AustralianBusinessExecutive.com.au - Vol.1 | 2014 by Romulus Rising

The

Australian Business Executive A Deeper Look at Business & Government

SPECIAL REPORT: Uranium mining in Australia

Over 30 pages on the resource that will drive Australiaâ&#x20AC;&#x2122;s future

Dr Vanessa Guthrie

Toro Mining Chief

On Becoming A Key Uranium Producer Australian Retail Association

Celebrating 110 years of supporting Australian retailers

MakMak Macarons:

Home business to blogging sensation

Dairy Australia

Horizon 2020 report

Q1 2014

Australian Business Executive Q1 2014

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EDITORS NOTE Welcome to 2014, and The Australian Business Executive. As we roll into the new year, we’re committed to interviewing and reporting on the events that keep Australian business progressing. Here, in our first themed edition, we’ve produced a special report examining nuclear and uranium issues in the country and what it means to the country’s future. Over the past few years, a number of state governments have lifted their longtime bans on uranium mining across the country. With over 400 nuclear reactors operating in 29 countries, and another 329 being proposed, Australia’s uranium industry has a bright future. The edition includes a number of pieces from industry insiders including the South Australian and Western Australian state governments, and key players in the space like Cameco,BHP and Energy Resources of Australia (ERA). Our cover story with Toro Energy Chief Vanessa Guthrie discusses their offer to potential investors and what makes uranium a safe investment into the future. This edition also talks with Sandvik CEO Klas Forsstrom and legal issues with Trish Hyde of the Australian Corporate Lawyers Association. The Executive Director of the Australian Retailers Association, Russell Zimmerman discusses their 110th anniversary of supporting Aussie retailers, and in our food and drink coverage we explore the changes to the Australian dairy industry with Dairy Australia who address the changing landscape and move to a free trading economy. In our final story, we speak with Carlos Heng, whose small business MakMak Macarons has had substantial success in the Newtown area of Sydney. From an inhouse start-up, now doing interstate sales, they prove that a market for niche foods can grow on word of mouth and reputation. Thanks for reading,

The Australian Business Executive team

The Australian Business Executive is published by the Esquire Media Group reaching a range of professionals including top executives and senior public servants across Australia. All rights reserved. Reproduction in whole or in part is strictly prohibited without written permission. Opinions expressed in the Australian Business Executive are not necessarily those of the editor or publisher. All reasonable care is taken to ensure truth and accuracy, but the editor and publishers cannot be held responsible for errors or omissions in articles, advertising, photographs or illustrations. Unsolicited manuscripts are welcome but cannot be returned without a stamped, self-addressed envelope. The editor is not responsible for material submitted for consideration.

Australian Business Executive Q1 2014

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Australian Business Executive Q1 2014

CONTENTS Editors Note

SPECIAL REPORT:

NEWS News in Review State by State Cities and Regions

8 10 12

Pg.15

SPECIAL REPORT: Uranium Mining In Australia COVER STORY Toro Energy CEO Dr Vanessa Guthrie’s Vision To Be Australia’s Largest Uranium Miner Australia And The World Nuclear Energy Situation

Dr Ron Cameron PSM FTSE, Head of Nuclear Development Division of the OECD Nuclear Energy Agency

Putting Nuclear In The Debate

Dr Alan Finkel AM FTSE, Chancellor of Monash University

COVER STORY Pg. 16 19

How To Conduct A Nuclear Conversation In Australia

Michael Angwin, CEO, Australian Uranium Association

Uranium Drivers as Strong as Ever

- Amanda Walker, Communications Manager, Australian Uranium Association

Uranium in Queensland

Michael Roche, CEO Queensland Resources Council

Putting Nuclear in the debate:

Record Proves Uranium Mining Safe

Australian Uranium Association

Pg. 23

AustralianBusinessExecutive.com.au

CONTENTS Ranger Uranium

BHP - The future of Olympic Dam South Australia Focal Point For Uranium

New brine concentrator facilities

Dr Ted Tyne, Executive Director Mineral Resources, South Australia Department for Manufacturing, Innovation, Trade, Resources and Energy

Uranium In Western Australia

Bill Marmion, Minister for Mines and Petroleum Western Australia

Paladin Energy - Opportunity at home and abroad Cameco - World leader in uranium

Sandvik CEO Klas Forsstrom

In-House Council pg.55

45 49

MANUFACTURING Talking productivity through innovation

Sandvik Interview Pg. 51

110 Years of Supporting Retailers pg.62

LAW In-House Council

Trish Hyde, CEO Australian Corporate Lawyers Association

When Your Counsel Claims Privilege

Trish Hyde, CEO Australian Corporate Lawyers Association

55 59

RETAIL 110 Years Of Supporting Australian Retailers

Russell Zimmerman, Executive Director Australian Retailers Association

Mak Mak Macarons pg.69

FOOD & DRINK Dairy Australia - Horizon 2020 Report MakMak Macarons

Home business to blogging sensation

65 69

Australian Business Executive Q1 2014

NEWS IN REVIEW Annual Spending Growth Nears Six-Year High • Economy-wide spending increased in November, the 15th straight month of growth. • 15 of the 19 industry sectors saw sales rise in trend terms, up from 14 sectors in October. • Transportation was the strongest industry sector for the month, with spending up 2.5 per cent. • Queensland was the only state to record a decline in spending, easing just 0.1 per cent. Economy-wide spending grew once again in November, lifting the annual growth rate to its highest level in almost six years, according to the latest Commonwealth Bank Business Sales Indicator (BSI). In trend terms, the BSI rose 0.5 per cent in November to record its 15th consecutive month of growth. The BSI is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals. The November BSI revealed trend spending growth has remained healthy, despite easing from a 0.7 per cent rise in October, after the previous month’s figures were revised to reflect new spending data. Looking at the more volatile seasonally adjusted measure, spending increased by 0.2 per cent in November, following a 4.1 per cent increase in October. Annual seasonally adjusted growth eased to 9.4 per cent in November, from 10.7 per cent the month before.

Telstra to sell majority stake in Sensis Telstra announced it had entered into an agreement to sell a 70 per cent stake in its directories business, Sensis to US based private equity firm, Platinum Equity for A$454million. The sale excludes the voice services business and includes economic benefits to Telstra from services it will continue to provide to Sensis. Telstra will retain a 30 per cent shareholding with Sensis now valued at A$649million. Platinum Equity is a leading global private equity firm with a highly specialised focus on business operations and 18 years of success in acquiring and operating businesses which have been part of large corporate entities. Among the transactions Platinum Equity completed in 2013 were carve outs from AP Moeller Maersk, CBS, CheckPoint Systems, Emerson and Deutsche Post DHL. Chief Executive Officer, David Thodey said he was committed to the new partnership and believed the agreement was the right strategic fit for both Telstra and Platinum Equity. He said the new partnership would maximise the value of the Sensis asset for Telstra shareholders. Sensis will continue producing and distributing the White Pages Directory as required under conditions of Telstra’s Carrier Licence. Telstra will also continue to provide directory assistance (1223) services as required under conditions of Telstra’s Carrier Licence. Voice services including the 1234 and 12456 services are a part of Telstra’s core telecom offering and will continue to be operated by Telstra as an ongoing supplier to Sensis. Following completion, Telstra will consider the net proceeds from this transaction, consistent with its capital management framework.

AustralianBusinessExecutive.com.au

NEWS IN REVIEW David Gonski to succeed John Morschel as ANZ Chairman in 2014 The Directors of Australia and New Zealand Banking Group Limited today announced that David Gonski AC will join the ANZ Board and succeed John Morschel as Chairman in 2014. ANZ Chairman John Morschel said: “David is one of Australia’s most respected business leaders and company directors. He knows ANZ well having previously served as a director from 2002 to 2007, and it is particularly pleasing to have someone of his calibre join the Board and to succeed me. “David’s business experience in Australia and in Asia, and his broad range of involvement with government and with the education and community sectors will be a significant asset for ANZ,” Mr Morschel said. Mr Gonski will join the ANZ Board in February 2014. After relinquishing some of his current commitments he will assume the Chair in May 2014. Mr Gonski will stand for election as a director at the ANZ Annual General Meeting in December 2014. “It is a privilege to succeed John as Chairman having had a strong relationship with ANZ over many years. The bank is in a strong position and I am looking forward to working with shareholders, with my fellow directors, and with Mike Smith and his management team to continue to realise ANZ’s super regional strategy,” Mr Gonski said. Mr Gonski is currently Chairman of Coca-Cola Amatil, the Guardians of the Future Fund, Investec Bank (Australia) and a director of Singapore Telecommunications. He is Chancellor of the University of New South Wales, Chairman of the Sydney Theatre Company, and a director of Infrastructure NSW and of the Lowy Institute for International Policy. Previously, Mr Gonski was Chairman of ASX Limited and a Director of ANZ, Singapore Airlines and the Westfield Group. He was Chairman of the Australia Government’s Review of Funding for Schooling, a member of the Takeovers Panel, the Committee of Inquiry into Charitable Related Organizations and of the Nugent Committee which examined the major arts organisations in Australia. Mr Gonski is a solicitor and was previously a partner at Freehills (now Herbert Smith Freehills).

National Australia Bank appoints Justin Greiner as Chief Executive Officer of JBWere. Mr Greiner joins NAB from ANZ where he was most recently General Manager Wealth Transformation. Previous roles at ANZ include Head of Private NSW and Head of Advisory. “With more than 20 years’ experience in the financial services industry, Justin is a wellrespected leader known for his customer centric approach and outstanding commercial acumen,” NAB Wealth’s EGM of Wealth Advice John Flavell said. “His extensive executive experience combined with the capability of the broader NAB Group will allow JBWere to build on its established momentum and deliver an even stronger experience for clients.” JBWere has performed well relative to peers in recent years, expanding its domestic and global service offering. JBWere has achieved industry leading results with significant growth in funds under advice, particularly in the areas of fixed income and global equities. Prior to joining ANZ, Mr Greiner was Greenway Capital Head of Retail and Chief Operating Officer. He has also held the role of Head of Financial Planning at Westpac and Head of Corporate Development at Rothschild Australia Asset Management.

Australian Business Executive Q1 2014

STATE BY STATE NSW Disaster Assistance For Nsw Communities Impacted By The November Storms & Tornadoes

Extra Assistance to Support Farmers

Minister for Justice, The Hon Michael Keenan MP and NSW Minister for Emergency Services Michael Gallacher MLC today announced disaster assistance to eight NSW communities impacted by severe weather and tornadoes during November 2013.

Minister Joyce said Farm Finance concessional loan funds would be reallocated to better reflect the number of farm businesses in each jurisdiction and to ensure they were available to farmers in areas of greatest need by reason of current seasonal conditions.

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ACT

Upgrades To Three South Side Shops Complete

Territory Retail Trade Continues To Rise:

Minister for Territory and Municipal Services Shane Rattenbury today officially unveiled the $1.22 million upgrade to the Farrer shops as part of a broader shopping centre upgrade program.

Treasurer David Tollner said in annual terms trend retail trade turnover in the Territory increased by 5.5 per cent in November 2013 compared to the same period in the previous year.

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TAS

VIC

New Record Tourism Figures:

Coalition To Allow Expunging Of Convictions For Historical Homosexual Offences:

A new record has been set for the Stateâ&#x20AC;&#x2122;s tourism sector. The Minister for Tourism, Scott Bacon, announced that more than one million visitors (1 007 000) had arrived in Tasmania on regular air and sea services for the 12 months ending September 2013.

People convicted of homosexual sex in Victoria are set to be able to have their convictions expunged, with Premier Denis Napthine today announcing that the Victorian Coalition Government will legislate to allow this to occur.

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AustralianBusinessExecutive.com.au

STATE BY STATE QLD $11 Million To Support Murray-Darling Basin Irrigation In Queensland:

QLD Economy Gaining Strength

The Australian Government will inject $11 million into Queensland’s Murray-Darling Basin communities to improve the efficiency of irrigation activities in the catchment.

The Newman Government’s measured plan to turn Queensland’s economy around after years of Labor neglect is continuing to deliver outcomes across the state, with a 13 per cent increase in housing finance commitments up to November last year.

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SA Capital works projects brought forward as part of Holden response :

Regional Funding For Alinta Green Energy Study:

Premier Jay Weatherill today announced that $34.75 million in capital works projects would be brought forward to maintain economic momentum as part of the State Government’s response to the closure of the Holden plant at Elizabeth in 2017.

A project investigating a green energy alternative for Port Augusta and Leigh Creek has been awarded more than $130,000 in the final grant under the State Government’s Enterprise Zone Fund – Upper Spencer Gulf and Outback.

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WA Reform And Restructure Puts Brakes On Debt: • Public borrowing to retreat $2.2b over forward estimates relative to 2013-14 Budget • Extended Fiscal Action Plan to save taxpayers $8.6b • Economic outlook broadly unchanged since 2013-14 Budget

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New Synergy First Step In Shielding Consumers From Electricity Price Hikes: • State Government delivers on promise to merge electricity utilities • Merger of old Synergy and Verve Energy completes first step in broader reforms of sector • State Government to overhaul systemic flaws in market to shield consumers

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Australian Business Executive Q1 2014

CITIES & REGIONS ADELAIDE Program For The World’s Premier Cycle Planning Conference, Velo-City Global Adelaide 2014, Has Been Announced.

Offered by the Cycling Promotion Fund in association with Velo-city Global, the awards celebrate the ideas and people that are driving the future of local, national and international cycling cultures.

While high profile speakers such as Janette Sadik-Khan, Mikael Colville-Anderson, Ethan Kent, and Lawrence Frank have already been announced, further announcements are expected shortly so the overall theme of ‘Celebration of Cycling’ will be addressed by speakers from almost every continent.

The award categories will be ‘first nations’ – awards that recognise Indigenous communities internationally and nationally for initiatives that connect country and culture through cycling, leadership, built environment and urban design, bike culture and behaviour change, cycling for the next generation and ‘pimp my bike - cycle chic’. Nominations open in early January.

A total of 195 abstracts have been accepted from presenters with a huge diversity of expertise and great stories to tell from more than 40 countries. They will cover topics such as national cycling strategies, getting more children cycling to school, engaging with the media, making space for bicycles on roads and cycle tourism, among others. These internationally recognised and respected experts will present to delegates from around the world on best practices for creating and sustaining bike-friendly cities, where riding is valued as part of daily transport. Road Safety Minister Michael O’Brien said he was looking forward to welcoming the presenters and delegates to Adelaide. “Hosting this conference is a real coup for Adelaide and we’ll also be offering a range of tours and workshops to delegates to show off our city. “The thought-provoking topics and the mix of presenters, all bringing their experience and knowledge from different parts of the world, will give us new ideas about how we can celebrate cycling and encourage people to make it part of their everyday travel,” Minister O’Brien said. Nominations for the Cycling Luminaries Awards will also be presented at Velo-city Global Adelaide 2014.

To coincide with Velo-city Global, Velo-fringe will be held from 16 May to 1 June. The concept is based on the famous Adelaide Fringe but all about bikes. Lord Mayor Stephen Yarwood said Velo-fringe would demonstrate that bike riding can be for everyone. “You don’t have to be a competitive cyclist, or have a particular kind of bike to get riding. Velo-fringe will celebrate what’s great about bike riding and show just how many different kinds of bike riders are out there. “With all the work that Council and State Government are doing to build better cycling infrastructure, the Tour Down Under coming up soon and with the sun shining, there’s never been a better time to give riding a go,” Stephen said. Individuals, community groups and businesses are encouraged to get creative with their events. The festival is open to anyone to register an event and regional towns can also register Velo-fringe events. Event registrations will open in January 2014. The Velo-fringe ‘design a logo’ competition is open until 20 December. To check out the conference program, register to attend and find out more about Velo-fringe, go to www.velo-city2014.com

AustralianBusinessExecutive.com.au

CITIES & REGIONS COFFS HARBOUR Council Adopts Commercial Approach A new business unit to be created by Coffs Harbour City Council is expected to generate millions of dollars for the city’s coffers.

The CityWorks division of Council has undertaken around $23m worth of contract work for other levels of government and neighbouring councils in recent years. The bulk of which was relocation of water and sewer mains as part of the Pacific Highway upgrade. By creating a CityWorks Business Unit in its own right, Council can now also tender for other projects in the private sector. “Council operates a number of businesses – Coffs Coast Holiday parks, Coffs Harbour Regional Airport, the Environmental Laboratory, Coffs Coast Conferences and its Telecommunications and New Technology unit,” said Steve McGrath, Council’s General Manager. “Council’s business units not only bring in much-needed extra income to the organisation – revenue that is used to benefit the whole community – but the need to be competitive in the commercial world drives further efficiencies in the way we deliver services as a whole. “In addition, the revenues generated are a vital component to help Council address its financial sustainability challenges and form an important part of our overall strategy to deliver better services to the community.” CityWorks can also provide local employment by undertaking projects that may otherwise be undertaken by contractors from outside the Coffs Harbour area. These often involve the use of substantial numbers of local contractors and casual staff. A good example is the upcoming multi-million dollar contract for the reconstruction of Cook Drive, North Boambee Valley Road and the Pacific Highway. To undertake work on the Pacific Highway for Roads and Maritime Services (RMS), contractors must be prequalified to the appropriate financial and technical level under the National

Contractor Prequalification Scheme. Only a handful of contractors on the North Coast are prequalified to the necessary level under this scheme, so if the works could not be undertaken by CityWorks, then the contract would have to go to a contractor from outside the region. As it is, a large portion of the contract value paid to CityWorks will be spent with local sub-contractors and suppliers. As a business unit, CityWorks will be held accountable for the way it operates in a similar way to a commercial business – this is expected to drive cost-efficiencies. Ultimately, this will mean more money is available to provide services for the community. The CityWorks Business Unit intends to build on the partnerships it has already formed with the Federal, State and Local Government sectors to win new contracts.

