of an internationally competitive minerals industry. A broad range
of factors has been responsible for this emergence. The
resultant advantages seem destined to continue. It would
be foolhardy, however, for firms in the resources sector
to become complacent about their current situation.
Developing and maintaining a competitive edge requires
continuing attention, some risk taking and strong community and public sector support. If Australia is to retain
its new found leadership position it must compete effec-
Table 6
Recent mining legislation reforms in nine selected nations in Asia, Africa and the Americasa
Country
Type and Extent of Regulatory Change
Year of Reforms
Major Investors
China
Market reforms, taxation system reform, changes in
regulations for foreign investors, five year tax
holiday, 33 per cent corporate tax
No reserved minerals, 50 per cent foreign equity,
higher equity also permitted
New Act 1995 (FTAA), tax holidays, carry forward
losses, 100 per cent foreign equity allowed, 25 years
project life
New mining code, tax concessions on exploration,
development and environment expenses, foreign
equity allowed, lower corporate tax, royalty maximum
at 10 per cent
New mining code, new national investment code,
corporate tax 30 per cent, withholding tax 10 per
cent, foreign ownership allowed
Market reforms since 1991, lower corporate taxes,
import duty waivers, remote areas concessions, small
scale mining regulations, 1991, remittance of 100 per
cent after tax profit, corporate tax rate 10 per cent for
special areas
Market reforms, 3 per cent royalty, 100 per cent
foreign ownership, tax stability over project life
ensured
Market reforms, tax incentives, security of tenure
guaranteed
Market reforms, removal of 7 per cent royalty,
reduction in corporate tax to 35 per cent, 100 per
cent equity allowed, privatisation
1993/94, 1995/96/97
BHP, Ashton
1993, 1995, 1996
Ashton, BHP, RioTinto
1994, 1995
WMC, MIM, Newcrest
1992, 1996
Delta Gold, MIM, BHP,
RioTinto
1979, 1997, 1998
Resolute, BHP
1991, 1992
BHP, Delta, RioTinto
1992, 1993, 1996
MIM, North, WMC, RioTinto
1985, 1992, 1994
Savage, BHP
1992, 1993, 1993
MIM, Santos
India
Philippines
Namibia
Tanzania
Zimbabwe
Argentina
Bolivia
Mexico
a
Source: Otto (1998), Naito et al. (1998), and Premoli (1998).
210
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
tively against other major nations which also exploit
large quantities of non-renewable and recyclable
resources, and then export them to the outside world.
These countries include Canada, South Africa, Chile,
Brazil, many of the OPEC nations, Russia, Kazakhstan
and several others.
At the time of writing the resources sector is emerging
from a considerable period of downturn. This has threatened the financial viability of many companies. Many
mining professionals have lost their positions and a significant proportion of this group may be tempted towards
other sectors. As the upturn re-emerges, problems with
staff recruitment may apply. Between 1997 and 1999
Australian resource companies withdrew from more than
ten countries. There were about 260 less overseas projects in 1999 than two years previously. The nature of
the mineral cycle means that risks can be considerable
and there needs to be continuing commitment despite
cyclical downturns.
Australia now has a mature and competitive minerals
industry. The challenge is to keep it that way. If Australian companies are able to maintain their presence in
70 or 80 countries it seems likely that this will imply
larger numbers of new overseas mining operations than
at present. They may occur in a variety of ways — joint
ventures, buy-ins, large equity holdings or simply full
ownership. The
www.elsevier.com/locate/resourpol
The internationalisation of the Australian mineral industry in the
1990s
Oliver Maponga a, Philip Maxwell
b,*
a
b
Institute of Mining Research, University of Zimbabwe and Mineral Economics Program, Western Australian School of Mines, Curtin
University of Technology, GPO Box U1987, Perth, WA 6845, Australia
Mineral Economics program, Western Australian School of Mines, Curtin University of Technology, GPO Box U1987, Perth, WA 6845,
Australia
Received 19 June 2000; received in revised form 18 September 2000; accepted 25 September 2000
Abstract
Overseas mineral exploration and mining investment by Australian companies increased dramatically from the early 1990s until
1997. In the wake of the Asian economic crisis and lower commodity prices it declined somewhat in 1998 and 1999. Reflecting
their international competitiveness, Australian resource companies were actively involved in projects in about eighty nations in
1999. This study assesses the extent of growth in exploration and mining operations, the distribution between large and small
companies and the changing regional focus which has been occurring. It also reflects on some of the key influences on this development. These include a strong domestic finance sector, supporting mining services provision, technological competitiveness, a growing
attractiveness of offshore locations and increasing structural impediments at home. 2001 Elsevier Science Ltd. All rights reserved.
Keywords: Internationalisation; Competitive advantage; Mineral exploration; Mining investment; Diversification; Structural impediments
Introduction
The minerals sector has played an important role in
the economic development of Australia. Since the Victorian and New South Wales gold rushes of the 1850s
there have been a series of other major discoveries which
have confirmed Australia’s standing as a world class
minerals province. Beginning with the 1960s resources
boom, and supported by a continuing series of major
project developments, the minerals and energy industry
has made a critical contribution to Australia’s recent
economic performance. Since the mid-1980s resource
extraction has annually contributed around four per cent
of Australia’s Gross Domestic Product. When basic
metal processing is added to this, the percentage almost
doubles. For the past three decades, mineral and energy
exports have annually averaged more than 35 per cent
of total export receipts.
* Corresponding author. Tel.: +61-8-9266-7757; fax: +61-8-92663764.
