The head of one of the world’s biggest mining companies says taxpayers should be digging into their pockets to help pay for the next generation of mining projects if they want a bigger share of the spoils.
Rio Tinto chief executive Jean-Sebastien Jacques reignited debate about a mining tax, telling The Business he was “open minded” about the idea.
“If a community or government wants a bigger share of the pie, they may need to be willing to take on more of the risk,” he said.
“That’s a really important part of our very capital-intensive industry.”
Mr Jacques said communities around the world did not think they were getting enough from their resources being mined and wanted to start a debate about how profits could be shared.
“What we’re saying is we don’t have the solution, per se, as we’re having this conversation,” he said.
“What we want is to have this conversation, to start the debate, in order that we find a solution which is win-win for everybody.”
Suggestion has similarities to Rudd mining tax plan
Mr Jacques’ proposal that communities take on more risk and upfront investment in new mining projects bears some similarities to a policy Rio Tinto and the other big mining companies spent millions of dollars fighting against nearly nine years ago.
In 2010, then Prime Minister Kevin Rudd announced a Resource Super Profits Tax (RSPT).
One of its major features was the sharing of risk between the Commonwealth government and mining companies, in return for the miners giving the Commonwealth a share of any abnormal or “super profits” a project made.
Under the design, the Commonwealth would contribute 40 per cent of the investment cost of a project — including as a cash refund in some circumstances — and miners would be hit with a 40 per cent tax on above-normal profits.
Mr Jacques, who was not leading Rio Tinto at the time the company so ferociously fought the tax, would not comment specifically on the previous Labor policy and said he was not necessarily referring to Australia.
“My sense is countries where the rule of law is well established, the infrastructure is well established, you know if I look at Canada, if I look at the US, if I look at Australia, I think my preference is for a situation where the government focuses on tax and royalties, because I think that’s the most effective way in doing so,” he said.
“I believe the model that we have in Australia today, which is tax and royalties, is a very effective model,” he told The Business.
“But what works in Australia may not work in Mongolia, may not work in Indonesia, may not work in Africa, so I think from our perspective, every country or every region has a specific set of different situations, and we need to adapt in order to find the right solution for this country.”
However, he argued that if communities wanted a bigger share of the “upside”, they needed to be willing to share more of the risk, and did not rule out supporting a similar policy to the RSPT today.
“Whatever idea is on the table, we are very open minded, we will look at the benefit in order to find a way forward, but I won’t make any specific comments on any specific proposition at this point in time,” he said.
‘Mining as a service’, others could do the investment
Mr Jacques is starting what could be difficult political debate.
“We need to have a very open conversation, to have a serious debate, and that’s why there is a piece of work that we want to launch very quickly with the likes of the World Bank and Harvard University and a few other stakeholders, to have a very honest, very grown-up conversation about how do we make sure we create more wealth and how do we share the wealth.”
He also suggested the mining industry should look at a completely new business model where, “we provide mining as a service and let other people finance projects that need billions in upfront investment, before the benefits can be shared”.
Mr Jacques took up the role of Rio Tinto chief executive in mid-2016, after serving as head of its copper and coal operations.