SYDNEY Light rail agreement ensures city transformation The City of Sydney and Transport for NSW have signed an agreement setting out the standards under which the new Sydney light rail project will be built through the LGA. Lord Mayor Clover Moore said the agreement was a major milestone for the project and will ensure Sydney has an efficient light rail system with world-class design. “This agreement sets out the binding conditions for the project that will transform the city centre and Surry Hills. The City had been working with design experts and with Transport for NSW to ensure our vision and design standards were delivered along the full route from Circular Quay to Moore Park. “The light rail project will return 40 per cent of George Street to pedestrians and make it a beautifully designed space for people, free of the noise of the hundreds of buses that now choke it every day.” “The NSW Government has made clear that Devonshire Street is

Australian Business Executive Q1 2014

CITIES & REGIONS its preferred route so we have worked to ensure the project will give residents and businesses the best possible outcome,” the Lord Mayor said

PERTH

The City is contributing $220 million towards the light rail project. Over the past ten years, the City has actively encouraged quality development and pursued design excellence in urban design. Since 2004 City projects have won more than 40 national and international design awards. The Agreement confirms that the Surry Hills route will be built in accordance with the same leading design standards used for all the City’s village main streets, including high-quality paving, furniture and trees. It also guarantees footpath upgrades, new plazas and pocket parks.

Green grants on offer for Environmental projects

The Development Agreement requires: •

A functioning light rail service, extending from Circular Quay to the University of NSW and to Prince of Wales Hospital in Randwick;

•

High design standards for paving, lighting, trees, smartpoles, street furniture and light rail stops;

•

Upgrading both footpaths along the length of Devonshire Street in Surry Hills, with high-quality concrete tile pavers;

•

High-quality new plazas and pocket parks where street closures are required adjoining Devonshire Street;

•

A new park for Surry Hills to be dedicated to the City as community lands on the current Olivia Gardens site;

•

Minimising above-ground infrastructure in Moore Park to maximise accessible open space;

•

A pedestrian and cycleway connection incorporated into a new bridge crossing Eastern Distributor to Moore Park;

•

Compliance with City of Sydney codes and standards to meet urban design requirements;

• The pedestrianisation of part of George Street from Bathurst Street to Hunter Street; •

Wire-free light rail for the pedestrianised area of George Street between the Town Hall and Wynyard stops;

•

Opportunities are explored to mitigate the loss of on-street parking without affecting open space;

•

Pedestrian and property access is maintained and all reasonably practicable steps are made to minimise construction impact; and

•

Potential for the future expansion of the light rail network to Walsh Bay/ Barangaroo and Green Square.

The second round of Environment Grants and Sponsorship for 2013/14 opens on 18 December, closing on 16 January 2014. The City of Perth offers grants and sponsorship up to $10,000 to support and encourage innovative projects that help make the city more sustainable. Lord Mayor Lisa Scaffidi said the City’s Environmental Grants and Sponsorship program helps many different organisations to introduce greener initiatives. “We are all more environmentally conscious but often making change requires financial assistance, this is where these grants are so helpful,” The City welcomes applications from community groups, non-government organisations, businesses and other organisations. To be eligible for a grant, applicants must demonstrate how they will produce positive environmental outcomes in the City of Perth local government area.

AustralianBusinessExecutive.com.au

SPECIAL REPORT: Uranium Mining In Australia Australia is in a unique place. As the world’s third largest producer of uranium, and owner of the world’s largest uranium deposit in the Olympic Dam, Australia will play a significant role in the future of energy demand. While China, Russia, India and other countries continue to develop nuclear technologies as a way of supplying baseload energy while addressing climate change, the lifting of the bans on uranium mining places us in an excellent position to meet the demands of these emerging economies. With the world’s energy needs growing rapidly, meeting this need presents many issues for how this demand will be met, but also many opportunities. In this Special Report, The Australian Business Executive has worked alongside some of the industry’s key players to discuss uranium issues and the role it will play in our nations future.

Australian Business Executive Q1 2014

COVER STORY

ON TRACK TO BE THE LEADING WORLD URANIUM PRODUCER Written by Dr Vanessa Guthrie, CEO, Toro Energy

It may not be long before Australia becomes one of the world’s leading uranium producers. For more than 30 years, we’ve known Australia has more economically recoverable uranium than any other nation but for a variety of reasons, most of them political rather than commercial, we’ve been unable to match production performance with the potential. Currently, Kazakhstan leads the way, followed by Canada, but I’m confident new Australian mines will come into production in the next decade to put us on top. Most of the political hurdles to the industry’s expansion have been removed and there’s a strong will to establish a regulatory regime which provides more efficient assessment of projects while ensuring safe and sustainable mining. Being the leading producer will be our rightful place. As well as having the biggest share of the world’s uranium endowment, Australia has played a positive role for more than half a century in encouraging the growth of a safe nuclear industry. Our company, the Western Australian based Toro Energy, is very confident about uranium’s future. In 2013, Toro completed Federal and Western Australian Government environmental approvals for Australia’s sixth uranium mine, and the first in the

west. Subject to the market, we are planning to be in production during 2016 from our Wiluna Project, about 580 km north of Kalgoorlie. During this year we’ve also added significantly to our resource base in the Northern Goldfields such that we can now contemplate at least 20 years of production from the deposits we hold. For the past two years, the Australian uranium mining industry has been affected by the suspension of nuclear power in Japan following the Fukushima tragedy. This has led to excess uranium supply, keeping prices below the level needed to entice investment in new mines. For the longer term however, uranium demand is projected to rise to outstrip supply. China has 30 reactors currently under construction, generating an anticipated 60 GWe of new nuclear power by 2020. The United Arab Emirates and Turkey are adopting nuclear as base load power options. There are firm plans for new reactors in Britain and the United States. India and Australia are putting in place bi-lateral safeguards arrangements to enable our uranium to be exported to that huge emerging electricity market. On the supply side, with new uranium mines having been deferred due to prices trading well below incentive levels for new production, it is inevitable that a shortfall will be realised. This is exacerbated

AustralianBusinessExecutive.com.au

by the end of the Russian-United States Highly Enriched Uranium agreement with secondary supplies beginning to dry up in the market. Current forecasts are for a shortfall of new supplies to occur from 2017 onwards. Toro’s strategy has been to position itself to be able to come into production as sentiment for uranium improves with an upswing in price as demand outstrips supply over the second half of the decade. As a demonstration of Toro’s continuing commitment to and confidence in the uranium industry, in November we completed the acquisition of the Lake Maitland uranium deposit, about 90 km south-east of our Centipede and Lake Way deposits, for which we already have government approval to mine. In addition to these three deposits, Toro has three others in the region which provide a total regional resource of 76.5 million pounds, allowing us to plan for long life mining in exploiting the proximities and similarities of all six deposits. One of them, Millipede, is immediately adjacent to Centipede and forms part of the greater Centipede deposit. The acquisition of Lake Maitland alone provides the following benefits: • The Lake Maitland resource includes high grade material which is expected to improve the overall blended head grade from our other deposits;

• Improvement in project economics; the increase in the Wiluna regional resource (both in tonnes and grade) has the potential to significantly improve the overall project economics, in particular through decreased operating costs particularly in the first 10 years of operation; and • Pre-existing strategic partner relationship; the existing Lake Maitland strategic partners, JAURD and IMEA, have an option to acquire a 35% interest in Lake Maitland and participate in the financing and development of that deposit. Accordingly, Toro will inherit the significant strategic and financial benefits of this preexisting relationship. During 2014, Toro will continue mining studies and economic modelling on our expanding regional resource base, providing a basis for a Definitive Feasibility Study to be completed during the year. We are also focused on project financing and the company has been encouraged by the level of interest from potential partners. The principal customer interest in our project has been from Asia in the form of investment and some off-take, with interest also from North America in product sales. Potential investors and customers realise that Toro is perfectly positioned as one of the few new producers in the world capable of providing supply when the market goes into shortfall.

Australian Business Executive Q1 2014

Toro plans to initiate the government assessment and approval process for mining the Lake Maitland and Millipede deposits early in 2014. It took almost four years to secure Federal and Western Australian government approvals for mining at Centipede and Lake Way. We are encouraged however, by the desire of government to ensure greater efficiency in project assessments and we are confident the assessment of mining at Lake Maitland and Millipede can be completed during 2016 enabling Toro to include them in its longer term mine development planning. As Western Australia’s first uranium mine, the State Government’s assessment process was understandably rigorous. During its final stages, Toro attended six meetings of the Board of the Environmental Protection Authority to discuss the key factors of groundwater, surface water, tailings and mine closure, flora and fauna, radiation and Aboriginal cultural heritage. During the assessment, the public had four opportunities to comment on Toro’s proposals. The main issue raised in public comment about the project was product transport, with concerns about the potential for an incident in the vicinity of Kalgoorlie leading to a spill of uranium. Toro initiated community forums and other consultation to address the issue and has also engaged with emergency services agencies. In the current phase of uranium mining in Australia, which began more than 30 years ago, there has not been a major transport incident. There is no room, however, for complacency and Toro will continue to consult with the community and government agencies as it develops its transport strategy and other plans in detail. A strong environmental focus of our mining at Wiluna will be tailings and rehabilitation management. Inpit tailings disposal below the ground surface in lined pits will represent world’s best practice for

this style of mining, allowing the project footprint to be returned as close as possible to the natural contours. Our modelling shows that this approach will ensure that the tailings remains secure in place for the foreseeable future. In developing our mining plans, Toro has undertaken extensive consultation with Traditional Owners. When the company first indicated its interest in mining at Wiluna in 2007, the Traditional Owners were naturally concerned to find out more about a product they had not encountered before. Toro has provided them with funds to seek their own advice about radiation in particular, and also flew them to operating mines south of Perth and in South Australia to see how mines of similar scale are managed. Toro has been very encouraged by the Traditional Owners’ endorsement of its approach to consultation. They released a public statement noting that ‘for the first time a mining company has come to talk to the mob about their concerns. As a result, the men who are responsible for that area have been able to sit down and talk about that country on behalf of all the Wiluna mob and be listened to and be involved in decisions about that country. That hasn’t happened before.’ This statement is an important indication of the level of trust and engagement between Toro and our community. There are other firsts ahead of the Australian uranium industry. It now has much stronger political support to add to the public support the industry has enjoyed in the past. Toro recognises and respects the views of the industry’s opponents, but the predictions they have been making for more than 30 years about the demise of the industry are as unlikely to be realised now as they ever were. This is an industry with a resilience which will continue to ensure that the future of the nuclear industry world wide is certainly bright.

AustralianBusinessExecutive.com.au In Australia, the concerns over the affordability of the changes needed to decarbonise the electricity sector represents the best argument in favour of nuclear.

Australia and the world nuclear energy situation By Ron Cameron

Governments throughout the world have to deal with the energy challenge – to find the correct equilibrium for a national energy system built around the concepts of energy security, low carbon and affordability, often depicted as the energy triangle Moving too far in any one direction has a direct effect on the others – countries with high security of supply from unmitigated coal do not achieve low carbon energy systems, while those who set high standards for low carbon emissions have affordability issues. Security of energy supply has two dimensions, the external or geopolitical dimension and the internal dimension that includes technical, financial and economic issues. Nuclear energy has some distinct advantages in strengthening the external dimension of energy supply security. This includes the facts that: it is a quasi-indigenous source of electricity, with a large part of its value sourced domestically; it has a low dependency on fuel supply (and even then the majority of the uranium comes from well-distributed and politically stable countries); and it is capable of providing large amounts of base-load power at stable costs with no vulnerability to changes in greenhouse gas policies. With regard to the internal dimension, it is a stable form of generation with good price stability and high levels of reliability. In terms of the mitigation of climate change, electricity systems produce around 40 per cent of all greenhouse gas emissions. The decarbonisation of the electricity system has been set as a major goal in many countries and is strongly advocated by international organisations.

For example, the International Energy Agency (IEA) has promoted a greenhouse gas reduction scenario (the 2DS scenario) that can maintain the rate of increase in global temperatures to 2°. While many other initiatives and policies will contribute to the decarbonisation required in the 2DS scenario, most of these are behind schedule and the necessary reductions in greenhouse gas emissions are not occurring at the rate required. Without significant action, the ‘window’ for 2DS is predicted to close by 2017. In a recent publication, the IEA note that “the global energy system is not getting cleaner, despite efforts to advance clean energy” and “the world’s governments are failing on almost every level to clean up their energy systems, and must intervene to support nuclear power”. The rush to introduce renewable energy sources, such as wind and solar, has significantly increased electricity costs and is causing concern in the number of the European countries who took the early initiative to promote renewable energy targets. Costs to industry in European countries have risen by more than 38 per cent since 2005, while the corresponding costs in the United States have decreased by four per cent. This significantly affects the competitiveness of European industry. In addition, the investments needed in infrastructure and support for low-carbon technologies has led to significant increases in household electricity prices in many countries. The four countries (Denmark, Germany, Spain and Italy) with the highest household prices are those with the most aggressive renewable energy targets. Australia sits just behind this leading group in terms of household prices of electricity with prices having increased by 70 per cent over the past four years.

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Nuclear today Nuclear power provides around 13 per cent of global electricity demand and around 20 per cent of that in OECD countries. Since 1971 it has avoided the commission of more than 80 billion tonnes (80 Gt) of carbon dioxide. Currently there are some 434 reactors. Between 1995 and 2013, the number of reactors remained virtually unchanged, but the installed capacity grew by more than nine per cent (341 to 371 GWe) due to upgrades and replacements. Its share of electricity generation varies from four to 78 per cent in OECD countries. Currently, there are 68 reactors under construction – the majority in China, but also significant construction in Russia, India and Korea. For the first time since the 1980s, construction is occurring in the US and construction is planned in the UK. However, the rate of construction is not sufficient to provide the level of greenhouse gas mitigation that is required under the 2DS scenario put forward by the IEA. This projects the need for 1100GWe of nuclear power by 2050 and would require a construction rate of around 16GWe per year, which would see nuclear energy providing around 20 per cent of global electricity. For a short period of time in 2005 to 2010, new construction starts were increasing at a rate compatible with the type of growth needed. However following the Fukushima accident, the growth stalled while many countries undertook reviews of their nuclear programs or conducted a series of stress tests of the reactors. Germany, Switzerland and Belgium all took decisions to phase-out their nuclear programs but many other countries reaffirmed their commitment to increasing nuclear power, such as the Canada, UK, Poland, the Czech Republic, Turkey, Vietnam, Russia, Korea, UAE and India. After a period of review, China has announced a resumption of its nuclear growth, with a projected increase of 40GW over the period to 2025.

Major challenges

Major challenges still lie ahead for nuclear power, including: 1. Public acceptance, which declined markedly after the Fukushima accident but is now recovering in many countries; 2. Institutional and legal frameworks to provide long-term stability and political commitment to the introduction of nuclear power; 3. Adherence to construction programs and budgets for the new generation of nuclear reactors – sufficient numbers of reactors must be built of the Generation III type to enable lessons to be learned from experience and costs to be reduced; 4. The reestablishment of industrial infrastructure and supply chains if the required rate of nuclear build is to proceed; 5. Radioactive waste disposal remains a concern for the public and demonstration of the ability to manage high-level waste is essential – good progress is being made in Finland, Sweden and France, with these three repositories expected to be operational by 2025; 6. Liberalised electricity markets do not provide for price certainty and discourage investors in high-capitalcost technology, such as nuclear – innovative funding methods are now being used in countries such as Finland, France and Turkey, either cooperative or build, own, operate (BOO) models; and 7. The development of skilled human resources and knowledge management systems.

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A good fit? Australia has many advantages in availability of fossil fuels and the opportunity for relatively efficient deployment of renewables, but it has also significant uranium resources and good geology for waste disposal. Despite government efforts, Australia remains a very large per capita emitter of CO2 â&#x20AC;&#x201C; and carbon capture and storage (CCS) is not proceeding at the rate expected. More serious efforts must be devoted to electricity system decarbonisation. Renewables offer significant potential, especially in meeting peak loads in warmer months but are intermittent and cause significant system costs for grid connection, reinforcement and back-up. These system costs increase over-proportionally with penetration level, in the absence of affordable storage. Some form of base-load is needed and the choice seems to be either coal with CCS or nuclear. Dealing with the GHG emissions of fossil fuels and the intermittency of renewables will lead to increasing prices to the consumer for electricity. On a basis of already relatively high electricity prices, the issue of affordability for households and competitiveness for industry becomes critical. Nuclear power offers low operational costs over long periods, but needs longerterm electricity price stability, bi-partisan support and better public acceptance to gain access to the market.

Dr Ron Cameron PSM FTSE is Head of the Nuclear Development Division of the OECD Nuclear Energy Agency, which provides advice to 30 member governments on policy and strategic issues related to all aspects of nuclear power development and the nuclear fuel cycle. Previously, he held senior roles at the Australian Nuclear Science and Technology Organisation. He has more than 30 yearsâ&#x20AC;&#x2122; experience in nuclear science and technology in the UK, Australia and with the International Atomic Energy Agency (IAEA), involving both power and research reactors. He has had extensive involvement in nuclear policy advice, international affairs and strategic planning.

In Australia, the concerns over the affordability of the changes needed to decarbonise the electricity sector represents the best argument in favour of nuclear. But many non-ecaonomic issues need to be addressed before this could become a reality. Republished courtesy of ATSE Focus Magazine

Australian Business Executive Q1 2014

Enhancing Australia’s prosperity through technological innovation The Australian Academy of Technological Sciences and Engineering (ATSE) ATSE is made up of some of Australia’s leading thinkers in technology and engineering. One of Australia’s four Learned Academies, it’s an eclectic group, drawn from academia, government, industry and research, with a single objective in mind – to apply technology in smart, strategic ways for our social, environmental and economic benefit. To achieve that goal, ATSE has formed a variety of expert, independent forums for discussion and action – platforms to move debate and public policy on issues concerning Australia’s future. These focus on energy, water, health, education, built environment and innovation – and the international collaboration necessary to ensure that Australia is abreast of world trends. It’s an open, transparent approach – one that government, industry and community leaders can trust for technology-led solutions to national and global challenges. Each year, the Australian Government recognises the importance of the work we do by awarding the Academy an establishment grant to help with: n Fostering research and scholarship in Australia’s technological sciences and engineering; n Providing and conducting administrative support, workshops, forums and similar events to enable the Academy and its Fellows to contribute on important national issues; n Managing the development and execution of our programs; and

n Supporting relationships with international communities.