E-mail address: [email protected] (P. Maxwell).
Although their fortunes vary, Australian resource
companies also play a significant role in share markets.
In early 1998 for example, approximately 100 Australian
minerals companies made the top 500 list on the Australian Stock Exchange. Five Australian-based companies — BHP, WMC, MIM, Normandy and North —
have regularly appeared in the list of the world’s top
fifty mining companies in the recent past.
The expansion and continuing strength of Australian
mining since 1965 has occurred during an era when the
economic geography of the world’s minerals sector has
experienced considerable change. One notable trend has
been the absolute decline of Western Europe as a major
mineral region and the relative decline of the United
States. Stricter environmental legislation and relative
resource exhaustion have influenced this change. Structural changes in the world economy more generally have
also altered the direction of capital flows. Between the
mid-1960s and early 1980s there was major disinvestment from developing nations and some developed
nations in response to factors such as nationalisation and
foreign ownership restrictions.
In the 1960s, Australia, the United States, Canada and
0301-4207/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved.
PII: S 0 3 0 1 - 4 2 0 7 ( 0 0 ) 0 0 0 3 2 - 5
200
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
South Africa received about 60 per cent of world mineral
exploration spending. This rose to 80 per cent during the
1980s. Over the past decade there has been a reversal
of this trend. By 1997 developing economies, particularly in Latin America, Africa and the Asia Pacific
nations were responsible for more than 60 per cent of
new mineral exploration and investment. Otto (1998)
notes that more than 90 nations have been working on
new mining legislation over the past decade. Many of
the new statutes have been supportive of foreign mineral investment.
The recent opening up of many nations to potential
mineral and energy exploitation has led to a dramatic
internationalisation of companies in traditional mining
nations. Australian, Canadian, South African, US and
some European companies have been prominent in this
movement. The focus of this paper is on Australianbased mining companies. Each year on average since
1995, Australian companies have participated in
resource projects in more than eighty nations. The
second section reviews some of the dimensions associated with this movement. Growth in exploration activity
and operations, the distribution between large and small
companies and a changing regional focus are areas of
particular note. Discussion in the third section reflects
on some of the factors, which have made Australian minerals companies internationally competitive. An assessment using the “Porter diamond” provides a useful way
of reflecting on these factors. Building on this foundation
in the fourth section, elements of foreign direct investment, internationalisation and diversification theories
furnish some insight into the emerging situation. Some
views on future trends in the industry appear in the concluding commentary.
The emerging Australian presence abroad
The extent of change
Before the early 1980s, the overwhelming focus of
most Australian minerals companies was on domestic
operations. A few large companies, including WMC
Resources, BHP and MIM, invested abroad. Their operations were in familiar terrain — places such as Papua
New Guinea and Fiji. Since the late 1980s, this has
changed to encompass other parts of Asia Pacific, Africa,
South America and Eastern Europe. The dramatic
upsurge in overseas activity began in the early 1990s
following the passage of Federal Native Title legislation,
and favourable changes in mining statutes in many geologically prospective developing nations.
Perhaps the best source of information on these trends
since the mid-1990s is a database developed by Minmet
Australia. This reports the activities of resource companies listed on the Australian Stock Exchange, but does
not include iron ore, or oil and gas offshore exploration
projects. Because several large foreign controlled mining
companies are listed on the Australian exchange,1 it
seems appropriate to exclude these from consideration.
The relevant data appear in Table 1. They show the
latter stages of the dramatic rise between 1995 and 1997
with new projects increasing by 119 in 1996 and 124 in
1997 to reach a peak of 715. This was followed in 1998
and 1999 by declines of 136 and 122 respectively. The
number of overseas projects at the end of 1999 stood at
similar levels to those in 1995. The increase in international focus (and the recent decline) by Australian
mining companies has been matched by similar trends
among Canadian resource companies.
The dramatic movements in the number of projects
are attributable in considerable part to changes in exploration activity. This shows up clearly in Table 2. The
number of exploration-based projects rose by 90 in 1997
to almost 500, before falls of 101 in 1998 and 118 in
1999. Movements in the number of projects in the operational phases — a rise of 34 in 1997, a fall of 35 in
1998 and a fall of four in 1999 were more modest.
An associated indicator of overseas mining activity is
the level of exploration spending. Annual surveys for the
Minerals Council of Australia since 1987 provide useful
data in this area for a constant group of member companies.2 They show a continuing rise in overseas spending
between 1987/88 and 1996/97. Overseas exploration
spending was static in 1997/98 before falling in 1998/99.
These data appear in Fig. 1. Of additional note is the
observation that the proportion of total exploration
spending by these companies overseas rose from 27 per
cent in 1986/87 to 45 per cent of their total exploration
budgets in 1998/99. Parallel surveys by the Australian
Bureau of Statistics since 1992 confirm this trend.
The rise in exploration spending by Australian companies until 1997 and the subsequent fall has occurred
more generally. Quoting data from the Metal Economics
Group, Allen and Waring (2000) find an apparently
larger decline in world mineral exploration in 1998 and
1999 in response to low mineral prices and poor mining
company profit levels. Given these more general trends,
the Australian commitment to overseas mineral projects
remains relatively strong. The peak of exploration
spending by Australian-based companies (and those
domiciled elsewhere) in 1997 seems a reflection of the
1
Of particular importance in this group are four North American
companies — Placer Dome, Homestake, Battle Mountain and Coeur
D’Alene. The large South African company AngloGold, was not listed
until the end of the period under observation.
