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The Boom: Native owners or mining companies: who benefits?

Mining companies are finally sharing the benefits with the native owners of the land. AFP/Christian Sprogoe/Rio Tinto

Aboriginal Australians living in remote areas have, for the past five decades, experienced at close quarters the ill-effects of large scale mining, while receiving few of the benefits.

From Cape York, to Arnhem Land, Kakadu and the Pilbara, the industrial-scale mining that got underway from the 1960s onwards did little to improve Aboriginal welfare.

Even when mining companies agreed to substantial royalty deals — as with the Ranger uranium mine and Groote Eylandt — it made little difference.

Decades of research in Australia confirms that Aboriginal people have succumbed to the same “resource curse” effects as experienced by people in the developing world.

So the advent of the biggest resources boom in our history and mega mining developments might suggest that the curse will loom larger.

Corporate social responsibility

Fortunately, there’s cause for optimism as mining companies are now putting Aboriginal welfare at the fore of their social responsibility agenda.

The turning point actually occurred in 1995 when Leon Davis, chief executive of CRA Ltd (now Rio Tinto), broke ranks with his industry and said he would negotiate under native title law.

Since then, the company has blazed a trail in negotiating agreements that offer job and economic development opportunities to Aboriginal people, and others are now following. Rio now employs about 1600 Aborigines, making it the single largest such employer in the country.

This month the company concluded the five agreements with Pilbara indigenous groups that will deliver jobs and economic development benefits while enabling it to rapidly expand mining operations in the region.

Value of agreements

Simon Hawkins, chief executive of the land council Yamatji Marlpa Aboriginal Corporation, estimates the agreements could be worth $2 billion to its four groups over the next 40 years.

The benefits in terms of business development could be substantially more than that amount, given the drive by mining companies to award contracts to indigenous businesses.

The income is based on a direct 0.5 per cent direct share of production, with 80 per cent saved in a charitable trust and used for business development and social services. The balance is to be held in a direct benefit trust.

One third is to be locked away for the benefit of future generations.

The agreements spread benefits around the region via a regional corporation that will be funded by Rio for the first five years.

The benefits for Rio Tinto

In return, Rio will have the certainty that its plans to dramatically ramp up production in the region, from 220 million tonnes per annum (mtpa) to as much as 500 mtpa in coming years, without being hindered by a claim or a determination under the Native Title Act.

Local Aboriginal elders worry about the loss of sacred sites, saying that much of their country remains in pristine condition at present.

Sam Walsh, managing director of Rio’s iron ore business, says he recently travelled through the region and saw large areas fenced off to protect cultural heritage.

Negotiations continue

BHP is believed to be offering a broadly similar 0.5 per cent deal in its native title negotiations, though it has a floor as well as a ceiling, with comparable economic benefits.

But Fortescue Metals Group, which has won accolades for its commitment to improve Aboriginal welfare, has consistently paid fixed dollar compensation well below this share, arguing that such deals amount to “mining welfare”.

Its contentious negotiations with the Yindjibarndi people in the Pilbara are based on a $4 million a year, unindexed, in return for resources worth $10 billion a year at current prices, or just 0.04 per cent. Earlier FMG agreements have paid as little as 0.01 per cent.

Official silence

Government policy is silent on these agreements. While we have minimum standards for wages negotiations, deals struck between powerful mining interests and impoverished Aboriginal communities are a complete free for all.

Native title lawyer Ronald Bower reveals how some groups still manage to find a way through this jungle. In earlier FMG negotiations, Bower advised the Eastern Guruma people to accept a very poor offer because he realised the company was steadfastly opposed to paying any more. He is now advising a breakaway group within the Yindjibarndi community.

But following the FMG deal, the Eastern Guruma people’s fortunes have flourished. They have used what little money they got from their agreement to start businesses. One of those businesses recently picked up a contract with Rio worth $160 million a year.

After being denied benefits from the riches in their midst, big changes are afoot.

Benefits now being derived from the mining boom by Aboriginal people and communities are in part the result of Paul Keating’s Native Title Act, in part the result of changed corporate culture, and in large part from the ability of Aboriginal people to pick themselves up after being knocked down for decades.

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