The Australian Academy of Technological Sciences and Engineering (ATSE) 1/1 Bowen Crescent Melbourne Victoria 3004 Australia +613/ (03) 9864 0900 info@atse.org.au www.atse.org.au

AustralianBusinessExecutive.com.au By Dr Alan Finkel

Putting nuclear in the debate A current example of the environmental importance of nuclear power is perversely illustrated by the worsening carbon dioxide emissions from Japan and Germany as they mothball their nuclear plants post-Fukushima.

Imagine two worlds, 50 years from now.

supply to use low-emissions sources, then generate two or three times more so that we can use the additional electricity for transportation and heating.

In both, electricity supplies the vast majority of the energy needs. In both, technology has transformed lifestyles in ways we cannot even imagine today. But in one there are rolling blackouts; in the other the electricity supply is absolutely reliable.

That has to be the goal. The question is, how do we generate the massive amounts of clean electricity that we need to achieve it?

Might the utilisation of nuclear energy be the difference between these two worlds? Itâ&#x20AC;&#x2122;s a question we need to ask, but on the issue of nuclear energy Australia has its head in the sand. We have avoided debate on the nuclear power option and that has blinkered our vision. This is disappointing because, as a huge and reliable supplier of uranium to the worldâ&#x20AC;&#x2122;s reactors, Australia has a moral responsibility to address issues of how the uranium is used and disposed of after use. But beyond moral responsibility, there is also a pressing environmental reason for Australia and other countries to actively consider nuclear electricity generation. To substantially reduce global greenhouse gas emissions the world has to massively reduce its dependence on fossil fuels. The only way to do this is to convert our electricity

ATSE has previously argued that Australia needs a mix of new and existing technologies. If nuclear is not included as part of the mix it will be difficult to achieve the abundant, reliable supply of low-emissions electricity needed to meet our goals. In short, nuclear power is a transformational opportunity. A current example of the environmental importance of nuclear power is perversely illustrated by the worsening carbon dioxide emissions from Japan and Germany since they mothballed their nuclear plants post-Fukushima. Meanwhile, across the border from Germany, in France 78 per cent of the electricity comes from nuclear and 12 per cent from hydro. In France, the grid average emissions level due to electricity generation is a mere 85 grams per kilowatt-hour â&#x20AC;&#x201C; 10 times lower than the 850 grams per kilowatt-hour grid average emissions in Australia. These figures speak for themselves.

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What’s needed in Australia and elsewhere is a large scale, always-available source of electricity to supplement the anticipated large-scale deployment of intermittent solar and wind electricity. But nuclear is not the only solution. Perhaps coal with carbon capture and storage, or geothermal, will grow to the required scale. However, the rate at which these can be adopted at commercial scale is unknown and cannot be relied upon. Natural gas and hydroelectricity can also fill the need, but each of them has its problems. Natural gas from conventional, shale and coal-seam sources is abundant, modest in cost and flexible. But although it has a much better emissions profile than coal it does not come close to the near-zero emissions of solar, wind and nuclear. Hydroelectricity is ideal, but there isn’t enough of it and local environmental objections will prevent largescale new construction.

It’s not an impossible dream. Despite public perception to the contrary, the nuclear industry has an enviable safety record. Consider that there were no deaths from nuclear radiation at Fukushima, and the on-going risk of radiationlinked cancers from that event is near zero. Indeed, death rates from nuclear energy are so low that a case can be made to deploy nuclear electricity generation specifically to reduce death and disease. James Hansen, well-known climate change activist, acknowledges this argument. He and a colleague this year published a paper calculating that between 1971 and 2009, 1.8 million deaths were avoided by generating electricity at nuclear rather than fossil fuel power stations. Per terawatt hour produced, nuclear electricity causes less than one hundredth of the deaths caused by the coal industry, even in wealthy regions like the US and Europe. And then there are the financial challenges. Nuclear construction is ploughing ahead in China and India, but

“What’s needed in Australia and elsewhere is a large scale, always-available source of electricity to supplement the anticipated large-scale deployment of intermittent solar and wind electricity.” So one of the challenges is to show why nuclear electricity must be considered as part of the mix if confidence is high that some of these alternative sources will become practical at the needed scale. Another challenge is to identify solutions that do not require governments to accept too much political or actual risk. If we are ever to have a successful nuclear industry in Australia it is essential that it be extremely safe, with generators that produce little long-lived or weaponsgrade waste, with durable management of the waste that is produced, and protected transport of materials. To achieve the required level of safety we would need a vigorous regulatory system and the adoption of internationally proven, standardised reactor designs. The latter might even include small modular reactors of 300 MW or lower capacity. These have been used in ships and submarines for nearly 60 years with an excellent safety record.

has stalled in the US. Although 24 applications have been submitted to the Nuclear Regulatory Commission, most are held up, not specifically because of safety concerns, but for financial reasons. The Economist magazine identifies natural gas as the culprit. The gas price fell from $13 per million BTUs in 2008 to just $2 last year, although it has since risen back to near $4. This low price reflects the technology-driven growth of the shale gas industry. This low price reflects the technology-driven growth of the shale gas industry, which is transforming energy economics in the US. So for nuclear to compete on economic terms it has to be cost competitive against natural gas in those countries that have abundant gas reserves. In the absence of a substantial carbon tax or new ways to reduce the cost of nuclear, this is not currently the case. One of the challenges is to identify ways that nuclear capacity might be built and operated at lower cost,

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in a robust regulatory regime. One has to ask: is the most effective way to promote consideration of nuclear electricity to advocate for a carbon tax? In Australia today, the opposite is the case. Pre-election policies from both sides have rejected carbon taxes. From one side, the policy is to eliminate carbon pricing entirely. From the other side, the decision is to replace the carbon tax with an emissions trading scheme destined to reduce the permit price to a level where it will have no impact.

“The rejection of carbon pricing is a mistake.” The rejection of carbon pricing is a mistake. Price of fossil fuels makes a difference. In Japan, to reduce the massive burden of expensive fossil fuel imports the Japanese government and energy companies are already seeking to reopen some of the nuclear plants closed after the Fukushima disaster. In Australia, coal is so cheap that without a carbon tax it is difficult for alternatives to compete.

Republished courtesy of ATSE Focus Magazine But at the end of the day, the real challenge is societal. How do engineers deliver the level of comfort that society demands? For much of the population nuclear power represents the sword of Damocles waiting to strike us down. This is totally out of proportion to the real risks. Clearly the way forward is to advocate for a strongly regulated industry, with standard designs and standard operating procedures. But then how does one preserve the elements of competition that lead to better designs and lower costs? When evaluated by the lessons of history, nuclear energy may well turn out to be one of the most extraordinary and exciting opportunities mankind could ever have been bequeathed. Australia cannot afford to dismiss this opportunity without an open debate.

In the meantime, much of the world is living in an alternative reality. There is a common perception that solar and wind are already starting to make a dent in global carbon dioxide emissions. The average person would believe this is the case, but it is simply not true. From 2000 to 2009 total world solar and wind generation combined rose by 260 terawatt hours but total world electricity generation increased by 4,700 terawatt hours, mostly from coal and gas – the combined new solar and new wind generation was less than one tenth of the total increase. This is why global carbon dioxide emissions continue to rise by almost one per cent every year. Earlier this year, we passed 400 parts per million, a symbolic milestone. At 40 per cent above the historical average, this is a level that the planet has not seen for more than a million years. None of us know exactly what the impact of these elevated levels will be, but it is unlikely to be desirable. We need to do something. So far, solar and wind have failed to meet the growth in global electricity demand. If we go the extra mile and replace fossil fuels with electricity for transport, heating and industrial processes we need to generate the required electricity using large-scale, lowemissions solutions. Nuclear energy should be considered as a contributor.

Dr Alan Finkel AM FTSE is an engineer, entrepreneur and philanthropist and has been the Chancellor of Monash University since January 2008 and President of ATSE since January 2013.

For 20 years Dr Finkel ran Axon Instruments, an American company that made electronic instruments and was later CTO of Better Place Australia, a company that will provide clean energy to run Australia’s future fleet of electric cars. Dr Finkel established two magazines – Cosmos, which promotes science awareness, and G magazine, which promotes environmental sustainability. Dr Finkel currently serves as the Chairman of the Australian Centre of Excellence for All-Sky Astrophysics.

Australian Business Executive Q1 2014

Record proves uranium mining safe This article was first prepared as a feature article for Australasian Mine Safety Journal

Introduction The future of nuclear power, and the uranium mining industry that supports it, has been the subject of much debate recently. The nuclear power accident that occurred at the Fukushima plant in Japan in March 2011 caused many to question the legitimacy of nuclear power as part of our modern, global energy mix. But make no mistake – although the legacy of Fukushima has created particular challenges for the industry – nuclear power still has an important role to play as a source of clean, reliable energy. The consensus amongst respected forecasters is that nuclear power capacity will grow absolutely and will maintain its share of the world’s electricity supply. According to the International Atomic Energy Agency and the International Energy Agency, nuclear power capacity will continue to expand into the foreseeable future, by at least 20% by 2030. The source of the expansion will mainly be Asia and Eastern Europe. The forecasts acknowledge that there could be a decline in nuclear capacity in Western Europe, but this will not be enough to offset the growth in Asia. The long-term outlook is clear: nuclear is here to stay. And this is where there is an opportunity for uranium businesses - because supplying nuclear growth requires new sources of mined uranium.

Uranium mining in Australia The development of an Australian uranium mining industry has had a bumpy history, subject to the political ideologies of the governments of the day at the national level as well as the state and territory levels. However, developments over the past two years point to broader and growing support from political leaders across the county. The first of these most recent developments was the announcement by the New South Wales Government in April 2012 that it would overturn a ban on exploration for

uranium in that state (although the ban on mining still remains in place). This was followed by the then newly elected Newman Government announcing in October 2012 that it would permit uranium mining in Queensland. With these changes in state policy there is now a positive investment environment for uranium in a majority of Australian states. Only Victoria prohibits all uraniumrelated activities. Perhaps of greatest significance for the industry however, was the agreement in October 2012 between Australia’s then Prime Minister, Julia Gillard, and her Indian counterpart, Manmohan Singh, to negotiate a treaty for the export of Australian uranium to India. This decision elevated the issue of uranium mining in Australia to a strategic policy issue for the nation and Australia now appears on the path towards having a complete and fully articulated national uranium policy. These developments have all occurred since the Fukushima nuclear accident, a period which has presented many opportunities for critics of uranium to attack our industry. Despite this challenging environment, we have slowly seen a shift towards greater political support for our industry, a situation which would not have been possible without a strong commitment by industry to continuous improvement in its operations and management practices – a commitment which builds on an existing record of solid performance. In fact, today’s uranium mines have a very good operational record of responsible environmental management and conservative radiation protection practices, in order to ensure the safety of their workers and the communities in which they operate. Let’s take a look at what the record shows:

Environmental impact of the industry Australian uranium projects have a track record of meeting the highest standards of environmental assessment and approval under mainstream project assessment and approval processes.

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Since 2008, four uranium projects have been approved under State and Federal environmental laws: • The Beverley mine expansion, located in South Australia. Federal Environment Minister Garrett approved the expansion after a ‘comprehensive, scientifically robust and transparent process’ that showed the expansion ‘would have no impact on water quality within the Great Artesian Basin’ and would operate ‘as world’s best practice’ (August 2008). • The Four Mile Uranium Mine, located in South Australia. Federal Environment Minister Garrett approved this mine and was ‘certain this operation poses no credible threat to the environment’ (July 2009). • The expansion of Olympic Dam, located in South Australia. Federal Environment Minister Burke approved the expansion with conditions that ‘ensure the proposal meets world-best practice environmental standards ...protection of the natural environment’ (October 2011). • The Wiluna uranium mine, located in Western Australia (WA). Federal Environment Minister Burke approved the project with conditions that would ensure it ‘can go ahead without unacceptable impacts on the environment’ (April 2013). Not only do Australia’s modern uranium mines have a history of meeting tough approval processes, they also have a good record of environmental performance once they are up and running.

The proof is this: there is no track record of regulatory, let alone punitive, intervention by governments or their authorities against the industry because of incidents leading to observable, recordable or lasting environmental impact. But there is a track record of uranium mining operations that authorities recognise as consistent with, or better than, the industry’s environmental obligations. Of course there are environmental incidents from time to time, as in any mining operation. However few have been serious enough to attract regulatory scrutiny or action. Take the Ranger uranium mine in the Northern Territory as a case in point. The environmental performance of this mine is scrutinised by the Office of the Supervising Scientist, a division of the Commonwealth environment department. In its 2010/2011 annual report, the Supervising Scientist reported that: ‘During the year there were no reported incidents that resulted in any environmental impact off the immediate minesite. The extensive monitoring and research programs of the Supervising Scientist Division (SSD) confirm that the environment has remained protected through the period.’ The Supervising Scientist has reported on Ranger’s performance in these terms for the past 30 years. There have been incidents but there is no track record of punitive intervention.

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In South Australia, where there is a long history of uranium mining, companies report publicly on a variety of bases to regulatory authorities. Reports are scrutinised and, if necessary, action is taken by the authorities. There are many reports but little regulatory intervention required. Why? Because the operational performance of the uranium industry is a good one.

Radiation protection of workers and the public Uranium mining often receives criticism as a dangerous industry because of fear or misunderstanding about the radiation associated with it. The truth is, radiation is a well understood, naturally occurring phenomenon that is managed well by the industry. The type of radiation with which uranium exploration and production is associated is radiation emitted by naturallyoccurring elements, although exploration, mining and processing change the form and location of those elements and may bring them closer to human beings. The uranium industry recognises that radiation can be hazardous and must be managed safely. The industry has well-tried systems and processes for ensuring emissions from mines and radiation doses for workers in mines and processing plants are kept to very low levels, consistently well below the limits set by federal and state regulatory agencies. Radiation associated with uranium operations is generally low-level radiation which uranium companies manage as part of their daily operations. Uranium companies manage the ways in which workers, the public and the environment are exposed to radiation and keep doses well below regulated limits. The uranium industry has thoroughly-developed bestpractice systems and processes for minimising radiation hazard and keeping risk as low as reasonably achievable. The systems the industry uses and the practices they embody are based on the globally-agreed fundamental science of radiation and radiation protection. A long-established collection of international organisations interpret the science of radiation and health physics to produce globally-agreed standards, policies and guidelines for the protection of people and the environment from the potential effects of radiation. Supervising Scientist Annual Report 2010/2011, page xi

This expert network includes the United Nations Scientific Committee on the Effects of Atomic Radiation (UNSCEAR), which is the world authority on radiation and its effects on human beings. Distinguished scientists comprise the International Commission on Radiological Protection (ICRP), the world’s leading radiation protection body. The ICRP takes UNSCEAR’s work into account when making recommendations and providing guidance on all aspects of protection against ionising radiation. The ICRP says its main objective is to provide an “appropriate standard of protection . . . . without unduly limiting beneficial practices giving rise to radiation exposure”.

Radiation protection in practice in Australia In Australia, the Australian Radiation Protection and Nuclear Safety Agency (ARPANSA) establishes the standards for radiation protection of workers and the public. ARPANSA’s dose limits, which are internationally developed and applied limits, for ionizing radiation are set out in the table below:

Occupational

Public

Effective dose 20 millisieverts per year, averaged over a period of 5 consecutive calendar years

1 millisievert in a year

Companies which operate uranium facilities are legally accountable for ensuring radiation risk is managed to ensure workers, the public and the environment are protected from harm. Again, we can look at the operational performance of Australia’s uranium mines for evidence of the industry’s record of radiation protection performance. Their results are all reported publicly through the relevant regulatory authorities.

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Olympic Dam BHP Billiton’s Annual Radiation Protection Report for 2010/11 of its Olympic Dam operations reports that the average dose for its underground mine workers during the year was 3 millisieverts; the maximum was 7 millisieverts. It also reports a consistent reduction of dose over the past five years. Public radiation exposure for the Roxby Downs township and the Olympic Dam village (which is closer to the mine) was estimated at 0.009 millisieverts for the year and 0.006 millisieverts for the year respectively. The dose contributed by the operation was indistinguishable from the background radiation; that is, it was below the limit of detection.

The result of the radiation protection measures taken by the uranium industry is that doses to workers average less than a quarter of the occupational limit and public doses are well below a tenth of the public dose limit. Uranium exploration, mining, production and transport give rise to very low levels of exposure which have no proved damaging effect on human health. Recording uranium workers’ radiation dose histories

Ranger

The uranium industry has been closely involved with the establishment of a national database to record career radiation dose histories of all uranium mine workers, no matter where they work or live. The National Radiation Dose Register allows uranium workers to check their own radiation dose histories as they move from mine to mine or between jurisdictions. The register will also permit the production of trend reports on recorded worker doses over time.

Energy Resources of Australia Ltd (ERA), operator of the Ranger uranium mine, reported in its annual report for 2010/2011 that the radiation exposure of its uranium workers is well below the legislated maximums – less than a quarter - and is declining.

The register has been operating since July 2012 and holds career dose data for around 24,000 people who have worked in the uranium industry. Mine operators collect the data and provide it to ARPANSA, which operates the register, and holds the data for workers to access privately.