2
Members of this organisation account for more than 80 per cent of
total exploration spending by companies operating in Australia. Some
member companies of the MCA have their head offices based outside Australia.
201
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Table 1
Offshore operations of Australian-registered and Australian-based mining companies 1995–1999a
Year
Australian-registered companiesb
Australian-based companiesc
1995
1996
1997
1998
1999
512
636
764
631
517
472
591
715
579
457
a
b
c
Source: Minmet Australia (various years) database, Register of Australian Mining.
Listed on the Australian Stock Exchange.
Listed on the Australian Stock Exchange with head office in Australia.
Table 2
The components of overseas activity of Australian-based mining companies 1995–1999
Exploration-based
Grass roots Prelim
Africa
1995
1996
1997
1998
1999
Asia Pacific
1995
1996
1997
1998
1999
Europe
1995
1996
1997
1998
1999
North America
1995
1996
1997
1998
1999
South America
1995
1996
1997
1998
1999
Total
1995
1996
1997
1998
1999
Change
1996
1997
1998
1999
Advan
Total
Operations-based
Feas. study Const
Total
Operats
Total
60
78
74
37
32
53
30
37
9
15
28
16
101
146
132
90
14
12
13
14
2
6
4
3
12
18
23
27
28
36
40
44
88
129
182
172
134
93
99
70
48
64
85
75
56
33
40
39
25
190
224
184
129
37
38
22
18
2
7
1
1
35
27
29
26
74
72
52
45
216
264
296
236
174
11
17
6
6
8
6
6
3
7
6
3
3
26
29
15
12
5
5
5
6
4
1
1
1
15
21
19
20
24
27
25
27
46
50
56
40
39
19
16
13
8
8
10
8
6
12
14
9
9
39
40
30
23
11
10
9
8
7
4
1
1
27
44
35
29
45
58
45
38
60
84
98
75
61
28
24
13
14
18
20
14
7
7
16
10
5
53
60
37
26
5
3
5
4
1
3
3
1
5
17
11
18
11
23
19
23
62
64
83
56
49
211
234
176
113
130
174
133
109
68
91
89
58
409
499
398
280
72
68
54
50
16
21
10
7
94
127
117
120
182
216
181
177
472
591
715
579
457
23
258
263
44
241
224
23
22
231
24
214
24
5
211
23
33
210
3
34
235
24
119
124
2136
2122
90
2101
2118
202
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Fig. 1. Exploration spending by Minerals Council of Australia Constant Group of Mining Companies 1987/88 to 1998/99 (at 1989/90
prices).
episodic nature of mineral exploration spending discussed previously by Eggert (1988).
Seniors and juniors
The foreign investment push included both large companies (often known as “seniors”) and small companies
(“juniors”).3 Twenty-five of the companies which had
overseas projects at the end of 1997 were large and 125
were juniors. (Resource Information Unit, 1998). The
attraction of overseas destinations was so strong that several new companies were listed on the Australian Stock
Exchange only to pursue foreign activities.4 Among this
group several large companies established junior subsidiaries to pursue international activities on their
behalf.5 A small group of junior Australian minerals
companies also listed on overseas exchanges to access
foreign equity. The Vancouver and Toronto Stock
Exchanges were particularly attractive listing destinations between 1995 and 1998.
Overseas assets and revenue now make a significant
contribution to the profile of many Australian resource
companies. Yet the extent of internationalisation varies.
3
In this paper we adopt the convention of market capitalisation
above $A 100 million in 1996/97 as the dividing line between senior
and junior companies.
4
In early 1998 this group included Tanganyika Gold, Ghana Gold
Mines, Leo Shield Exploration, and Equinox Resources.
5
In early 1998 examples included Astro Mining and Quantum
Resources (Gutnick group) and Metex Resources and Archean Gold
(Delta Gold) and Pacific Wildcats (Sons of Gwalia).
This is reflected in the entries in Table 3, which show
changes in the number of other countries in which large
Australian resource companies operated in the 1993/94
and 1996/97 financial years and in late 1999. Many of
the largest Australian resource companies have extensive
international activities. Yet some have maintained a
more domestic focus. In line with the decline in exploration activity throughout the world after 1997, the number of countries in which these companies operated fell.
Casual observation suggests that there is a positive
relationship between market capitalisation and the number of countries in which a company operates. Other factors such as the type of commodity extracted, company
age and the method of company formation also appear
to influence the situation.
During the 1990s, several Australian resource companies also had forced or voluntary de-internationalisation
experiences.6 Examples of forced de-internationalisation
included the Westralian Sands (now Iluka Resources)
departure from Vietnam and Consolidated Rutile from
Sierra Leone.
For many large Australian companies internationalisation has been a gradual process. In most cases, companies initially limited their activities to one or two countries within a specific region. They then spread interests
to other nations within a region, before finally moving
to other regions of the world.
As can be seen in Table 3, several Australian companies embarked on substantial increases in their international activities between 1993/94 and 1996/97. Prominent among the group were WMC Resources, North,
Normandy, MIM and Newcrest. Each more than doubled
the number of countries in which they operated during
this period. As argued below, these actions appear to fit
in with the so-called “Uppsala-model of internationalisation.” This evolutionary theory considers internationalisation as an incremental learning process leading to a
stepwise increase in commitment in foreign locations.
(Andersen, 1993).
