Farr-jones: Land of missed opportunities
Billion-dollar mining funds manager says NZ'S door is open
Amultibillion-dollar funds manager specialising in the mining sector is paying more attention to New Zealand after the change in government, and it's actively looking at at least one project.
Taurus Fund Management met resources minister Shane Jones in Auckland last week and said it believed “the doors are now open” after the country had “largely squandered” the economic opportunity in the past.
Taurus specialises in financing global mid-tier and junior mining companies. Established in 2006 and headquartered in Sydney, Taurus manages A$2.3 billion (NZ$2.51B) in committed and drawn capital from its client base of predominantly United States institutional investors and pension funds.
Its portfolio includes gold, coal and many other minerals miners, providing project and acquisition finance debt to emerging mining and metals companies to finance or refinance project developments.
Taurus brought a team of more than 20 last week to meet Jones. Among them was fund director Nick Farr-jones.
Farr-jones has an investment and banking background but is betterknown in NZ as a former Australian rugby halfback and captain who terrorised many All Black rugby fans by leading his team to victory over NZ several times, particularly at the 1991 Rugby World Cup.
Back in NZ in investment mode, Farr-jones said: “We were very encouraged”.
Heard it through the grapevine
In February, Jones met mining chief executives to discuss strategic and critical projects in NZ.
“I started getting feedback about how NZ was open to business and the permitting processes would be well, obviously fast-tracked or at least streamlined,” Farr-jones said, adding Jones had been “so positive".
"He understands the risks, but he's the type of person that says look, us as political leaders need to be demonstrating that we're prepared to take risks … not blow up the environment or what have you. But make sure that there's a balanced approach.”
NZ had the potential minerals wealth onshore and offshore, but Taurus was fully aware of the environmental sensitivities in this country.
Its borrowers and clients had to comply with internationally recognised ESG principles and World Bank standards.
If Taurus was to invest in companies operating in NZ, they had to be confident they had a social licence.
“You'd want to make sure that they're employing local people, you'd want to make sure that they fully understood their rehabilitation liabilities, and that those liabilities were locked away for whenever the life of mine runs out … and so obviously, governance, if you're listed companies, it's critically important,” Farr-jones said.
Opportunity knocks
But there were not only profits to be made in NZ, but economic opportunities for the country.
“There's no doubt that they come if you go to a country like mine [Australia], the royalties governments make, and the corporate tax returns that the Government makes are a huge part of our GDP. And I suspect that over the years, NZ'S largely squandered a lot of that potential economic return.”
Taurus saw opportunities in NZ, particularly the South Island and the gold opportunities, but also some offshore opportunities.
Farr-jones said the fund was looking at a gold project in the South Is.
But there were probably other opportunities that Taurus and others in the sector were unaware of.
Farr-jones said Taurus had already missed out on opportunities in this country, singling out Bathurst Resources, which is NZ’S largest coal company specialising in coking coal.
“Bathurst has done a terrific job … And sometimes we probably kick ourselves that we weren't more involved in that company."
One area Taurus tended to avoid was rare earth and minerals, which have become increasingly important to the world economy.
The market was volatile, opaque and largely controlled by China.
“We prefer to look at large terminal markets such as copper, gold, zinc, metallurgical and coal."
The next step for Taurus now “the doors are open” would be to look at opportunities in NZ.
The fast-track consent process would no doubt help, but the fund manager was used to working in different consenting regimes.
Australia’s federal system itself presented different processes.
“For example, the Victorian Govt is going to take either forever or knock it back. As opposed to Western Australia, which is one of the best jurisdictions as far as investment stability and certainty of process.
“We think that particularly with this fast track bill, and you don't, fortunately, have an upper house to deal with in your Parliament, that will make New Zealand far more investable for people looking at the extractive industries globally.
“As minister Jones said, all of a sudden, mums and dads will be delighted because their daughters and sons won't be going to Kalgoorlie to work; they will find a job here in NZ in their backyard.”
Reassurances but no promises Minister Jones said whether outfits like Taurus invested in NZ would be down to several factors, many of which were not within the control of the Government.
“Rule number one of the funds industry is don't lose money, so no matter what the consenting regime or the social acceptance, nothing would happen if the investment didn’t stack up on its own and in comparison to other investments across the globe.
Jones said his role was to give investors a “greater understanding that we are moving towards a new regime to bring clarity and rationalism to the debate and the approval processes for the extractive sector".
"It was evident to them that my motto is all take coal before the dole, but they wanted lots of information about the fast-track proposal.
“They wanted to know whether or not the media reports about opposition MPS saying that people would be stripped of their consents if they were given consents … Should they put any weight on those statements?
"So, I was surprised at how well and how well briefed and how closely they're following the media reports about the extractive sector and the fast-track bill.”
It wasn't easy to give reassurance about what a future Parliament might do and to be certain it would honour contracts.
“I said, look, mate, we're a liberal democracy, we have regular elections. I said one possible hitch against a future government going completely off the reservation is the fact that we will have a schedule of projects in the actual bill, and Parliament will have countenanced those projects.”
Jones said he could not give a 100 per cent guarantee of what a future Parliament would do, but generally, politicians in NZ respected property rights. — Business Desk