The effective dose for members of the public is consistently one-twentieth to one-tenth of the maximum permitted dose.

As the uranium mining industry grows in Australia, the uranium industry will urge governments of jurisdictions where uranium mining is a new industry to make the necessary legislative provisions to allow any mines that are established in their jurisdictions to be exempted from privacy restrictions that would prevent the mining companies contributing their employees’ dose data to the register.

Beverley Heathgate Resources’ 2010 annual reporting against its Beverley uranium mine Radiation Management Plan reports that: Doses to employees and contractors at the Beverley Uranium Mine remained low during the year. The average dose of 0.28 mSv was less than the annual effective dose limit of 1 mSv to members of the public as stipulated in the South Australian Radiation Protection and Control (Ionising Radiation) Regulations 2000. The maximum dose for the year was 2.69 mSv, also well below the employee dose limits of 20 mSv/yr averaged over 5 years or 50 mSv/yr in any one year.

Currently limited to uranium mining, the coverage of the dose register might be extended to other industries in which radiation exposure of workers is a consideration in occupational health and safety. Monitoring of worker dose levels is an essential part of ensuring that uranium miners remain safe and healthy. This is central in the continuing efforts of the uranium industry to operate to the highest standard of environment, community and employee safety.

http://www.epa.sa.gov.au/xstd_files/Radiation/Report/beverley_2010.pdf

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There is little radiation risk when UOC is packed for transport and it is safe for personnel to work near the containers during packing and loading. In Australia, the Australian Safeguards and NonProliferation Office (ASNO) licenses each shipment of uranium oxide to depart the mine site and for export. Uranium is transported by road or rail following the normal routes for commercial transport.

Transport safety The product that is produced at a mine ready for export is called uranium oxide concentrate (UOC); it is also commonly known as ‘yellowcake’. An international system of practices and protocols exists to regulate the packing and moving of UOC, which performs the dual function of ensuring the safe and secure transport of uranium product. Before it can be transported off the mine site, the UOC must be sealed in 200-litre steel drums in accordance with requirements set by the International Atomic Energy Agency. The drums are then stowed securely into shipping containers, secured to international standards using a webbed Kevlar-based strapping system. This effectively means that the UOC is ‘double encapsulated’ - an inner sealed container (drum) contained within an outer shipping container. This practice minimises the likelihood of a spill as the result of an incident. The drums of UOC are tightly sealed and monitored prior to container loading. The accidental dispersal of radioactive material via dust or mud on equipment leaving the site is prevented because anything leaving the mine site is washed, then checked. Only after passing a contamination clearance process, and formally recorded as clean, may it leave the mine site. Each drum is also registered and recorded before the shipping container is sealed. The containers are locked and are not opened, unless for official inspections, until they reach their overseas destination, thus ensuring the secure movement of the product.

Since the early 1980s, over 6800 containers of uranium from the Ranger uranium mine in the Northern Territory, over 3600 from Olympic Dam in South Australia and 583 from the Beverley uranium mine, also in South Australia, have been transported to ports at Adelaide or Darwin with no incidents involving a spillage of uranium oxide over that period. Uranium mine operators have an exemplary record in the area of radiation protection. The industry knows it is only as good as its poorest performer and must constantly look to improve the way it operates in order to maintain its social licence.

Key facts: Australia has the largest endowment of uranium – some 31% of the world’s resource. Despite its large endowment, Australia supplies around one eighth (approximately 11%) of world demand for uranium each year. Australia has 4 operating uranium mines: (Olympic Dam, SA; Ranger, NT; Beverley, SA; Honeymoon, SA) Export revenues in 2017-18 are forecast to be nearly $A1 billion ($A910 m)

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HOW to conduct Australia’s nuclear conversation By Michael Angwin CEO, Australian Uranium Association Originally written for ATSE’s Nuclear Energy conference

In 2007, I was invited by the Central Lands Council to debate one of the Australian Conservation Foundation’s anti-nuclear executives. For a week, we travelled the Tanami Road, north-west of Alice Springs, debating nuclear issues in a couple of remote Aboriginal communities. I’m pretty sure I lost the debates. But I learned a lot, not the least because my knowledge of remote Aboriginal communities was about zero until then. I couldn’t avoid learning something. One of the things I noticed was that electricity in one community was provided by a combination of solar power – during the day – and diesel, at night. That made a lot of sense for a community not connected to an electricity grid and not likely to be any time soon. And it helped me learn a real lesson about electricity supply: the world needs a variety of sources of electricity supply to meet a variety of needs. In particular, my Tanami Road trip made me wary of claims popular in the nuclear industry at the time that nuclear power could supply all the world’s electricity needs. It made me equally wary of claims that renewables could supply all the world’s electricity.

Technically, I suppose, both claims have some substance, if you ignore economics and practical politics. Practically, however, no one fuel for electricity will capture the market. Nuclear power is best at providing continuous, reliable electricity for large populations. Solar power is good at generating electricity when it is needed most – during the day and on hot sunny days when electricity demand is at its peak driven by air-conditioners. All countries will require most sources of electricity and it is a mistake to back one source over all others. So, the first step in conducting Australia’s nuclear conversation is to acknowledge that nuclear power is not the answer to everything. A more credible position is to be a ‘portfolio’ advocate as well as a nuclear advocate. Step 2: Understand that energy policy is a community politics issue involving complex risk perception questions. It is not just a technical or economic issue. Information about energy economics and technologies is essential to the energy conversation. But information is not likely to remove the confusion and complexity that most people encounter when they observe the debate in action. If information alone is your offering, no one is likely to take much of it.

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Even more necessary than being economically and technically solid is to understand why people fear the nuclear fuel cycle. People do fear radiation. There is no getting around that. They fear it most when they are unfamiliar with it, when it is outside their control and when a source of radiation is imposed on them. People are very susceptible to having their fears stoked by the clever PR people from anti-nuclear NGOs who know exactly the impact of a mushroom cloud superimposed on the image of a small boy. Nuclear experts know that radiation risks associated with nuclear power are very small; but that is little comfort for the targets of the NGO spin doctors. However, it is also likely that an audience that responds fearfully to the nuclear image touted by NGO spin doctors is asking to be understood. It is not necessarily closed to the nuclear argument. Creating understanding requires both political and local action. So step 3 is to build a political constituency by patient, long term engagement across the political board. Let’s face it, nuclear power has insufficient political support. It has supporters along the political spectrum; but not enough of them.

While nuclear’s political position continues to be relatively weak, it will be exposed to short term political expediency. This is code for: politicians will disavow nuclear power if they have to. There is no point in complaining about that. And every reason to do something about it; like engage and keep engaging for as long as it takes. The uranium industry has had the great good fortune to have had the support of all Australia’s recent Prime Ministers: Howard, Rudd and Gillard. Political leadership of that kind changes the way Australians see an issue. That is as true for uranium mining in the last decade as it was for the way Australians responded to economic reform in the 1980s under the leadership of Hawke and Keating. And it could be true of nuclear power too. Step 4 is for nuclear advocates to engage with Australians directly, both broadly and locally; and systematically. Nuclear advocacy in Australia has mainly been carried out by knowledgeable and informed individuals, science-based organisations and, to some extent, the uranium industry. It has been opportunistic and enthusiastic. If nuclear advocates wish to build on that basis, a more strategic and organised approach will be necessary. It still needs to be discovered.

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The drivers underpinning demand for Australia’s uranium are as strong as ever This op-ed was first produced for Australian Resources and Investment magazine By Amanda Walker, Communication Manager, Australian Uranium Association

In April 2013, Toro Energy’s Wiluna uranium project received federal environmental approval. The decision brings Western Australia one step closer to having its first uranium mine and, should the project go ahead, it will be Australia’s sixth uranium mine. The approval of the Wiluna project is significant for the industry, as it opens up a new jurisdiction in Australia to the opportunity of uranium mining. Whilst uranium production has been carried out in the Northern Territory and South Australia for over 30 years, this is the first time since the 1980s that another state or territory looks set to have an operating uranium mine in the modern era of environmental regulation. Western Australia has substantial known deposits of uranium of around 211,000 tonnes, with significant exploration activity underway to find more. The investment by Cameco Corporation, one of the world’s largest uranium producers, of $430 million to purchase the Yeelirrie uranium deposit in 2012 demonstrates the long-term confidence that business has in the uranium sector in WA. But some in the anti-nuclear lobby have questioned the logic of persevering with plans to mine uranium. After all, they claim, the nuclear power industry (uranium’s main customer) is in decline and has been ever since the Fukushima disaster. Germany’s decision to move away from nuclear power and the uncertainty surrounding the possibility of reactor restarts in Japan is proof of this argument they claim, and even BHP Billiton’s decision to defer its Olympic Dam expansion is construed as further evidence of an industry in the doldrums. But is this pessimistic view true? Are companies misguided in their commitments to push forward with developing new mines if the future of the global nuclear industry is so uncertain? The truth is - the outlook for the nuclear industry is not that uncertain. In fact, respected international organisations such as the International Energy Agency (IEA) and the OECD Nuclear Energy Agency (NEA) have been consistent in their forecasts that, contrary to the doom and gloom

predicted by some, the nuclear industry will continue to grow. The picture is one which demonstrates that nuclear power is, and will continue to be, a vital component of baseload power around the world. It is a picture of consistent and modest expansion, where nuclear power will expand by at least 20 per cent by 2030.

Demand Although Fukushima has had a prolonged, negative effect on the industry, the fundamental drivers of demand for nuclear power have not changed. The future of the global nuclear industry will continue to be tied to global demand for electricity (which will only continue to grow), the pursuit of energy security and international efforts to reduce the effects of climate change. Nuclear energy’s reliability as a source of clean (i.e. low carbon emissions), base-load power makes it an appealing power source, particularly for countries with rapidly growing energy demand. It is in this context that Asia is set to become the biggest source of growth in nuclear capacity over the coming decades. China will undeniably be at the forefront of this growth - it has 28 reactors currently under construction, in addition to the 17 already operational. And it is easy to see why China is looking for clean, reliable energy solutions: its demand for energy use is expected to rise by 60% by 2035. India will also play an important role in the expansion of nuclear power in the longer term; the country aims to supply 25% of electricity from nuclear power by 2050. Because India has remained outside the Nuclear Non-Proliferation Treaty, it was for many years largely excluded from trade in nuclear plant or materials. Following a decision by the Nuclear Suppliers’ Group in September 2008 to permit trade with India, foreign technology and fuel are now expected

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to boost India’s nuclear power plans considerably, as supplier countries like Australia move in to establish trade agreements that provide the same protection as the NPT. Yet China and India aren’t the only countries where demand for uranium is expected to grow. Elsewhere in Asia, South Korea remains a strong market with a further 8 reactors planned, and Vietnam is an emerging new market. Eastern Europe and the Middle East will be other important sources of growth, with substantial expansion plans in Russia and the Ukraine, and new build programs in the UAE, Jordan and Turkey. In the mature markets of Europe and the US, new reactors are being approved and constructed to replace older technology fleet.

Supply While all the signs indicate that demand for uranium will see significant growth in the years ahead, what is uncertain is how the market will supply that demand. The negative effects of Fukushima on the uranium price have created a difficult investment environment for the entire uranium sector. Coupled with the overhang in nuclear fuel inventories in Japan, low prices have forced many companies to defer planned expansions or new developments. In Australia, we have seen this reflected in BHP Billiton’s decision to defer the expansion of Olympic Dam and Cameco’s decision to put on hold the development of its Kintyre deposit until prices are more favourable. Most analysts consider that an incentive price of around US$70 to $80 per pound is needed for new projects to be economically viable. Another factor contributing to supply uncertainty is the end of the secondary market supply coming from the Megatons to Megawatts program at the end of 2013. This program was established between Russia and the US in 1992 and has seen Russian weapons-grade uranium downblended for use in US nuclear power plants. The conclusion of this agreement will see the removal of some 24 million pounds of relatively low-cost secondary annual uranium supply from the market; or approximately 15% of world reactor requirements. To cover the supply gap arising from the end of Megatons to Megawatts, there will likely be an increased call on primary mine production. Coupled with the mine expansion and production deferrals we have seen over the past two years, this could lead to a much tighter uranium market in the near term.

The figures indicate that new mines aren’t coming online as fast as new reactors are – at some point in the future this imbalance will trigger a recovery in prices, paving the way for new mine developments to achieve the incentive prices expected. And this is where the optimism – and opportunity – for Australia’s new uranium mines lie.

Outlook for Australia Australia’s uranium already earns a respectable export income of around $700 million annually, at about the same level as aircraft and aviation component exports; and some dairy exports, like cheese. This income is delivered by Australia’s existing uranium production, which is already fully committed through long term sales contracts with overseas nuclear utilities. Australia’s Bureau of Resources and Energy Economics (BREE) forecasts that global consumption of uranium is projected to increase at an annual rate of 5 per cent to total around 100,000 tonnes in 2018. In order to meet this growing demand for uranium and take advantage of the opportunities presented, Australia needs to encourage new uranium mines to be developed. Western Australia and Queensland have committed to this path, closely followed by New South Wales being opened up for exploration. With Australia’s large endowment of uranium resources, the country is ideally placed to meet this growing demand, if we play our cards right. Despite the dominant scale of Australia’s uranium resource (31 per cent of the world’s uranium resource recoverable at less than US$130/ kilogram – by far the largest in the world), Australia supplies a disproportionately small share, approximately 11 per cent of the annual world requirement for mined uranium. Australia is regarded positively as a source of reliable supply of uranium, given its stable systems of government and its relatively low levels of perceived sovereign risk. Clearly, opportunities exist to improve Australia’s competitive position and, consequently, its share of world uranium production. Globally, the demand will be there for Australia’s uranium well in to the future. The question is – can we step up and make the most of this opportunity? If Toro’s experience is anything to go by, then we are cautiously on our way.

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Uranium in Queensland By Michael Roche Chief Executive Queensland Resources Council

The move from uranium exploration to uranium mining under the Newman State Government represents a huge opportunity for Queensland. The significant potential of a uranium mining industry is well known but it is the associated boost to the regional economies of north and north-west Queensland where enduring value lies, particularly for indigenous communities in those parts of the state. A number of QRC member companies have well advanced plans to develop the state’s significant uranium resources, notably in the Carpentaria and North West Mineral Province centred on Mount Isa. Based on projected prices and exchange rates, Queensland’s known uranium resources are worth tens of billions of dollars. That translates into hundreds of millions in potential new revenue for Queensland via royalties paid to the state government. Modern uranium mining has been around since the 1970s in South Australia, the Northern Territory and in Queensland at Mary Kathleen, where production ceased in 1982.

The industry’s operations in Australia are transparent, accessible and consistent with a safety regime – both for workers and the public – that is world class, risk averse and improving constantly. The industry works closely with stakeholders, especially Traditional Owners. It conducts intensive, patient and honest conversations with them about how they’d like to see the land after a fully-funded rehabilitation process. Australia’s uranium exports are used for peaceful purposes only and Australia plays a significant global role in nuclear safety, security and safeguards. There is no question about demand for nuclear energy and uranium continuing to grow. Emerging nations in particular need reliable electricity supply to meet their citizens’ aspirations, and large-scale baseload generating capacity is currently available using fossil fuels, hydroelectricity and nuclear energy. In a carbon-conscious world, nations are also being encouraged to reduce greenhouse gas

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emissions, which uranium-fuelled nuclear energy has been delivering for more than 50 years. The state government’s approach to the resumption of uranium mining in Queensland has been cautious, consultative and detailed for which it deserves full credit. The recent release of the government’s action plan for a staged resumption of uranium mining is clear evidence of a best practice framework, benefitting from the experiences of South Australia, the Northern Territory, and Western Australia. It is also impressive that the government expects to have the framework in place by mid-July 2014. Companies like QRC member Areva Resources are voting with their feet through a $5 million exploration program in the Carpentaria region of North West Queensland. Developing Queensland’s uranium deposits is about creating new jobs, supporting new businesses and helping to consolidate the State’s reputation as a leading mining investment destination.

As Mount Isa Mines moves towards its 90th year of continuous production, it is pleasing to see the exploration and development ball being picked up by new players and new industries. The North West is highly mineralised but lightly explored. The reversal of the previous government’s uranium ban has revived exploration interest in the region and with an uptake in exploration, up goes the prospects of finding a successor to Mount Isa. The resources sector is a major contributor to the North West Queensland economy with annual spending of $2.5 billion in 2011-12. Keeping that level of investment on track is the challenge for industry and governments. Queensland needs to ensure a strong pipeline of projects for the North West and that will require a clear focus on addressing multiple supply and cost disadvantages including energy, rail services, water security, tax imposts and regulatory hurdles.

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New Brine Concentrator significantly improves water management capability at Ranger uranium

ERA’s new Brine Concentrator Facility in Jabiru, Northern Territory.