While Australian junior companies have played a role
in exploration in several emerging mining nations, the
prominence of small foreign companies developing projects in these nations is less common. CRU International
estimated that juniors were responsible for an average
of 27 per cent of the world’s significant gold and copper
discoveries between the 1970s and the late 1990s.
(Anonymous, 1998). Their contribution was highest in
Australia, Canada and the United States. As can be seen
in Table 4, juniors made more than half of significant
gold and copper discoveries in Australia between 1970
and 1997.
6
Deinternationalisation includes contraction of overseas operations,
switching of modes of operation, sell-off or closure, reduction in ownership stake and, in extreme cases, seizure of operations by local authorities.
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Table 3
International presence of the largest Australian resource companies — 1993/94 and 1996/97a
Company
BHP
RioTintoc
Woodside Petroleum
WMC Resources
Santos group
North Limited
Normandy Group
Pasminco group
MIM Holdings
Gutnick Group
Iluka Resources
Newcrest Mining
Sons of Gwalia
Acacia Resourcesd
Novus Petroleum
Delta Gold
Western Metals group
Resolute Limited
Goldfields Ltd
Ashton Mining
Ranger Minerals
Ross Mining
Total
a
b
c
d
Market capitalisationb
A$ million
No. of countries
1993/ 94
1996/ 97
1999
31,960
16,613
6738
5773
4311
3006
2802
2214
1433
930
732
566
556
504
420
412
411
386
338
320
234
159
80,818
40
17
1
6
5
3
5
7
7
1
4
4
5
1
3
1
1
1
1
5
1
1
120
50
25
2
16
9
7
19
7
16
1
6
10
5
1
6
2
2
2
2
8
4
2
202
21
40
2
13
4
9
11
6
6
2
3
2
1
1
9
4
3
4
2
8
2
2
155
Source: Resource Information Unit (various years) (1994, 1997), Company Annual Reports
At end March, 1998.
Though technically based in London, RioTinto is included in the list because of its large Australian shareholding.
AngloGold took control of Acacia in 1999.
Table 4
Junior companies share in significant gold and copper discoveries
between 1970 and 1997
Region
Share of discoveries by
Juniors — percentage
Australia
Canada
United States
Asia
Chile
Other Latin America
Other
Average
51
38
30
8
5
22
26
27
While foreign direct investment by junior mineral and
energy companies grew during much of the 1990s, similar trends have also been apparent in other industry sectors. (see UNCTAD, 1997). Many juniors have opened
new frontiers ignored by large companies for reasons
related to economic, political and social risk. In late 1998
some junior Australian mining companies were active in
as many offshore countries as their larger counterparts.
Companies such as Leo Shield Exploration, Equinox
Resources and Aquarius Exploration operated in more
than five countries. The increased overseas activity of
junior Australian mining companies mirrors the experience of Canadian companies reported by Harper et al.
(1998).
The regional focus
The Asia Pacific region and Africa were the first
“new” investment destinations for Australian companies
following the renewed resources boom of the 1980s. The
“new” frontier expanded to include South America and
Eastern Europe later in the decade. Though Australian
minerals companies remain active in the traditional
foreign destinations of Canada, the United States and
Western Europe, their presence in the new environments
grew particularly strongly between 1993 and 1997. Some
details of the recent regional focus of Australian-based
companies appear on Fig. 2, which has been derived
from Table 2 above.
The situation in Africa illustrates the changing situation reasonably well. O’Neill (1992) reported that in
1985 Bridge Oil was the only Australian minerals company operating in Africa. There were fifteen Australian
minerals companies active on the continent by the end
of 1992. A review of the Australian Mines Handbook
(Louthean Publishing, 1998/99) and company annual
reports indicates that seventy-five Australian minerals
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Fig. 2. Overseas resource projects of Australian-based Mineral Companies 1995 to 1999.
Argentina had become notably more popular during the
period. Chile and Bolivia seemed less popular.
The increased preference for “new” geological
environments in Africa, Asia Pacific and South America
is also a reflection of international developments. As
noted above, the Metal Economics Group reports similar
trends on a world scale. Collected for companies responsible for over 80 per cent of world exploration spending,
their studies show an increase in proportion of world
exploration going to Asia, Africa, South America and
the Pacific from 34 per cent in 1990 to around 60 per
cent by 1999. Exploration spending in Canada, Australia
and the United States declined during this period. Australia had similar exploration spending levels to Africa
in 1997. In 1991 it received more than twice as much
as Africa did.
The competitive advantage of the Australian
mineral industry
companies were operating in thirty African countries in
late 1997. They were involved in more than 180 projects.
The decline between 1997 and 1999 to 134 projects was
due overwhelmingly to reductions in exploration-based
activity.
The Asia Pacific, with 38 per cent of overseas projects, and Africa, with 29 per cent, were the two most
preferred regions by 1999. Europe had about eight per
cent, North America thirteen per cent and South America
eleven per cent. Since 1995 Africa’s share of projects
had been rising, while the share of the Asia Pacific group
of nations fell.
Exploration spending data from both the Australian
Bureau of Statistics (Catalogue 8412.0) and the Minerals
Council of Australia (2000) since the mid-1990s also
show increasing preference for Africa and South America. According to the Minerals Council of Australia
Industry Survey for 1998/99 there was a dramatic
decline in spending in the Asia Pacific region in 1997/98,
with some recovery in 1998/99.
Within the broad regions bunching-up is evident in
certain countries. This is a reflection of factors such as
geological prospectivity, geographical proximity, familiarity with systems of government, previous commercial
or political links, and perceptions of sovereign and country risk.