Energy Resources of Australia Ltd (ERA) has unveiled a new $220 million Brine Concentrator facility, bringing world’s best practice water management and treatment technology to the Ranger uranium mine in Jabiru. The Brine Concentrator uses internationally proven technology to treat industrial process waters to extremely high standards through a process of heating and evaporative cooling. It has the capacity to produce 1.83 billion litres of clean distilled water each year. The Brine Concentrator will be used to manage and reduce ERA’s process water inventories, and will play an integral part in progressive rehabilitation activities at Ranger. Northern Territory Chief Minister Adam Giles and the Minister for Mines and Energy, Willem Westra van Holthe, attended the opening ceremony at the Ranger mine site. Mr Giles said “ERA had continued to demonstrate the highest commitment to environmental protection”. “The construction and successful commissioning of the $220 million Brine Concentrator is further evidence of ERA’s focus on meeting its commitments to protect the environment, and progressively rehabilitate the Ranger mine site,” Mr Giles said. ERA Chief Executive Rob Atkinson said the Brine Concentrator was the central piece of a detailed, long-term water management strategy. Mr Atkinson said, “We have listened to the concerns of the Mirarr and other key stakeholders and the

opening of the Brine Concentrator marks a very significant step forward in demonstrating our ability to treat large quantities of water effectively.” The Brine Concentrator has been manufactured and supplied by HPD, a subsidiary of Veolia Water Solutions and Technologies and Hatch Pty Ltd was the EPCM contractor. Downer EDI Limited has undertaken the construction phase of the project. Mr Atkinson said each of these businesses has performed very well to date and they have taken on this project as if they were members of the ERA team. The Brine Concentrator is one of a number of key strategic initiatives progressing on schedule and within budget at Ranger, including the Ranger 3 Deeps exploration decline, feasibility studies into underground mining, and the progressive rehabilitation and backfilling of the recently completed Pit 3 open cut mine. About Energy Resources of Australia Ltd (ERA) Energy Resources of Australia Ltd is one of the nation’s largest uranium producers and Australia’s longest continually operating uranium mine. ERA has an excellent track record of reliably supplying customers. Uranium has been mined at Ranger for three decades. Ranger mine is one of only three mines in the world to produce in excess of 100,000 tonnes of uranium oxide. ERA’s Ranger mine is located eight kilometres east of Jabiru and 260 kilometres east of Darwin, located in Australia’s Northern Territory.

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Revisting Olympic DAM The Olympic Dam came into the ownership of BHP after their buyout of WMC Resources in 2005 and is the third largest uranium mine in the world. But what investors often overlook is that its also the world’s largest single uranium resource. While its major expansion has been delayed due to financial costs, its expected to pick-up again in the coming years. Here’s a recap of the recent history surrounding Australia’s most significant uranium mine. In October of 2011, the then South Australian Premier Mike Rann signed off on the Olympic Dam project. State royalties were estimated at $350 million per year and was expected to create over 25,000 jobs. It would have been the largest open cut mine in the world.

It was expected it would take BHP two decades to recoup its capital investment and BHP was given 12 months to decide whether to go through with the project. By May 2012, Olympic Dam construction was well underway even though BHP had yet to officially approve the project. August 2012 - BHP shelves the Olympic Dam project and no timeframe is put on when the project will restart. Rising prices of energy like diesel make the capex required to progress the Olympic Dam unfeasible. In the same month, BHP posts a 35% drop in earnings.

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It was to be a $30 billion expansion. Original plans would have made it the world’s largest open pit copper and uranium mine it’s size, larger than the city of Adelaide. Although the mine site continues to produce, the uranium is only a small portion of the mines revenue in comparison to other assets including copper, where most is exported to China. With uranium prices expected to remain low for the next 18 months BHP has little reason to look into the project again. There’s much speculation about what the future holds. Some say the country’s mining boom is over. We prefer to believe that we have years of prosperity ahead, with uranium to come to the forefront of resource sales in the foreseeable future.

BHP has asked the SA Government to extend its indenture agreement for the proposed expansion until October 2016 indicating that the Olympic Dam project will be revisited. The South Australian government, dependent on them for income and job creation, have granted this extension. Despite the deferment of the project, the Premier of South Australia, Jay Weatherill has stated he still believes preparation and engineering is continuing to take place on the site. And with the Coalition government’s recent election, the federal government are also showing a keen interest in advancing the project. Especially with Holden exiting the state in 2017.

OlYMPIC DAM - Image courtesy of BHP BILITON

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SOUTH AUSTRALIA

FOCAL POINT FOR URANIUM

by By Dr Ted Tyne, Executive Director Mineral Resources, South Australia Department for Manufacturing, Innovation, Trade, Resources and Energy

South Australia remains the focal point for Australia’s uranium mining industry with extensive uranium resources, mining expertise and responsible stewardship. The strength of South Australia’s uranium sector is highlighted by this statistical snapshot: • South Australia hosts almost 30% of the world’s reasonably assured resources of uranium. • South Australia holds 80 % of Australian economic demonstrated uranium resource . • South Australia hosts three of Australia’s four active uranium mines – Olympic Dam, Beverley and Honeymoon. • In the 2012 calendar year, South Australian mines produced 4267 tonnes of uranium – accounting for more than half of the nation’s uranium production. The recent approval granted for the Four Mile uranium mine by State and Federal regulatory authorities in September can only further enhance South Australia’s leadership position. South Australia hosts one of Australia’s two approved ports for the export of uranium, providing a smooth path to market.

South Australian uranium mines are a significant contributor to world production through long term contracts to supply uranium for generating electricity in civil nuclear reactors in the United Kingdom, France, Sweden, Finland, Belgium, Japan, South Korea, Taiwan, Canada, United States and Spain. The Australian regulatory framework for the uranium industry is widely recognised as world’s best practice. Industry has consistently met national and international codes of practice to ensure the safety and protection of our environment. South Australia has established its social licence to operate as a result of its 25 year history in uranium mining, with proven regulation that ensures the safe handling and transport of uranium. Regulators are constantly working to deliver best practice regulation, environmental controls and safeguards that build a social licence to operate and foster a socially responsible industry. Export licences and controls are granted under strict Commonwealth legislation ensuring Australian uranium is solely used for generating electricity.

Geoscience Australia; Bureau of Resources and Energy Economics Australia’s Mineral Resource Assessment 2013 ISSN 2202-770X

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Wellfield at Beverley in-situ recovery uranium mine, South Australia. Photo courtesy of Heathgate Resources Pty Ltd.

South Australian advantage Access to precompetitive geoscience knowledge is an essential resource that supports our explorers. The South Australian Government actively supports exploration for uranium in South Australia. . South Australia’s world-leading PACE 2020 initiative has established programs across the minerals resources value chain, from discovery to mine development, and has formed effective partnerships to leverage opportunities for resource investment. PACE 2020 directly contributed to the discovery of the Four Mile uranium deposit, through the PACE collaborative drilling program. Four Mile is one of the most significant low-cost uranium deposits found in the world during the past 25 years. A major geophysical survey was recently completed in the Woomera Prohibited Area to bring forward discoveries in this highly prospective region of the Gawler Craton. Initiated by South Australia’s Geological Survey in partnership with Geoscience Australia, the survey has collected data from more than 34,000 gravity stations within and adjacent to the Woomera Prohibited Area.

The processing and interpretation of this data by the Geological Survey of South Australia and Geoscience Australia will highlight prospective areas, enabling explorers to generate new exploration targets. Through national partnerships, South Australia has continued to identify areas with elevated potential for uranium. The Frome Embayment Airborne Electromagnetic survey completed last year by Geoscience Australia is an important example of this collaboration. A key component of the South Australian government’s internationally recognised PACE 2020 initiative has been the development of world leading data delivery services, in particular South Australia’s world-leading online resource information geoserver SARIG. SARIG is an exceptional application that provides access to more than 125 years of geo-scientific information through an easy-to-use platform which is continuously being refined and enhanced. In May this year, SARIG was given a resounding endorsement by the nation’s ICT experts, winning the Australian Government Excellence in e-Government Award for geospatial applications. SARIG is just one example of the support South Australia offers that makes it an attractive place for major global companies to explore developments in the state.

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International uranium partnerships To maintain its position as leader South Australia is committed to long-standing geosciences research partnerships to share knowledge on uranium. In 2007, the Geological Survey of South Australia signed a memorandum of understanding with the Beijing Research Institute of Uranium Geology, part of the China National Nuclear Corporation which continues to be effective in facilitating cooperation in uranium geosciences and exploration technology.

Uranium Geology in China and the Saskatchewan Geological Survey in Canada. With the world’s three leading uranium jurisdictions involved, this collaboration brings real benefits, boosting synergies in uranium geology and exploration research Written by; Dr Ted Tyne, Executive Director Mineral Resources, Department for Manufacturing, Innovation, Trade, Resources and Energy..

Another great example of South Australia’s strong working relationship on uranium geosciences is with the Canadian Province of Saskatchewan, the leading uranium mining province in North America. The South Australian Government’s strong working relationship with the Province of Saskatchewan also extends to regulatory processes. Through collaboration, teams share knowledge on the regulation of uranium approvals, production, monitoring, environmental controls and mine closure. It is another example of the State’s commitment to deliver new discoveries, best practice regulation and environmental controls and safeguards to build a social licence to operate. In 2012 South Australia further extended its international uranium-geoscience link with the signing of a three-way memorandum of understanding with research partners – the Beijing Research Institute of

The Department for Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) is responsible for South Australia’s key economic development sectors – mineral resources and energy resources, manufacturing, trade and inward investment. The resources arm is responsible for facilitating mineral, petroleum and geothermal exploration and development within a sustainable framework by providing geoscientific information and data, industry regulation, and legislative and policy development. DMITRE has also taken leadership in implementing the State Government’s priority of realising the benefits of the mining boom for all South Australians.

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Uranium in Western Australia By Minister Bill Marmion Minister for Mines and Petroleum Western Australia

In 2009 as the then Minister for Environment in the Western Australian State Government I overturned the ban on uranium mining in the State. Since the ban was overturned, my department of Mines and Petroleum has built on its considerable expertise in managing radioactive materials associated with mineral sands mining.

than 25,000 tonnes to 234,000 tonnes.

As a State Government we are keen to see this figure increase further and are actively encouraging exploration in Western Australia. One way we are doing this is through our Exploration Incentive Scheme (EIS), managed by the Department of Mines There has also been a considerable amount of work behind and Petroleum. This scheme is helping companies to the scenes to ensure Western Australia is well prepared discover mineral deposits in underexplored regions for the unique challenges presented by uranium mining. of the State. For example, in January this year the department signed Earlier in the year we announced 61 drilling projects a Memorandum of Understanding with the Radiological that would have the chance to share in $7.2 million Council in regards to radiation safety. This helps to clarify in government subsidies, as part of the scheme’s the roles of the two agencies and will help ensure the co funded drilling program. This included more than safe, responsible development of Western Australia’s $600,000 towards six uranium exploration projects. uranium resources. Previous rounds have supported a significant number The recent shift in global economic conditions has of uranium drilling programs including Toro Energy’s impacted on a number of sectors, including the uranium Theseus and Enterprise Metals’ Yalgoo discoveries. sector. The Fukushima earthquake and tsunami have The State Government’s support of exploration also had a significant and prolonged effect on the industry. has led to Western Australia becoming one of the Despite this, uranium still has a vital role to play in the most attractive investment destinations in the world. world’s energy mix. The industry-renowned Fraser Institute ranked According to the World Nuclear Association, globally there Western Australia 15th out of 96 jurisdictions in are 432 operating reactors generating approximately 12 the world - and number one in Australia. However, per cent of the world’s electricity. A further 70 reactors are even with the State Government assistance, it is currently under construction, 173 ordered or planned and clear that exploration companies are facing tough another 314 that have been proposed. As global energy times. Access to funding for drilling programs has demand continues to increase, so too will the need for been difficult to obtain, which is why the Western fuel to generate that energy - fuel such as uranium. Australian State Government continues to work with industry groups to ensure the EIS is properly Western Australia remains highly prospective for uranium targeted. While we will continue to do what we can exploration and development. According to data from to encourage exploration, it is also important that the Australian Bureau of Statistics, almost once an economic resource has been discovered, $600 million has been spent on uranium exploration in the approvals process is as smooth as possible. Australia in the last four years. Western Australia has Since 2009, the Department of Mines and Petroleum accounted for more than 44% of that total, or $264 has rolled out a number of online systems that allows million. companies to lodge, track and pay application fees The effect of this increase in exploration expenditure has online. seen WA’s known uranium deposits increase by more

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This has helped improve the quality of applications and the efficiency of the approvals process. The impact of these reforms was highlighted earlier in the year. In 2007 the number of applications waiting for approval was nearly 19,000. It is now about 5000 – the lowest level in almost two decades. In the last year we have granted exploration over nearly 17,000 square kilometres of land which was previously tied up in the approvals process. The total number of square kilometres covered by exploration tenements in WA is an area two and a half times larger than the entire State of Victoria. Another area we have looked to improve is the environmental bonds system. On July 1 this year, DMP’s Mining Rehabilitation Fund came into effect on a voluntary basis. This fund, which will become compulsory from July 2014, is a first for Australia and may well be the most innovative mining security system currently operating anywhere in the world. The fund largely replaces the State’s environmental bonds system and aims to meet public expectations for the highest standard of rehabilitation and mine closure. This really is a win-win for the sector as it frees up valuable funds at the start of projects and encourages ongoing rehabilitation. Unlike the old bonds system, contributions to the MRF can be used on any site, and interest from the fund can be used to clean up legacy sites. Another important area of change is the department’s environmental reforms. The Reforming Environmental Regulation program will help deliver greater certainty, confidence and clarity surrounding the State’s environmental regulatory system. The shift to a less prescriptive, more risk-focused system places the responsibility on operators to determine how they can best minimise the environmental impact of their operation. The State, industry and the community will directly benefit from these reforms through more effective application of environmental standards within the industry, and a more

responsive regulatory agency. When it comes to uranium mining, it is not just worker safety that is an issue, but also community concerns and perceptions. The issue of transport is one such concern. This is why it is important the State Government informs the community about the development of the uranium sector in WA. Earlier in the year, the Department of Mines and Petroleum released a “Guide to Uranium in Western Australia” and a “Guide to Uranium Transport in WA”. These guides contain detailed information about the uranium industry and were developed following consultation with a number of relevant State and Federal agencies. However, it is not just the State Government that must inform the community. It is also important that companies work closely with the community in which they operate. In other words, they need to gain a social licence to operate. There are many good examples of companies that have clearly established a social licence to operate within local communities in WA. The sheer number of successful mining operations across our State is testament to this. However, there is no one-size-fits-all approach to gaining community acceptance. It is not a definitive concept, and what is suitable for one community may not be for another. One thing they do have in common though is the need for a foundation of transparency, trust, communication and goodwill. The uranium industry in Australia is acutely aware of the importance of maintaining a social licence to operate. They also realise that it’s not only about good community engagement, but also good operational performance. Good health, safety and environmental performance. This is what helps deliver a social licence to operate and it is a focal point for both government and the industry, and will be vital in establishing a successful uranium industry in Western Australia.

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PALADIN ENERGY

Opportunity at home and abroad

Status Paladin Energy Ltd is a uranium production company with two operating mines in Africa, the Langer Heinrich Mine (LHM), in Namibia, and the Kayelekera Mine (KM), in Malawi. These are two of the world’s newest conventional uranium projects. Paladin is listed on the Australian Securities Exchange (ASX), Toronto Stock Exchange (TSX) and Namibian Stock Exchange (NSX) under the symbol PDN. The Company also trades on the Munich, Berlin, Stuttgart, and Frankfurt Exchanges under the symbol PUR. Paladin sells its uranium production to electrical utilities for use in nuclear power reactors. Growing international recognition that nuclear power offers a critical solution to meeting the world’s insatiable appetite for electricity, without adding to the atmospheric carbon load, means uranium has an excellent short and long-term market outlook. Paladin has assembled superb in-house uranium expertise and is applying it to the Company’s several exciting, high quality, project development opportunities in southern Africa, Canada and Australia, providing a solid platform from which to increase shareholder value.

Background Paladin’s corporate pedigree dates back to 1970 when Uranerz Australia started operations in Perth, Western Australia, with Mr. John Borshoff, Paladin’s Managing Director/CEO, serving as Chief Executive from 1986 to 1991. Uranerz, the Australian arm of German-based uranium mining house Uranerzbergbau,

explored throughout Australia, New Zealand, and Africa, focusing primarily on uranium. When Uranerz decided to close its Australian operations, John Borshoff acquired its extensive proprietary databases, which subsequently formed the nucleus for the public float of Paladin in 1994.

Board and Management Team Industry-specific skills and experience are critical factors for building a successful uranium business and the Paladin Group has a highly-qualified team experienced in all aspects of the sector. Paladin’s Board of Directors and dedicated management team encompass high quality project evaluation, resource development, mining, marketing (uranium specialists), and corporate management professionals. The management team works co-operatively to apply their unique skills and knowledge to Paladin’s projects.

The Strategy Paladin’s long-established objective has been to accumulate advanced uranium projects, with defined resources to position the company in the lower cost quartile. Few companies focused on uranium during the extended market downturn, and so Paladin, as a producer, now finds itself in the unique situation of having a highly attractive uranium inventory. Paladin has a global mineral resource inventory of over 530 million (M) pounds (lb) of uranium in its project pipeline from 21 deposits in five countries. The uranium spot price reached

Australian Business Executive Q1 2014 US$136/lb in June 2007, reflecting the widening supply deficit, and whilst price fluctuations are occurring and the spot price is now in the low US$40’s per lb, there is convincing evidence that the price will soon continue its long-term trend upwards as new demand enters the market from existing plant requirements as well as from the emergence of China, Russia, India and the Middle East as significant world market participants.

Strong Project Base The Company’s uranium projects have the added benefit of geographical diversification, including Langer Heinrich in Namibia; Kayelekera in Malawi; and Manyingee in Western Australia. Each of these projects had feasibility studies carried out by previous owners during the 1980s, and Paladin secured the projects at low cost during the depressed uranium market. Paladin augmented its resource base in Australia through the acquisition of Valhalla Uranium Pty Ltd, whose primary assets are the 50% joint venture interests in the Valhalla and Skal deposits near Mount Isa in Queensland and 41.71% ownership of the Bigrlyi deposit in the Northern Territory. In February 2009, Paladin completed the takeover of Fusion Resources, adding the Duke Batman and Honey Pot deposits to the existing Mount Isa project area. The Fusion tenements are to the north of, and contiguous with, the Summit Isa North Uranium Project tenements, affording an excellent opportunity to consolidate exploration efforts in these areas. Paladin also has an 82.08% controlling interest in Summit Resources Limited, Valhalla’s joint venture partner at Mount Isa and the holder of other promising exploration titles in the region. In February 2008, Paladin, in conjunction with joint venture partner Cameco, was selected from a highly-competitive field to explore the Angela and Pamela deposits located approximately 25km south of the town of Alice Springs in the Northern Territory. Following successful completion of two drilling programmes, an updated Mineral Resource estimate was completed by the JV partners in July 2011. In April 2013, Paladin assumed full ownership of the Angela project by acquiring all of Cameco’s interest. In 2011 the Company acquired the uranium assets of Aurora Energy Resources Inc (Aurora) in the province of Newfoundland

and Labrador, Canada. At the time, the Aurora deposits were considered one of the last sizable uranium assets available for acquisition. The capacity of the LHM operation has been successfully expanded to a production rate of 5.2Mlb per annum. These activities, together with KM, illustrate the development potential of these projects, uniquely positioning Paladin as a key global supplier of primary uranium.

Proprietary Database – Project Generating Advantage In 1994, Paladin acquired the Australian archival proprietary database and data reference system from Uranerz after that company ceased its Australian operations in 1991. This unique asset resulted from a US$38M (unadjusted) exploration effort in Australia carried out over a 20-year period. In 1998, Paladin also acquired the residual uranium technical database from Uranerz Germany, which covered Africa, the Americas, and Asia, where the company had worked extensively over a 30-year period. This vast database, which was primarily focused on uranium, represents an invaluable information resource for generating future uranium projects. As clearly demonstrated in 1997 when the Company quickly secured projects containing in excess of 60Mlb U O , this data has given Paladin enormous and longterm competitive advantage in its ongoing worldwide exploration efforts.

African Focus LHM in Namibia is Paladin’s flagship project. Having reached its initial production of 2.7Mlb U3O8 per annum in 2008, the mine completed its Stage 2 ramp-up to 3.7Mlb per annum in the 2010 financial year. Subsequently, the Company has completed a Stage 3 expansion and is now producing at a 5.2Mlb per annum rate. An additional Stage 4 expansion review is currently nearing finalisation with the view to potentially increase production up to 10Mlb per annum at a later date when the economics justify such additional investment. Langer Heinrich will be a core, long-term production centre for Paladin in the continuing positive outlook for uranium. An enormous amount of quality technical work had been completed on this project since its discovery in 1973, mainly by Gencor (the original explorer), a large South African mining house

AustralianBusinessExecutive.com.au that evolved into BHP Billiton. Paladin acquired Langer Heinrich in 2002, and commenced a BFS in 2004. Paladin’s Board approved the development proposal at a capital cost of US$92M in 2005; site works began in September 2005; and, the project construction was completed on time and within budget. The mine was officially opened by the President of the Republic of Namibia in March 2007. KM in Malawi, the Company’s second mine, provides an excellent follow-up to Langer Heinrich. A Development Agreement with the Government of Malawi was executed in February 2007, which provides fiscal stability for the project for ten years. KM was officially opened in April 2009 and is now operating at design production rates of 3.3Mlb U3O8 per annum. Regional exploration is underway to identify feedstocks to extend the current project life. In November 2010, Paladin completed the takeover of NGM Resources Ltd, which gave the Company access to a significant area of ground prospective for uranium in Niger. This acquisition gives Paladin a foothold in a country with a substantial and long standing uranium production history.

Canada In February 2011, Paladin completed the acquisition of its first Canadian project, establishing the Company on another continent. Paladin acquired the uranium assets of Canadian company Aurora which added a significant tenement package in the highly prospective Central Mineral Belt (CMB) in the province of Newfoundland and Labrador. Aurora had already established a Mineral Resource base of

40.2Mt at 0.09% U O (83.8Mlb) of Measured and Indicated category material, with an additional 29.0Mt at 0.08% U O (53.0Mlb) of Inferred category resources. These mineral resources are located in six individual deposits within the CMB, with the majority (75%) being at the Michelin deposit. The Company’s aim is to significantly expand the existing resource base which it is hoped will lead to medium term development opportunities and will build upon the excellent stakeholder relations and community programmes already developed by Aurora.

The Uranium Market The tsunami and subsequent severe damage to the Fukushima reactors in Japan in March 2011 caused most nuclear countries to order safety reviews of existing nuclear power plants and, in some cases, a temporary halt to new construction. With the exception of Japan itself, and Germany, worldwide nuclear plans have been re-affirmed, and work has resumed on plants under construction. The independent Nuclear Regulation Authority of Japan has recently promulgated new safety reassessment standards to apply to all nuclear power plants in Japan. Four utilities subsequently applied to re-start 10 idled plants as soon as inspections can be undertaken and national and local government approvals obtained, which might be as soon as early 2014. Worldwide there are now 68 nuclear power plants under construction, six more than at the time of the Fukushima events and 432 nuclear power plants are in operation.

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Paladin Uranium Project Summary A summary of the status for each of the Company’s key advanced projects is detailed in the following table. This table does not include Mineral Resources from Bikini, Andersons, Mirrioola and Watta/Warwai deriving from Paladin’s 82.08% ownership of Summit Resources Ltd or the 100% owned Duke Batman and Honey Pot deposits.

Project

Overview

Mining Method/ Outlook Deposit Type

Resources

Uranium Production * Langer Heinrich Mine - 100% The Company’s cornerstone asset (Namibia, Southern Africa) commenced production in 2007. Conventional The Stage 3 expansion is complete open pit; with production at 5.2Mlb per calcrete annum (pa). Studies are underway for a further expansion to 10Mlb pa. *Kayelekera Mine – 100% (Malawi, Southern Africa)

Paladin’s second operational uranium mine announced commercial production in July 2010 producing near 3.3Mlb pa nameplate.

Conventional open pit; sandstone

Project life in excess of 20 years

M&I (inc stockpiles): 127.3Mt @ 0.053% (147.8Mlb U3O8) Inferred:

18.5Mt @ 0.06% (24.1Mlb U3O8)

M&I Exploration to identify additional (inc stockpiles): 17.5Mt @ 0.08% (30.4Mlb U3O8) resources for mine life Inferred: 5.4Mt @ 0.06% (7.5Mlb U 3O 8) extension

Uranium Development *Aurora Project – 100% (Labrador, Canada)

Paladin’s first entry into Canada. Resource Resource definition and additional Open pit definition and exploration commenced in the underground; second half of 2012 and is ongoing. metasomatic extension drilling has commenced

M&I:

40.2Mt @ 0.09% (83.8Mlb U3O8)

Inferred:

29.1Mt @ 0.08% (53.0Mlb U O )

**Manyingee Project – 100% (Western Pilbara, Western Australia)

Resource definition and extension drilling has been planned and expected to commence in the September 2012 quarter. A key pipeline asset for Paladin.

M&I:

7.9Mt @ 0.10% (17.8Mlb U3O8)

Inferred

5.5Mt @ 0.05% (6.2Mlb U3O8)

Exploration target

8.0Mt @ 0.12%-0.14% (U3O8)

Oobagooma Project – 100% (West Kimberley, Western Australia)

*Valhalla, Skal & Odin Deposits Paladin’s primary Australian asset. – 91.04% Efforts are ongoing to develop a flowsheet and expand the (Queensland, Australia) Resource before moving towards a Feasability Study. *Bigrlyi Deposit – 41.71% (Northern Territory, Australia)

*Angela Deposit – 100% (Northern Territory, Australia)

In-situ leach; sandstone

3 year staged feasibility study required

In-situ leach; sandstone

3 year reserve/ resource drilling required

Development Open pit dependent underground; on market metasomatic conditions

Drill planning in progress to expand resources within the JV tenements. Cooperative arrangement to assess Open pit nearby regional targets. underground; sandstone

Mining and engineering studies underway. Additional drilling to expand resources planned Planning is underway for resource Future direction extension and development drilling. Open pit of project will underground; be determined by market sandstone conditions

M&I:

57.2Mt @ 0.07% (93.7Mlb U3 O8 )

Inferred:

16.3Mt @ 0.06% (22.0Mlb U3 O8 )

M&I:

4.7Mt @ 0.14% (14.1Mlb U3 O8 )

Inferred:

2.8Mt @ 0.11% (7.1Mlb U3O8)

Inferred:

10.7Mt @ 0.13% (30.8Mlb U3 O8 )

Mineral Resources are quoted inclusive of any Ore Reserves that may be applicable. Mineral Resources detailed above in all cases represent 100% of the resource – not the participant’s share. *Complies with JORC(2004) guidelines & is NI 43-101 Compliant. **Complies with JORC(1999) guidelines. For Valhalla, Skal & Odin, Paladin’s interest is based on 50% deriving from the Isa Uranium Joint Venture and 41.04% via Paladin’s 82.08% ownership of Summit Resources Ltd. For Kayelekera, the Government of Malawi holds a 15% equity interest in the subsidiary, Paladin (Africa) Ltd, the holder of the Kayelekera Mining Licence. Langer Heinrich and Kayelekera Mineral Resources have been depleted for mining to the end of June 2012. M&I = Measured and Indicated Table sourced from Paladin Energy,, July 2013

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Cameco - World’s Largest Uranium Miner If you have an interest in uranium, then you need to know about Cameco. Not only are they the world’s largest publicly traded uranium company, they are the world’s third largest uranium producer. With 62 nuclear reactors under construction across the globe right now, Cameco is in a unique position to service this global demand. Their interests in Australia date back to 1996, where their exploration interests include two of our largest undeveloped uranium deposits - Kintyre and Yeelirrie. Their most significant project, the McArthur River project in Saskatchewan, Canada contains ore grades around 100x the average grade (compared to other uranium mines).

McArthur River Located in northern Saskatchewan, the McArthur River mine has an annual uranium production capacity of 18.7 million pounds of U308.

The McArthur River project began in 1999, and together with their Key Lake project they employ over 800 people at the two sites. A joint project - 70% owned by Cameco, 30% owned by Areva, Cameco returned strong third quarter earnings in 2013 in part from existing long-term contracts. With over 4 million hectares (10 million acres) of land across the globe, and exploration in the Americas, Australia, and Asia, you can get exposure to Cameco on both the Toronto and New York stock exchanges.

Raisebore Drilling at McArthur River From the 530 meter level a pilot hole is drilled through the orezone into the tunnel on the 640 meter level.

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PRODUCTIVITY

THROUGH

INNOVATION

Klas Forsström, President of Sandvik Coromant in Sweden, was in Melbourne last month visiting the company’s local operations and meeting clients. Shane Infanti, CEO of the Australian Manufacturing Technology Institute Limited (AMTIL), met up with him, along with Patrick Ryan, Vice-President Engineering – Asia Pacific, and Peter Rollauer, General Manager for Australia and New Zealand.

Australian Business Executive Q1 2014

Shane Infanti: How are things going for Sandvik Coromant at the moment? Klas Forsström: Well, us Swedes are humble, we tend not to brag, but I can say we are the number one cutting tool brand worldwide. We recently published our quarterly results, and the beginning of this year has been somewhat weaker than last year. That said, the first quarter last year was one of the strongest ever, both for the Sandvik group and Sandvik Coromant. The US and North America were extremely strong. North America is still very strong. Europe is quite strong. And I think China is set to pick up again – last year China was weaker, in part because of “reshoring” of some production back to the US. What we are known for and will continue to be known for, is our ability to bring out new products. We pride ourselves on the 1500 to 2500 new products that we bring to the marketplace twice a year. If I look at our product portfolio, I’ve never seen such a strong one. I think the coming 18 months will be one of the strongest in Sandvik Coromant’s history in terms of new products. We’re in what could be viewed as a mature industry, but there’s still a lot of innovation being brought into the marketplace, and it’s not only about products. Also, what is the definition of products? You used to just buy a drill, but for many years we’ve said you also get our people and their competence free of charge. In the future, you’ll get a lot of information with the product: the dimensions; the physical aspects so you can program your machine faster, put it into your CAM systems; the machining data, when you order a product or when you download the data, or when you utilise our tool library services. The definition of a product is moving from just this physical product to something with expanded value. Infanti: That’s an interesting area, the way knowledge dissemination around the application of cutting tools seems to be becoming more important than the cutting tool. Forsström: With Australia, we have refurbished our Productivity Centre here. We have 27 of these training facilities worldwide, with more than 100 machines, dedicated to training people. Last year we brought more than 30,000 individuals through our physical training programs, and we are also bringing out programs on the web. In this region, we plan this year to launch an Application Centre, and that’s the next level, bringing customised, collaborative R&D close to the customer base. Peter Rollauer: We see this as a big opportunity for the industry. At our Productivity Centre in Dandenong – which I’d urge people to please come and see, it’s changed a lot – we recently installed a new Okuma Multus MB400

multitasking machine, and we’re finding so many customers are buying multitasking machines, but not fully utilising them to their capacity. They’re using it still like a twoaxis lathe. It’s our mission to get customers into our facility and actually show them the correct use and capability of the machine, through the application of cutting tools. So they get a whole lot more than just a tool. They get a solution and the competence of the people behind the tool. Patrick Ryan: On average we train every week, either in our centre or at the customer’s premises. We’re doing between 50 and 60 training sessions a year. Rollauer: We’re also looking for apprentices that we can bring into the centre and train. We’re working with Holmesglen, Chisholm and other learning institutions to tap into their TAFE arms to include our advanced metal-cutting training in their syllabus. And they’re very interested in accrediting our courses, so it becomes a norm for them to cycle apprentices through our facility. Forsström: We aim each year to bring back to the industry 10-20% of our invoiced sales in the form of productivity savings. That’s not something we dream up,

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that is savings that the customers have confirmed. Infanti: I wanted to get an understanding of that, because from the Australian perspective we’re predominately SMEs here. Companies often struggle to make time for training like this. Ryan: We try and tailor it. Sometimes we do a threeday course, but we try to limit the size to groups of 8-10, so it’s not like a classroom environment with 25-30 people. On average it’s a day or two days. Rollauer: The interesting part about the training that we feel is quite unique is that one of our training people, Colin Fairbank, will put up a problem on the whiteboard, and then ask the people how to solve it. And he’ll get their answers, and then they’ll take that solution out to the machine shop and put it into practice, and see how that worked. Then they’ll pull that apart and see what they can do to make it better as a team. So we give everyone the opportunity to contribute to the answers, it’s very interactive. It’s the theory, but then attaching the practical sense to the training. The guys who do the training, we try to tailor it to their capacity in their machine shop. There’s not much point talking about 20,000rpm if they can do 5000. We pre-question the customers and tailor the course so they can use what we’re teaching them. It’s very important we don’t just teach them theories they can’t apply.

Forsström: Buying a machine is a huge investment, up to a million dollars or more. Every day that machine isn’t performing to its top level, it’s not the best use of money. Infanti: There’s been a lot of talk about additive manufacturing, and its impact on production processes, for example. Forsström: You can view additive manufacturing from two perspectives. There are certain components, or in repair, where it will grow faster. But then the other area is: how can you speed up rapid prototyping? How can you reach out to customers? Even if you show a 3D simulation on-screen, it can be even better to bring with you a solid prototype. But it will take time, as all new technologies. The cutting process will always be there. Additive manufacturing of some parts will grow, but when it comes to close tolerances, very smooth surfaces, etc, nothing can beat metal cutting and machining. Of course we are into it, and we monitor it. But currently it’s more a support to us than a long-term threat. Infanti: So what are the key areas of development and innovation at the moment? Forsström: The material changes that have taken place in aerospace, from alumina to composites, and then to develop methods to machine that, that is one area of development. Another is in machining technology. We’ve put a lot of resources into gear-milling, but not just in tools. It’s how you program, it’s features and strategies. We have one method called InvoMilling, that is involute milling, where you program it in a clever way and suddenly you can produce gears, with conventional CNC machining, where in the past it would require hobbing. Ryan: And you’re talking about massive productivity gains here. Cutting speeds rising from 15-20 metres a minute to 200 metres a minute.

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Rollauer: It’s the same shift in technology when a solid carbide drill was introduced to compete with a highspeed steel drill. That mindset change, in speed and feed and cycle-time reduction, is now going to come into gear-milling. It’ll be a game changer. That technology, which will come into the market shortly, will become available on multitasking machines. Through InvoMilling, people with a multitasking machine and standard cutting tools can produce these types of gears, where in the past they would typically send it out to a gear-milling specialist. Forsström: And we can add numerous examples. Blade machining, blisk machining, high-pressure coolant: we have quite a lot of products in that area. Infanti: Now did I read right that Reuters named you one of the most innovative companies in the world? Forsström: That’s right. I don’t remember the exact ranking, but the Sandvik group was among the 100 most innovative companies. Ryan: It was alphabetical, the list. And the interesting thing is that there were no other metal-cutting companies in that list. Rollauer: And that’s top 100 companies, full stop. Not the top engineering service companies, or metal-cutting companies. We were among the top 100 innovative companies globally. Forsström: And innovation is part of our culture and it will continue be part of our DNA. Every year, we’re bringing innovation to our customer base. The Productivity Centres were an innovation, the productivity improvement programs, in my book that was an innovation, and we have numerous examples of products. When you have reached an ISO standard level, I think that’s an innovation, and Coromant Capto reached that level and now it’s an industry standard. Ryan: I think it’s innovative as well to capture a standard around the dimensional sizing of the product program, so it can be a value-added tool in terms of CAM programming that can be uploaded to CAM systems today. Also the machining strategies we’re working with in applications, for specific features such as thin walls, deep pockets, heat-resistant superalloys. These strategies we’re developing now that we can deliver to customers without even selling a tool – that’s innovation.