The number of projects in the top countries each in
Africa, the Asia Pacific and Latin America in 1995, 1997
and 1999 appear in Table 5. Although there was a peak
in 1997 and a subsequent decline, there were more projects at the end of the period than at the beginning for
each of the countries listed. This contrasted with the
main Asian Pacific nations. Papua New Guinea, China
and Fiji each had fewer Australian-controlled mining
projects in 1999 than they had had in 1995. Among the
major South American mineral investment destinations,
The internationalisation of any industry depends on
it establishing and sustaining a competitive advantage.
Appreciating the sources of this competitiveness underlies an explanation of the subsequent overseas movement
of companies operating in a previously domesticallybased sector.
Initially one can argue that Australia’s mineral industry competitiveness is a function of its control over
scarce mineral resources. Yet it is clear that other determinants are important. Applying Michael Porter’s well
known “diamond analysis” provides a useful taxonomy
of these influences. He sees factor conditions, demand
conditions, related and supporting industries, and firm
strategy, structure and rivalry as the key influences
which promote or impede the creation of competitiveness. Favourable government policy and chance supplement these to establish national competitive advantage for extended periods.
Factor conditions
Porter identifies human resources, physical resources,
knowledge resources, capital resources and infrastructure in his list of factor conditions. In addition to favourable geology, each of these other factors has influenced
the competitiveness of the Australian resources sector.
The country has had a mining tradition since the 1850s.
In developing a strong human resources base to support
the industry the public sector initially established a comprehensive framework for the training of mining professionals and workers through a school of mines system. While the minerals sector languished during the first
half of the twentieth century, minerals education
remained viable at both university and technical college
level. It re-emerged after 1960 in a resilient way. The
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Table 5
The major destinations of International Investment of Australian Mining Companies in 1995, 1997 and 1999a
Country
Africa
Ghana
South Africa
Namibia
Guinea
Ivory Coast
Tanzania
Asia Pacific
Indonesia
Papua New Guinea
The Philippines
New Zealand
China
Fiji
South America
Peru
Brazil
Chile
Argentina
Bolivia
a
Number of Projects in
1995
Number of Projects in
1997
Number of Projects in
1999
24
12
4
6
2
2
51
15
8
13
13
13
30
20
18
8
9
20
+6
+8
+14
+2
+7
+18
50
40
19
47
12
14
81
37
57
23
13
13
51
27
26
21
5
3
+1
213
+6
226
28
210
9
4
15
7
9
10
13
23
13
7
8
6
10
13
5
21
+2
25
+6
24
Change 1995 to 1999
Source: Minmet Australia (various years) Database (1999).
nation’s stock of other knowledge resources developed
through research institutes (in the Universities and the
CSIRO), data collection agencies such as the Australian
Bureau of Statistics, and trade associations such as the
Minerals Council of Australia, State Chambers of Mines
and related bodies, has supported this framework.
In the area of capital resources Australia has
strengthened its role in finance provision for resource
projects particularly since the 1980s. Large financial
resources arising from equity and debt during the stock
market boom were partly responsible for this. The formation of the Australian Stock Exchange in 1987 from
the amalgamation of state stock exchanges encouraged
local and foreign companies to list. The Exchange has
since matured into a significant source of equity for the
resources sector, especially for medium sized projects
for both local and overseas companies. By early 1999
over 450 Australian-based and twenty foreign-based
resources companies were listed. The deregulation of the
Australian financial sector also made a positive contribution.
From the mid-1980s, the financial viability of Australian gold mining companies was also enhanced by
increased profits from emerging techniques of forward
selling. Producers of other minerals have subsequently
used these techniques. Between 1985 and the late-1990s
many companies successfully used hedging as a renewable source of finance. By closing hedge books when
appropriate, they also raised profitability and increased
the supply of internal resources for further investment.
Demand conditions
Porter (1990, pp. 86–97) emphasises two dimensions
of domestic demand as important influences on competitiveness. These are its composition and its size. He
argues that “a nation’s firms are likely to gain competitive advantage in global market segments which represent a large or highly visible share of home demand
but account for a less significant share in other nations”
(p. 87). Sophisticated and demanding buyers at home
additionally make a nation’s firms more able to compete
internationally. There are mixed arguments about
whether a large home market is good or bad for competitiveness. While large local markets enable domestic producers to reap economies of scale, small markets will
encourage them to export if they are to reap such economies.
Because of the generally small Australian domestic
market for minerals, the growing demand by companies
in Asia has been important for Australia’s mineral producers. Representatives from Japanese, Chinese, Taiwanese and Korean heavy industry must purchase iron
ore, coal, natural gas and other key minerals. They are
sophisticated and demanding in their requirements. Australian producers must maintain a competitive edge to
meet their needs.
Related and supporting industries
An important recent source of Australian mineral sector competitiveness has come from the emergence of a
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
major mining services sector. This has occurred against
the backdrop of the rise of the services sector more generally and the growing international trade in services. In
its publication, Australian Mining Industry 1996/97, the
Australian Bureau of Statistics (1998) reported estimates
of more than $A3 billion for contract, sub-contract and
commission work for Australian mining establishments.
Australian mining service providers have also been
actively operating in other nations. Mining service provision has emerged as an important export industry.
While the ABS does not yet produce annual estimates
of mining service exports, a survey of member companies of the government-supported industry organisation,
Austmine provides useful information on this issue. Its
115 member companies reported export sales of more
than $A 1 billion in 1996/97. Both sets of estimates seem
likely to understate the current strength of the mining
services sector.