Infanti: So what’s your view of the Australian marketplace and where the future lies for us? Forsström: That’s a tough question after two days here. But I think the future of Australian manufacturing is similar to other developed countries. That is: productivity gains, adapting to new technology as fast as possible, trying to be open-minded, not sticking to old methods, old ways of working. That would be my advice. Always try and think ahead of yourself. Be open-minded to what strong partners can provide. Partners like Sandvik Coromant, or others. And ask for advice, go to training programs, take the benefit. We are global, we have the knowledge base of more than 130 markets and more than 27 training facilities and eight direct R&D facilities. Team up with partners that are forward-looking, are not satisfied with today and are moving into the future. Rollauer: I think the analogy is that a lot of customers are very busy sawing at the tree. They’ve got their head down and they’re sawing away. Sometimes if they just stop and allow us to sharpen their saw a little bit, by doing the training and getting us involved in their business, they’ll get the job done a lot quicker. They’ve got to take that little step. Forsström: Perhaps my last thought is: how do you attract the talent of the future? As one of the main players in our industry, we have a commitment to talk about what the industry is about, promoting the possibility to make a career in the manufacturing industry. With the wrong talent pool 20 years ahead it doesn’t matter if you’re a winning team today. So how can we attract talent? That is why we dedicate so much resources into training programs and supporting schools worldwide. Reprinted courtesy of AMT Magazine. www.amtil.com.au www.sandvik.coromant.com

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In-house Counsel:

From a small start to a power-house profession Written by: Trish Hyde, Chief Executive Officer of the Australian Corporate Lawyers Association

There was a time when most businesses didn’t have an in-house legal department. The few lawyers that practiced in-house were considered lesser professionals by their private practice peers.

Organisations expect more from in-house counsel than just the day-to-day legal duties. It is commonplace for the most senior lawyer, General Counsel, to be involved at an executive management level.

However, over time, the case for an in-house legal department has been demonstrated. In-house counsel, are close to the business, understand the organisation’s needs and work to deliver good commercial outcomes.

It is also commonplace for the General Counsel to have other roles/responsibilities, such as Company Secretary, Chief Risk Officer or Compliance Officer. Increasingly General Counsel are heading up multifunctional departments, these may include nonlaw based functions such as Human Resources or Corporate Affairs.

The role In general, in-house lawyers come from private practice, where they have honed their legal skills and expertise. Their focus is on the law and the matters they handle for their clients. While legal skill and expertise are important for inhouse counsel, their success in the role rests not only in this, but in their ability to work with business colleagues to deliver the organisation’s goals. Today’s legal department is an essential part of the c-suite for successful businesses. In-house counsel, are trusted advisors, demonstrating their knowledge of their organisation’s business through timely and commercially savvy legal advice and practice. The functional elements of the role will depend on the size and type of organisation, but usually include managing legal matters (i.e. costs, litigation and external providers), managing business legal risk (i.e. IP protection, compliance programs and assessing legal risk) and providing commercial legal advice (i.e. for marketing programs, new ventures, acquisitions etc.).

Performing these varied responsibilities in harmony with the business’ needs is the challenge for in-house lawyers. Little in legal training prepares in-house counsel for the commercial acumen, influencing and negotiation skills, and cross-functional understanding needed to perform the role. In addition to this, in-house counsel must maintain the high professional standards required as an officer of the Court. Lawyers rely on professional privilege to provide frank and fearless legal advice to their client. The Australian courts determine profession privilege by the degree of independence and dominant purpose of the communication. In 2005, Deloitte’s Global Survey showed less than a quarter of general counsel believed they had greater influence in their organisation than their external firm. In 2010 that figure was over 70%. Today, the figure is even higher.

Top tips for success

Australian Business Executive Q1 2014

Know your organisation: Each organisation is different. Some embrace their legal department; others see it as an obstacle. The cultural dynamics will determine not only how you are treated but it will also determine how your advice received. Understanding the culture means you can develop strategies for being heard and adding value to the business.

Know your business and industry: Your colleagues are likely to be intimate with how the business operates and the issues within the industry. It is important for in-house counsel to also be across these things – not just so that your can communicate internally, but to ensure your advice is relevant.

Never compromise your ethics: High standards must be maintained and at times it may be challenging to manage the dual responsibilities.

Focus on value, not cost: The legal department has traditionally been seen as a cost centre. However, more and more, in-house counsel are showing the value they provide to their organisation through risk mitigation, better matter management and contributions to commercial outcomes. In-house counsel need to be across developments in practice management and embrace change.

Don’t operate in isolation: the role of in-house can be lonely, especially as most legal departments contain one-person or a very small team. In-house lawyers worldwide have benefited from building relationships with other in-house lawyers, sharing knowledge and supporting each other. Reaching out to peers can be a constructive way to deal with the strains and challenges of the role.

Trends for the future Turn cost pressure into value adding

The GFC lead organisations to examine their spend – all the low hanging fruit has been saved and now procurement is looking for new ways to add value to the business. To date procurement specialists have not been very successful in the legal space because of the nature of legal advice. However, in-house counsel needs to take ownership of the process of driving value to get the best result and shift thinking from cost to value.

Diversity in the role

The role of in-house counsel has expanded to include related functions and is predicted to continue to incorporate non-legal functions too. Already 40% of General Counsel’s play the dual role of Company Secretary. Increasingly, in-house counsel are being asked to manage diverse teams which can include HR, operations, compliance, risk and government/ corporate affairs.

Range of roles, but more CEO reporting

There is no one size fits all in legal department size, structure or reporting lines. While there are some well known large legal teams, there are many sole counsel and small teams. Depending on the organisation, the General Counsel may report to the CEO, CFO, COO or other officer. The legal department can be centralised or decentralised based on the need. Equally, specialisation may be insourced or outsourced. What this means is that there will continue to be a variety of in-house roles, including legal specialists, large department leaders, sole counsel generalists, Greenfields operators and small team managers. Along with the diversity of roles, will be an increasing tendency for the General Counsel to report to the CEO. Results from the ACLA/CLANZ 2010 Legal Department Benchmarking Report show that already 59% of Australian respondents reported directly to the chief executive.

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Employment contracts

Employment contracts are an important measure to protect privilege and provide in-house counsel with the ability to best exercise frank legal advice. Increasingly in-house counsel’s employment contracts incorporate independence, including defining the primary responsibility, appropriate reporting lines, transparent remuneration and protection from termination when exercising independence.

In-house Counsel Project Managers

The most pressing issue facing in-house counsel today is managing workload. As the department is expected to increasingly provide value to the business, in-house counsel are increasing managing legal matters as project managers – scoping the work, determining what can be done internally, what should be outsourced and where, managing external parties to deliver on time and on budget, managing internal stakeholders and undertaking post matter review. With this project management approach in-house counsel are finding new ways to deliver value to their organisations and changing the relationships with legal service providers.

Outsourcing for value

A new trend to emerge has also been the wider set of provider’s in-house counsel now works with to deliver value for their organisations. These include; full service firms, boutique firms, specialist software solutions and legal process outsourcing (LPOs). The 2010 ACLA/CLANZ Legal Department Benchmarking Report showed 32 per cent of respondents forecast an increase in the use of specialist and boutique firms and only 5 per cent indicated a decrease in usage.

More than legal expertise

What makes in-house lawyers unique is that they are the nexus between legal and business. For in-house counsel knowledge of black letter law is important, and now equally important, is the ability to influence the business and be an integral part of the organisation’s decision-making process. In this new environment there is an increasing focus on in-house lawyers obtaining broader skills, from effective communication, to influencing skills, or learning how to ‘sell the service’.

Technology

We are in a rapidly changing technology space, where it is said that most technologies become obsolete within 5 to 7 years. With each technology development and new application comes new risks and opportunities for organisations. In-house counsel are increasingly being asked to assess privacy, security, business ventures and marketing opportunities, in this new landscape where consumer expectations and technological capabilities are not always completely understood. And with this technical trend set to continue, in-house counsel needs to be ready to provide valuable advice to the organisation.

Regulation

In recent years there has been a growing regulatory focus from governments and with this comes challenges for the in-house lawyer. The rate of regulatory change is expected to continue over coming years too, meaning there is no let up in sight. Organisations will continue to look to their in-house counsel to be across all regulatory developments and advise what is needed. However, with the pace of change, in-house counsel will need to look to new ways of staying ahead of that change and ensure compliance.

Propensity to litigate

A relatively new trend is the increasing propensity for litigation. While Australia is not on the same scale as we see in America, there has been an increasing willingness for litigation, including class actions. This trend not only impacts inhouse counsel with potential litigation matters to manage, but on mitigation as well.

Continuous change

One thing is certain – the profession and role will continue to evolve. There will be more diversity for in-house counsel and opportunities to progress into other leadership roles in the organisation. Change can be daunting. As in-house counsel embrace change they will reap the professional and personal rewards for doing so.

Australian Business Executive Q1 2014

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What it means when your counsel claims privilege Written by: Trish Hyde, Chief Executive Officer of the Australian Corporate Lawyers Association

Sometimes lawyers speak another language. You can be deep in a transaction and suddenly they are asking you not to forward on an important email because of legal professional privilege. It can seem unreasonable, rude or outrageous. Legal professional privilege is one of the most commonly misunderstood legal principles in a business and one that can be difficult for in-house counsel to explain in the heat of a deal. Ironically it is also one of the most important legal principles that you have at your disposal. Every business should know its basic protections, what they can do to assist in-house counsel, and what they can and can’t do with legal advice. Legal professional privilege is the fundamental touchstone of our legal system that protects communications between the organisation’s lawyer/s and the organisation from compulsory disclosure to third parties, courts or regulators. Legal professional privilege enables in-house counsel to give full and frank legal advice, without it being used against the organisation. As the ‘client’ of in-house counsel’s advice, you may want to claim legal professional privilege at some time. For example, your legal department is providing you advice that, if seen outside your organisation, would be damaging or embarrassing, or could be used to your organisation’s detriment by a counterparty or litigant. Imagine that you receive legal advice that your organisation is in breach of a regulation or contractual obligation, or that it is liable to pay under a claim. You want in-house counsel to give you frank and fearless advice and you need to receive this advice without the fear of it being used against the organisation.

The benefit of legal professional privilege often leads organisations to believe everything can be protected Copying in-house counsel into all communications and assuming this means an organisation cannot be examined by a court or regulator is not the purpose of legal professional privilege and you will not succeed by doing this. Furthermore, legal professional privilege can be easily lost by inadvertent action. So to protect your organisation’s right to legal professional privilege, you need to know what it is and how to protect it.

Legal professional privilege defined To claim legal professional privilege your in-house counsel may be required to prove that the communications were: •

Confidential

•

Made for the dominant purpose of seeking or providing legal advice or for use in existing or anticipated legal proceedings . If there is another purpose, such as providing an incident report, then that may be seen as the more dominant reason for the communication and therefore legal professional privilege will not apply .

•

Between an in-house counsel able to provide independent advice and its client (the organisation). The courts want to know that the in-house counsel was able to provide frank and fearless advice without perceived risk of repercussions. The area of independence is often examined by the courts, so to maintain legal professional privilege the independence of the role of in-house counsel needs to be entwined into the function from the beginning.

In this case, your organisation would be well served if the communication between you and your in-house counsel does not have to be disclosed. The way to protect this communication is through legal professional privilege.

Australian Business Executive Q1 2014

Protecting legal professional privilege Your in-house counsel will implement processes and procedures to assist in maintaining legal professional privilege. You can help them by following these tips. The following does not guarantee communications will attract legal professional privilege, but they will minimise the risk of losing legal professional privilege. If in any doubt seek advice for your legal department.

Professional standing

Ensure your in-house counsel hold and maintain a current practising certificate Support your in-house counsel to fulfil their professional obligations to undertake mandatory continuous professional development

2. Independence Encourage and support your legal function’s independence (right to give frank and fearless advice without influence from the organisation) through a published Independence Policy Ensure the head of the legal function has direct access to the Board of Directors and Board Committees, Chairman and Chief Executive Officer, and vice versa, to ensure that legal advice is able to be given freely Ensure the legal function is distinct from other functions

Use legal professional privilege wisely

Your in-house counsel will guide you on what constitutes communications that should be protected. When he or she labels a communication as “Privileged & Confidential” do not disseminate it to anyone without in-house counsel’s consent and do not refer to legal advice in communications. If you want to communicate a point from the advice state it as the company’s view…..”It is our view that…”

Copying in-house counsel in on communications broadly does not provide a ‘safety-net’ that the communications will attract LPP. Overuse and inappropriate use can do more damage than good

Recognise legal communications

If your in-house counsel has more than one role (legal and a non-legal function) they will need to separate communications to clearly establish those that are legal communications and those that are part of another function (or social). Don’t be surprised if, when you send one email seeking legal advice and add a question, such as ‘when is the next Board meeting?’, you receive two emails one addressing the legal matter and one addressing the non legal matter Again, do not forward or add CCs in replying to communication marked “Privileged & Confidential”

Ring-fence the legal function

The legal team/person should have an area that is separate from the rest of the organisation and that can be secured (locked filing cabinets and separate server location) to prevent unauthorised access to information

In-house counsel to manage external counsel

There should be restrictions on who within the company can brief external counsel and your in-house counsel are best placed to manage this relationship directly or supervise the process to ensure legal professional privilege is protected

Once waived it is gone for good

Disclosing the substance or gist of a legal advice across an organisation could be enough to waive privilege. This includes across related entities within a corporate group. Seek advice before circulating sensitive matters

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Expect the ‘lawyer’ voice

•

You may be best of friends, share the same sports passion or simply be good colleagues, but when your in-house counsel is communicating “privileged and confidential” information they will write it as a legal document – one that would be appropriate if read in court. It’s not personal, and normal communications will take place outside the legal professional privilege arena

A clear reporting line. For the General Counsel it should be to the CEO with the right to go to the Board on any legal matter and for other lawyers a reporting line to another lawyer .

•

Termination terms that do not allow for repercussions for exercising the above. This can be achieved by requiring the Board to ratify the dismissal of a general counsel .

•

Transparent remuneration that rewards individual performance over company performance .

It cannot be retrospective

In-house counsel cannot retrospectively apply legal professional privilege where it would not have applied. The relevant time is the time when the issue arises and the documented advice in question comes into existence

10.

Common sense

Good business-wide understanding of legal professional privilege is an important element to the ability for an organisation to be able to attract legal professional privilege to appropriate communications. But not everything is black and white. Your in-house counsel should be your trusted adviser, providing advice that is practical and organisation applicable. If you want to know more about legal professional privilege, or any other issues contact them.

Setting independence in stone While in-house counsel should be presumed to be independent, some companies go a step further and add the ‘independence’ of the in-house counsel role to their employment agreement. This can be achieved by adding the following to the employment contracts: •

In addition, the employment contract should clearly define the client/s so that the lawyer can claim legal professional privilege with related corporate entities.

Conclusion Legal professional privilege can be a foreign term for nonlawyers, yet it is an extremely important legal principle that enables in-house counsel to provide frank and open legal advice on an issue while protecting that advice from having to be disclosed. It is a fundamental cornerstone of our legal system, ensuring access to justice. Like most things precious, it needs to be treated carefully and should not be overused or abused. Rather your organisation should encourage broad understanding of legal professional privilege and work with in-house counsel to protect relevant communications. And remember, when they use that overly-lawyerly tone in emails it’s not personal!

Terms spelling out that the in-house counsel’s primary responsibility is to the law and the court in a defined independence clause .

Australian Business Executive Q1 2014 On May 15 2013, the Australian Retailers Association (ARA) celebrated its 110th anniversary. Looking back over the last 110 years, it gives me great pleasure to see how far the ARA has come as Australia’s leading retail industry body, and the milestones we’ve achieved along the way. But also to see how far the retail sector has come.

110 years of supporting Australian retailers By Russell Zimmerman,

Australian Retailers Association Executive Director

Since 1903, the Australian Retailers Association (ARA) has been the peak industry body representing Australia’s now $258 billion retail sector which employs over 1.2 million people. The retail landscape has definitely changed over the past 110 years, particularly since the introduction of the internet and the evolution of online retailing. We now see not only bricks and mortar retailers competing against online retailers, but also multichannel and omnichannel retailers in the mix too. Today, the ARA ensures retail success by informing, protecting, advocating and educating its 5,000 independent and national retail members throughout Australia.

As Australia’s retailing sector has proliferated, diversified and matured, so too has the ARA. In the past few years we’ve seen an immense change within the organisation with the reinvigoration of its brand, a new executive team and the expansion of our service offering - which is very exciting to be a part of. As a retailer myself for over 30 years, I am tremendously proud to lead an organisation with such a long and dedicated history of protecting and promoting the retail industry’s interests, including changing the perception of retail as a viable career option.

110 years ago, on 15 May 1903, representatives of David Jones, Farmers, Hordern Bros., John Hunter and Son Ltd., W. T. Waters and Co. Ltd., Grace Bros. and W. Buckingham met and decided to form an association for the advancement of the retail industry in NSW – they called themselves the ‘Master Retailers Association of NSW.’ During its first 20 years, retailers began to see the benefits of an organisation prepared to represent their interests and stand up to the demands of a growing union movement. The association enjoyed rapid growth during this time and solidified its position as a legitimate employers’ association. After a number of years (and a fair few name changes) the various retail associations in each state agreed the issues affecting retailers were no longer exclusively covered by State Governments and it was agreed that a strong nationwide organisation was now essential. It was then that each association decided to amalgamate and become what we now know as the Australian Retailers Association. On December 1, 1998, a heads of agreement was signed that paved the way for the restructuring of the organisations from a federated council into a national body. In May 2004 a new registered organisation was approved under the Workplace Relations Act, and in October 2006, the Australian Retailers Association (ARA) became a true national organisation.