The extent of services provided to the mineral sector
is broad. It covers core areas which have become highly
specialised. These include mineral exploration, geochemistry and geophysics, satellite surveying, mine and
plant design, engineering and construction, environmental management, human resource management, legal services, accounting services and information technology
provision. Larger companies often employ professionals
in these fields but smaller companies are more likely to
engage contractors.
There has also been a so called “de-integration” trend
to entrust the provision of non-critical service activities
to outside contractors, even if the services can be performed equally as well within a company. This often
involves work in areas where is it hard to recruit, retain,
or supervise employees. Advances in information technology have improved the ability of service sector firms
that can now reap considerable cost advantages from
specialisation. Areas such as drilling, open cut and
underground mining contracting, laboratory services,
transportation of staff to mine sites, transport of minerals
and recruitment of staff come to mind.
Competition and focus have been important influencing factors. A large domestic minerals industry operating
in a competitive environment provides incentives to raise
productivity and boost quality. Creating such incentives
for service providers within companies is more difficult.
Porter (1990 p. 246) notes that “specialised service providers can often hire and train people better, employ better methods, use better equipment and perform the service cheaper and better”.
Firm strategy, structure and rivalry
Australia is a significant producer on a world scale of
several minerals. These include bauxite and alumina,
iron ore, gold, nickel, copper, lead, zinc, coal, diamonds
and titanium minerals. Within each of these sectors there
have typically been small numbers of producers who
have been competitive with one another. This has led
to a continuing competitive situation driven in part by
domestic rivalry but also influenced by global rivalry and
competition more generally.
While most long-term producers of these minerals
(except perhaps in the gold industry) have typically been
medium to large companies, the ownership system of
mineral rights has allowed smaller companies also to
play a role in exploration and promotion of new projects.
The ability of smaller (often exploration) companies to
enter various sectors of the mineral industry has played
a positive role in stimulating the competitive domestic
environment in Australia. Similar competitive environments exist in few other nations.
Chance
Following Porter (1990, pp. 124–125) chance items
includes acts of invention, major technological discontinuities, surges in world or regional demand, discontinuities in input costs such as oil price shocks, shifts in
world financial markets or exchange rates, political
decisions by foreign governments and wars. Some of
these factors have positively influenced the competitive
fortunes of the Australian minerals sector during the past
two decades.
Australian mining companies have developed technological advantages in exploration, mining methods and
minerals processing. Notable recent applications of technological innovations include things such as satellite
imaging in mineral exploration, carbon-in-pulp leaching
of gold, pressure acid leaching of lateritic nickel deposits
and advances in block caving. These are a small portion
of a much longer list. Slater (1996) has argued that technological innovation is an area where Australian gold
mining companies have recently had an edge over their
US counterparts. Premoli (1998) identifies the ability to
develop small mines to operate profitably as particular
areas of strength and sources of competitiveness.
The strong growth of the nearby Asian economies has
been a fortunate development as well. Even though the
“Asian economic miracle” of the 1970s, 1980s and early
1990s gave way to the “Asian economic meltdown” of
the late 1990s there has been a net positive impact on
the fortunes of many Australian mining companies.
In the development of Australian financial markets,
exchange rate levels have also been important. By following an effective exchange rate policy Australia maintained low inflation rates after the mid-1980s
accompanied by sound economic management in other
policy areas. During the first part of the 1990s, the Australian dollar fell against several of the major Asian currencies. The “commodity currency” effect, often attributed to the Australian dollar, shielded the minerals
sector during the Asian economic crisis.
O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Government
State and federal government policy has played an
important encouraging and supporting role in influencing
the four key determinants of national competitiveness for
the Australian resources sector. States are the major
players in implementing mineral policy. Some states
have been more influential than others. The positive contribution of the Western Australian government is particularly notable but it can be argued as well that the
Queensland and South Australian governments have
played a strong supportive role. Population density, climate and the resultant greater environmental sensitivity
appear to have held back pro-mineral development policies in New South Wales, Victoria and Tasmania.
Using the limited range of powers available to it in
the natural resources area, (particularly with respect to
offshore oil and gas exploitation), the Australian Federal
government has generally taken a position which is not
adverse to mineral development. There are, however,
two areas where this has not happened. The effects of
the High Court’s findings in the Mabo judgment in 1992
and the subsequent Native Title legislation, passed
initially in late 1993, has increased the perception of
increased structural impediments at home being erected
by government. The Native Title situation has been subject to further High Court decisions and amendments to
Federal and State land use legislation. Growing community expectations with respect to environmental quality issues have also affected the minerals and energy sector and legislative requirements in this area.
Relative to the governments of nations at similar
stages of economic development, government action and
policy implementation in Australia has been favourable
to resource exploitation and export. It has achieved this
by supporting and promoting Porter’s four determinants
of national advantage.
Explaining internationalisation
Against this background, the foreign direct investment
and internationalisation literatures also provide useful
foundations for considering the growing international
presence of Australian mining companies. Within this
field it is instructive to consider two broad themes. First,
there is a process of strategic diversification and globalisation occurring within a mature and competitive
minerals industry. Second, the emergence of a range of
structural impediments has influenced the situation.
Growing impediments at home, combined with more
favourable operating conditions abroad, have pushed
Australian mining companies towards other geologically
prospective nations. In this discussion we reflect briefly
on the reasons for, and process of, internationalisation
207
which follows the establishment of a nationally competitive industry.
Models of internationalisation
At least two approaches offer useful insights into what
has been occurring. First there is the so-called Uppsala
model of internationalisation, proposed initially by
Johanson and Wiedersheim-Paul (1975). This provides
the foundation for later innovation-related stages models
of internationalisation. Andersen (1993, 1997) provides
a useful review of this literature associated with the first
group of models. Another interesting perspective
emerges from the eclectic framework advocated by Dunning (1988).
The first group of models are based on the behavioural
theory of the firm and the theory of growth of the firm
(Johanson and Vahlne, 1990). They grew out of empirical research on the international growth of Swedish
manufacturing firms. They view international expansion
as a gradual process. Experimental knowledge of overseas conditions (tacit commercial experience) results in
incremental international involvement. This theory, often
referred to as the stages model, (Andersen, 1997), suggests that firms enter markets with successively greater
“psychic distance”. Psychic distance depends on differences in culture, language and political systems. When
applied to manufacturing, the model progresses from no
export, to export via independent representatives, to
sales through subsidiaries and eventual to manufacturing
offshore (Andersen, 1993).
An incremental model of this type has some relevance
to the internationalisation of Australian mining companies. The argument by Johanson and Vahlne (1990) that
firms start by “invading” neighbouring markets is relevant. As experience, knowledge and confidence grows
they move to more distant markets. Initial offshore
activities in Fiji and Papua New Guinea prior to the
1980s, the rise in activities in Asia and the exponential
increase in exploration and mining investment in Africa
can be explained by tenets of the stages model. The minimising of psychic distance is apparent in Australian
activities in Africa. Most are concentrated in countries
whose official language is English and those whose legal
system has its origins in the English Common Law.
Despite its attraction as an internationalisation theory,
the stages model has difficulty explaining the motivation
for internationalisation and also in incorporating International New Ventures (INV). In the minerals sector
these are the junior mining companies which are international from inception (see Oviatt and McDougal,
1997). Dunning (1995) attributes the increasing participation of small and new firms in globalisation to changes
in the attitude of multinationals. He contends that most
small companies are arms of multinationals — they represent an entry mode into international operations.
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
Dunning’s eclectic approach also provides insights
into offshore investment in the minerals industry. Its
emphasis on competitive advantages is particularly useful. In the eclectic paradigm factors which influence
internationalisation originate from inside and outside
organisations. They include ownership factors (O) specific to each firm, location-specific factors (L) and
internalisation attributes (I), which make it profitable to
operate within a firm rather than to rely on external markets.
Ownership advantages may arise where firms have a
technological edge over competitors, from access to or
control of raw materials, political influence or ability to
obtain competitively priced finance. Brouthers (1995)
argue that ownership advantages are both unique and
sustainable and provide firms with a competitive advantage in entry mode selection. Location factors
encompass issues such as transport costs for raw
materials, a country’s tariff system and taxation regime,
and also the issue of political stability. Internationalisation gains can arise from effective management within
a firm that brings economies of scale and reduces uncertainty associated with dealing with other firms. If a firm
is to invest abroad each type of condition must be fulfilled.
Companies diversify to exploit firm-specific advantages. They increase returns to shareholders as a result
of industry-competitiveness and location advantages.
Profits, growth and survival are the key goals in following such a strategy. To internationalise successfully a
company must control its establishment and operating
costs in foreign locations. In achieving this it must hold
a range of specific advantages. A mature company
operating successfully within an internationally competitive domestic industry is more likely to possess these
attributes. The maturity of Australian minerals companies seems to explain a significant part of their success
in internationalising. Though evolving to this position
over 150 years, they have particularly developed a range
of industry-specific advantages in the past thirty years.
As noted in the previous section, the specific advantages of Australian-based resources companies include
technological competitiveness, access to suitable project
finance and to a wide range of other mining services.
Firm-specific advantages have developed particularly
with high levels of expertise in exploration and mining
technology. By moving to geologically prospective
regions with more friendly operating environments than
one or two decades ago, Australian resources companies
are exploiting location-specific advantages abroad as
well as at home. Firm and industry-specific advantages
are important in this process.
In terms of the OLI approach one might list such factors for resource companies as follows:
Ownership: Technology, management, access to
raw materials (abroad), political support (abroad),
access to favourable finance (at home),
Locational: Geology, transport costs, labour costs,
tax policies of host country, political stability of host
country, environmental policy of host country,
Internalisation: Avoiding uncertainty, reaping
economies of scale, maintaining control, retaining
technological edge.
The success of juniors as international new ventures
The internationalisation of junior Australian mineral
companies does not fit into the normal diversification
process proposed in the mainstream foreign direct
investment and traditional internationalisation literature
for several reasons. First, they generally have a much
smaller capital base. Second, many juniors do not have
any domestic operations to use as a springboard in internationalisation. Third, they do not have much international experience as companies and they are much
“younger” compared with conventional international
investors.
One of the important reasons behind increased international activities of junior companies in the 1990s lay
in their access to sources of finance. A reliance on speculative capital has meant that they usually seek highly
profitable deposits and take greater risks in search of
high returns by going to “virgin” countries where probabilities of finding bonanza deposits are higher.
The search for quick returns partly explains their bias
towards gold projects until 1997. The activities of junior
companies are much more market-driven because they
lack strong working capital. Their exploration programs
emphasise rapid discovery and progression to delineation drilling in order to generate interest from larger
investors. They usually apply lower hurdle rates in
investment assessment and take greater risks. The risktaking mentality of executives is a source of competitive
advantage in internationalisation.
Competitive overseas conditions and structural
impediments at home
The movement overseas of Australian minerals companies has also been a natural response to a changing
environment for minerals sector investment around the
world. Large geopolitical movements have occurred over
the past thirty years. Many developing nations were previously unattractive for foreign investment because of
social instability, sovereign risk, foreign-investment barriers and other regulatory constraints. In the past decade
their policy makers have rewritten their investment
codes, introduced market reforms and embraced democracy and transparency in pursuit of growth (see Otto,
1998; Naito et al., 1998). These changes have opened
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
profit opportunities and affected the flows of international capital. Internationally competitive Australian
mining companies and investors have responded positively to the change. Some indication of what has been
occurring appears in Table 6. This contains a summary
of changes in mineral investment conditions in nine
selected and representative nations — three in Asia,
three in Africa and three in Latin America. The shifting
of concentration of mining activities also reflects relative
resource depletion in Australia.
The decline in levels of structural impediments abroad
has been accompanied by perceived increases in structural impediments at home. As noted in the previous section there is greater community awareness of environmental quality issues. Resource companies operating in
Australia are facing higher operating costs and greater
challenges in obtaining environmental approvals for
newly proposed projects. Native Title issues have also
played a much more prominent role. Although business
objectives motivate investment decisions, less competitive domestic conditions arising from a changing balance
of structural impediments have also clearly influenced
the internationalisation process.
Where structural impediments at home continue to
grow and those abroad decline, the process is set into
motion for the emergence of nationally competitive minerals industries in other nations. The further emergence
of nations such as Chile, Ghana and Russia may place
them in strong leadership positions in their respective
regions. This may challenge the strong present competitive positions of Australian, Canadian and South African
companies. A dynamic perspective of the “Porter diamond” might see an eventual decline in the international
competitiveness of Australian mining companies in such
a scenario.
Some concluding comments
The dramatic internationalisation of Australian mining
companies since the late-1980s is a reflection of an internationally competitive minerals industry. A broad range
of factors has been responsible for this emergence. The
resultant advantages seem destined to continue. It would
be foolhardy, however, for firms in the resources sector
to become complacent about their current situation.
Developing and maintaining a competitive edge requires
continuing attention, some risk taking and strong community and public sector support. If Australia is to retain
its new found leadership position it must compete effec-
Table 6
Recent mining legislation reforms in nine selected nations in Asia, Africa and the Americasa
Country
Type and Extent of Regulatory Change
Year of Reforms
Major Investors
China
Market reforms, taxation system reform, changes in
regulations for foreign investors, five year tax
holiday, 33 per cent corporate tax
No reserved minerals, 50 per cent foreign equity,
higher equity also permitted
New Act 1995 (FTAA), tax holidays, carry forward
losses, 100 per cent foreign equity allowed, 25 years
project life
New mining code, tax concessions on exploration,
development and environment expenses, foreign
equity allowed, lower corporate tax, royalty maximum
at 10 per cent
New mining code, new national investment code,
corporate tax 30 per cent, withholding tax 10 per
cent, foreign ownership allowed
Market reforms since 1991, lower corporate taxes,
import duty waivers, remote areas concessions, small
scale mining regulations, 1991, remittance of 100 per
cent after tax profit, corporate tax rate 10 per cent for
special areas
Market reforms, 3 per cent royalty, 100 per cent
foreign ownership, tax stability over project life
ensured
Market reforms, tax incentives, security of tenure
guaranteed
Market reforms, removal of 7 per cent royalty,
reduction in corporate tax to 35 per cent, 100 per
cent equity allowed, privatisation
1993/94, 1995/96/97
BHP, Ashton
1993, 1995, 1996
Ashton, BHP, RioTinto
1994, 1995
WMC, MIM, Newcrest
1992, 1996
Delta Gold, MIM, BHP,
RioTinto
1979, 1997, 1998
Resolute, BHP
1991, 1992
BHP, Delta, RioTinto
1992, 1993, 1996
MIM, North, WMC, RioTinto
1985, 1992, 1994
Savage, BHP
1992, 1993, 1993
MIM, Santos
India
Philippines
Namibia
Tanzania
Zimbabwe
Argentina
Bolivia
Mexico
a
Source: Otto (1998), Naito et al. (1998), and Premoli (1998).
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O. Maponga, P. Maxwell / Resources Policy 26 (2000) 199–210
tively against other major nations which also exploit
large quantities of non-renewable and recyclable
resources, and then export them to the outside world.
These countries include Canada, South Africa, Chile,
Brazil, many of the OPEC nations, Russia, Kazakhstan
and several others.
At the time of writing the resources sector is emerging
from a considerable period of downturn. This has threatened the financial viability of many companies. Many
mining professionals have lost their positions and a significant proportion of this group may be tempted towards
other sectors. As the upturn re-emerges, problems with
staff recruitment may apply. Between 1997 and 1999
Australian resource companies withdrew from more than
ten countries. There were about 260 less overseas projects in 1999 than two years previously. The nature of
the mineral cycle means that risks can be considerable
and there needs to be continuing commitment despite
cyclical downturns.
Australia now has a mature and competitive minerals
industry. The challenge is to keep it that way. If Australian companies are able to maintain their presence in
70 or 80 countries it seems likely that this will imply
larger numbers of new overseas mining operations than
at present. They may occur in a variety of ways — joint
ventures, buy-ins, large equity holdings or simply full
ownership. The