AustralianBusinessExecutive.com.au Fast forward to 2013, the ARA offers a comprehensive range of member and advocacy services, including discussions with governments at all levels on pressing issues for retailers around tenancy, planning and zoning reform and educational opportunities for the sector. March saw the ARA present its Federal Budget & Election skills submission to the Federal Government, in order to address the many skills shortages we’ve identified in the Australian retail sector. This submission is crucial for the ARA as the peak retail industry body to have input into the needs of the retail industry relating to future skills and training. The ARA urged the Australian Government to follow suit after the US Senate announced in April their intention to vote on a bill that would give states the authority to collect sales taxes on all internet purchases. The bill would grant all states the power to collect taxes from out-of-state vendors selling goods to their residents, and we think it’s time for the Australian Government to also act on the issue of tax-free online shopping, as a reduction of the Low Value Imports Threshold (LVIT) would prevent erosion of state GST resources. Reducing the LVIT is a simple and economically beneficial solution, and we look forward to continuing to work alongside the Government to implement a lowering of the threshold which will help Australian retailers remain globally competitive. The first week of May saw the release of ABS March retail trade figures which illustrated the lack of consumer confidence in the whole economic situation in Australia. Unfortunately for retailers, consumers are continuing to tighten their purse strings when it comes to discretionary spending, and are not reaping any of the benefits of interest rate cuts. The ARA Board released its Federal Election submission on 24 May, urging the Government and alternative governments to use the 2013 election to assist retailers in Australia who face a difficult operating environment. The ARA wants to see the cost of small business to stop rising, particularly in the area of employment relations, and penalty rates must be reduced while flexible working hours within the sector are further supported. We’re also calling on the government to commit to introducing no new taxes or increasing existing taxes, but rather continue to reduce business taxes, with exception of the broadening of the GST.

Since the announcement of the federal election, we have been calling for stability in government, as it is clear that recent political instability is a real risk to supping consumer confidence further. The ARA believes that political stability can only be achieved through a majority government, and as far as we’re concerned, the September election can’t come soon enough. As I write this column, the ARA office is abuzz with awards fever - sorting through the organised chaos of high-quality submissions to award retail’s best at the ARA Australian Retail Awards Breakfast on 23 July in Melbourne. Since it was reinvigorated in 2008, the ARA Australian Retail Awards program has brought successful retail players from the shop floor to the national stage. As Australia’s only national retail award program, the ARA Awards have played a hand in helping many recipients achieve greater success. Following a tough 18 months, celebrating retail’s best is a positive way to kick start the new financial year. There have been four new awards added this year to the already broad recognition program. The inaugural awards in 2013 are the Kogan Australian Online Retailer of the Year, the REST Industry Super Australian Individual Retailer of the Year – male and female categories, the Roy Morgan Australian Customer Satisfaction Retailer of the Year and the Victorian Governments Victorian Retailer of the Year. We are proud to recognise those industry superstars who innovate to achieve excellence - if you’d like to be a part of the action, visit www.australianretailawards.com.au for more information. If you’d like to learn more about the Australian Retailers association or would like to see how we can support you and your business, please visit www.retail.org.au or call 1300 368 041. I look forward to keeping you regularly updated on the Australian retail sector through this column and until next time, I wish you and your business the best of luck.

Australian Business Executive Q1 2014

Up close and personal with Russel Zimmerman Since 1980, Russell Zimmerman has owned and operated the Spark’s Shoes retail chain with his wife Marion. Spark’s Shoes is a 75 year old family business specialising in the fitting of children’s footwear. Russell became a Councillor of the Australian Retailers Association, New South Wales Division in 1995. He held the position of President of the NSW State Division from 2001-03. From 1997 he held the position of state delegate to the Australian Retailers Association National Council. He served as President of the Australian Retailers Association National Council from 2003-04. These positions are held in an honorary capacity. Being involved in a small business Russell brings a closer perspective of day to day issues as he is in close contact with staff and customers and also deals with the managerial issues of operating and financing a Small Medium Enterprise. Russell also volunteers as Chair of the Australian Merchants Payments Forum (AMPF), a non-paid position. Much like the Australian Retailers Association, The Australian Merchants Payment Forum represents merchants in Australia by liaising with the Reserve Bank of Australia, card schemes and other interested parties on all card payment issues. Russell’s experience as a retailer and as the ED of the ARA has given him an overall view of all types of card payment transactions and the related issues that confront retailers. Due to Russell running his own retail outlets Russell has an overall view of all types of card payment transactions and issues that confront retailers irrespective of size of the merchant from the front of store to the back room workings. Russell is an active member of the Rotary Club of Beecroft and has held various positions on its board. Russell was honoured with the award of a Paul Harris Fellow from the Rotary Club of Beecroft in 1990 for service to the community. Russell is a devoted family man, married to Marion. They have a son Derrick (known as Deke) and a daughter Jaythene. Russell and Marion also have two adorable grandchildren – Livinia is three and Saskia is one.

AustralianBusinessExecutive.com.au

Dairy Australia: Horizon 2020 By Jamie Boyd

Dairy Australia is a national services body established to promote the dairy industry in Australia and also in a wider global context. Utilising a multifaceted workforce, they collectively observe trends in the market and analyse farm production at each stage of the process, ahead of arriving at the dining tables of consumers. Representing and advising the Australian dairy industry, Dairy Australia believes it’s important that farmers, government, the community and consumers get their voice heard. Their efforts to improve the fortunes of the industry has been met with difficulty over the last ten years, resulting in an overall reduction in Australian dairy exports. They also act as an investment arm in the industry, funding new projects on behalf of individual farmers and companies. This is paid for through annual funding via a combination of levy, government, and leveraged funds. On average it returns a $3 benefit to farmers for every $1 levy dollar raised. Recent key endeavours resulting from their continued growth include a review of their core operations expressed in their Horizon 2020 project. This document, compiled in 2012, has been put together by a consultant specialising in the milk marketplace and created in accordance with a project brief developed by Dairy Australia and the Gardiner Foundation. It shows that each stage of the dairy supply chain is mutually reliant on the next to generate business, and Dairy Australia is investing across its whole supply chain with the aim of creating a profitable trading environment. Investment is split into two distinct supply chain categories: pre-farmgate investment, which focuses on farm profitability and efficiency before dairy goods have left the farms. This involves farm business management, feed-base development, animal performance, and sustainable resource management, with around 45% of levy investment funds focused on these areas.

The second, post-farmgate investment is where the real profits lie for the remainder of the market, with a sustainable dairy industry reliant on correct action once milk products leave the farm. Areas targeted for investment here includes safe production processes, recognition of the nutritional value of dairy; which much of the western world is now seen to be lacking in our diets, alongside bioscience technologies, trade policy reform and secure market access amongst others. Sue Webster, External Communications Manager for Dairy Australia, was able to provide a breakdown of the body’s promotional and investment operations as a whole. “We deal with what we call pre-farm gate and post-farm gate. Pre-farm gate is what we do with cows, farms, soil, nutrients and milking. Post farm gate, when the milk leaves the farm, involves stainless steel, factory products, nutrition, and human health.” “Post-farm gate is where the value is, the economics kick in once the milk leaves the farm.” John Droppert, Industry Analyst for Dairy Australia gave an insight into the types of observations the body makes. His analysis focuses on fluctuating dairy markets and their worldwide impact, and elaborating on their role in helping farmers adapt to an ever changing environment. “My particular focus is on inputs to farm production and what’s affecting Australian dairy farmers as they run their own businesses, so, market commentary. I report on international market developments and Australian market developments in regards to the farming business. This involves Europe, New Zealand and the US also, as they affect us from a competitive point of view. “I work in a global context, with more focus in terms of milk supply. We’ve got other people that tackle the demand side of the equation and how that milk gets pulled through to the supply chain, post farm gate.”

Australian Business Executive Q1 2014

Erratic dairy market

Global Competition

The Horizon 2020 report details the variety of trends altering the way in which consumers are making their food purchase decisions in the modern world, and how this impacts on dairy production as a whole.

Despite still having ties to the global dairy trading market, it appears Australia have taken a backseat in the industry in recent times. This has allowed neighbours New Zealand to capitalise on a greater rainfall and more favourable conditions for pastoral farming. With agriculture being the largest sector in their economy, it contributes around two-thirds of exported goods in recent years.

Growing demand for convenience relating to in-store location, portion sizes, and waste reduction have all affected how consumers buy and access dairy products. Suggestions in the report indicate that price-based competition, an expansion of digital influences, and an increase in the prevalence of takeaway meals are all factors likely to affect future dairy trends. Droppert outlined how these changing trends of the worldwide dairy market have seen repercussions for the stability of dairy importing and exporting. “Dairy is a thinly traded commodity; in general less than 10% of production makes its way into traded products cross borders. The biggest suppliers are New Zealand, EU and the US, with Australia placing behind them. We export around half of our milk production, we peaked at about 60% and used to be much more export focused but that was about ten years ago.” “We’ve had some pretty severe droughts since then and a few other challenges have come up, so milk production has actually retreated a bit to about 40%. We’re still heavily linked to the world market and are still an exporter, but we’ve kind of lost a fair bit of significance in that respect, and that will have come out in the Horizon 2020 report.”

Despite this, Australia and New Zealand’s close proximity allows for ease of trade and mutual benefits with regard to dairy imports and exports. “In terms of imports, any sort of milk product that’s not personable can be imported into Australia. We see a fair bit of butter coming across from New Zealand, they’re probably the key alternative source of product because it’s so close and they’re such a big dairy country. The main dairy processor in New Zealand is Fonterra. They operate in Australia as well, so it’s fairly easy for them to shuffle product between the two markets.” “There are countries much bigger in terms of production than us, with the US being around ten times bigger and the Europe more than 15 times. They export around 10% of their milk, while New Zealand produces twice as much as us and they export around 95%, so there’s quite a variety.” “They’ve got a lot of rainfall and grass they can put into cows and are good at promoting their dairy business. I guess a large majority of that goes into whole milk powder, and a large amount of that whole milk powder then goes to China these days, around the million tonne mark.”

AustralianBusinessExecutive.com.au New Zealand isn’t alone in terms of a burgeoning dairy scene, with the US dairy trade also emerging as a direct competitor to Australia’s dairy export potential. Advantages exist in the form of traditional cheese imports from the US and Europe, as they’re not currently being produced on Australian soil.

Australia’s future growth and success rests on the ability to adjust and embrace recent changes to trading regulations. These regulations have seen a great upheaval to traditional farmers not accustomed to a move away from a more predictable, governmentally regulated dairy trade network.

“We see a bit of cheese coming from the US as well. It’s a bit different to cheese anywhere else, and has relatively limited applications, but US products do find their way here. The EU imports tend to be speciality cheeses and another product we don’t produce here. From our point of view, European products have a premium associated with them. But in the markets we sell into, all three of those exporters are our competition.

“Traditionally it was only 10-15 years ago that our dairy industry was relatively protected from the international market, and then deregulation came along. When you think about how often dairy businesses change hands, it runs through generations, so we’ve still got a lot of people who are used to operating in a fairly regulated market.”

“The US has been growing pretty rapidly in the last few years and New Zealand has been growing due to producing more milk.” “Side effects of the mining boom are that Australia has been enjoying the high currency, and that naturally makes our product less competitive compared to other suppliers. Areas such as Europe and the US, countries like Japan, and to a lesser extent China, they can buy globally, so we’re competing with other exporters, especially with the US. “If our country is high against the dollar then they’re much more competitive and vice versa.”

Current issues There are many current and future challenges affecting the global dairy market, with volatility affecting every continent and trade markets in general. Several issues are considered to impact the future of the market. This includes variables such as climate change affecting dairy pasture growth, and fluctuating economic shifts such as the predicted economic power shift to East Asia. Trade barriers imposed by governments to protect against high market prices has also ensured an unpredictable dairy market must always be factored into industry expectations and business practices. “One of the key issues is confidence. Global markets in general have seen a lot of volatility ever since the global financial crisis, and because we’re an export focused industry, we’ve seen a lot of volatility in commodity prices.” “Farmers see milk prices going up and down from one year to the next, and meanwhile the cost base is comparatively steady, so they can go from making a decent profit one year to losing a lot of money the next year, so that impacts their confidence.”

“They’re still getting used to the idea that international cost is dictating what they get at the farm gate, trying to build a focus of dealing with volatility in income instead of deploring it.” “Part of the Horizon 2020 report was focused on ways that dairy farmers can be empowered to work with the market rather than struggle against it when things turn against them.”

Deregulation The deregulation Droppert refers to has had a monumental impact on dairy trading since its introduction in 1999. This consisted of the removal of both state and federal legislation specific to the dairy industry. Essentially, regulated sourcing and pricing of milk ceased, alongside support of manufacturing milk prices, seeing a more open market which adversely impacted on farmers and branded milk manufacturers, but saw consumers benefit from lower milk prices in most cases. The impact of deregulation has been varied, but traditionally milk set at regulated prices has been important to individual farms at the beginning of the production cycle, in terms of their total milk output. A number of farmers took advantage of exit payments offered under the DSAP scheme that was set up to minimise social and economic impact of total industry deregulation. This saw an overall decrease of total farms that were previously reliant on static pricing. “The Australian industry tended to be a lot more like every other one around the world. In the sense that the government had a fairly active role in setting farm milk pricing, and the trade of milk between states in the country was restricted. For example, in the north, they have high production costs because the weather’s less conducive to pastor production.

Australian Business Executive Q1 2014

“The cost of production was higher and the regulation provided for that by setting higher milk prices. The markets were fairly domestically focused then, because there were small dairy communities geared towards producing product for local sale.”

of consumers. This undermines the share of branded milk in the category and two years on its lead to discounting that has arguably taken value out of the category.”

“There was another layer of regulation on top of that such as a single exporter shipping product overseas, rather than anyone being able to buy it in and anyone being able to import product. The other half of the equation is imports, and a lot of dismantling of import barriers with the World Trade Organisation.”

“The key factors driving the market have been the move to cheaper loss leading private milk, and I guess that share of that takes away from branded milk. There has been some regaining in market share since then, but it’s been looked back upon as a hallmark for what’s wrong.”

“There’s been a lot of wholesale change which has taken the industry from a state of being fairly well protected from the global headwinds.”

Legendairy

Coles discounting sparks copycat milk discounts Deregulation has paved the way for competing large supermarket chains to manipulate trading markets. They’ve set their own prices on milk products in an attempt to undercut competition by selling cheaply and in bulk. The move from Coles two years ago paved the way for low priced, price matching of milk prices in rival supermarkets. While the consumer benefits from such moves, Droppert indicates how these drastic supermarket measures undermine, and arguably devalue the value of dairy production. “The most recent thing that’s come up started about 2 years ago, with Coles and Woolworths, where Coles instituted a dollar a litre off the milk. That was a significant discount and a volume driven strategy.” “That was a landmark occurrence, and since then other supermarkets have matched the price, which for a while led to a trade down to private label products by a good proportion Photos courtesy of Dairy Australia

Finally, the recently launched initiative by Dairy Australia of Lengendairy conveys what the body is about, providing awareness of information about how important a dairy diet is to our continued wellbeing as a society, while showcasing the stories of individuals, farms and business involved in dairy production to highlight the efforts of those seeking to make dairy a viably sustainable business option in Australia for as long as possible. More public information on the nutritional value of dairy products is seen as a key component of the long term success of the industry, with healthy natural solutions seen as key to differentiation and variety in food options. “There’s a platform we’ve launched known as ‘Legendairy’, building on the stories of the industry and promoting that right through to the nutritional benefits of consuming more dairy. Research shows that consumers, like a lot of westerners aren’t consuming as much dairy as they perhaps should be for their health. Dairy Australia has taken the lead in trying to promote that from a category level.”

AustralianBusinessExecutive.com.au

MAKMAK MACARONS

Interview: Home business to blogging sensation By Jamie Boyd

estled on 601 King Street along the main strip running through the quirky cosmopolitan suburb of Newtown, Sydney, is the home of Macaroon selling confectionary business MakMak Macarons.

Founded in April 2010, a permanent store aimed at providing the local community with macaroons, a lightly baked, cookie type confection. Now with a total of ten employees, the business is transitioning from a home based business to a small retail business. The baked treats are a current sweet ‘craze’ in Sydney, allowing the company to capitalise on current macaroon fever, acting as an example of how small business can be run successfully if entered into at the right place and at the right time. Even fast food multinational McDonald’s are getting in on the act, seeing the neat, diminutive, and quintessentially French dessert cookie being sold at Paris McCafés. Parisians are renowned for their trendsetting in the food world; rarely do these connoisseurs of the industry get it wrong when it comes to making decisions about whether a product deserves pride of place in their well informed establishments. Director Carlos Heng’s primary goals involves trying to emulate these finest patisseries in Paris, and eventually seeing MakMak established as Sydney’s rivalling equivalent in terms of macaroon production. The story of MakMak’s development is an altogether humbling one. Heng founded the store after studying to be a qualified chef, partaking in the fine dining business for several years alongside a stint in bar management. He then boldly opted towards founding MakMak in a bid to forge his own path in fuelling his culinary passions. He oversaw his business expand year on year, from initial fruition as a home delivery service, into a retail shop front that is the talk of the town. MakMak has certainly caught the attentions of the trendy food blogger, seeing all manner of positive critic reviews helping the business reach a wider consumer base. TimeOut Sydney listed MakMak macaroons as the judge’s pick in the city. The berry flavour macaroon featuring highly, with glowing comments about the naturally tasting flavours and how “the gloss on top is just beautifully formed”, said TV regular and chef and snow egg expert Peter Gilmore. Such ringing endorsement has seen MakMak macaroons popping up in various restaurants and cafes in the area. This includes Duke, Baffi, Mo and Cafe Lounge, as their products look to steadily segue into the city’s popular snack market. The macaroons are handmade, hand-piped and 100% gluten-free, using the finest quality ingredients in a range of flavours, colours and textures. Available flavours include Rhubarb & Rose, Apricot & Elderflower, alongside innovative creations such as the Blood Orange G&T (gin paired with tonic water in a jelly centre

Australian Business Executive Q1 2014 surrounded by blood orange ganache). It’s a quick insight into why food enthusiasts have been raving about these small snacks making a big impact. What is the full story behind this bakery store in Newtown that’s got everyone talking, and what makes it stand out from other businesses in the baking trade?

Strong community support Heng begins by portraying an image of the early days of the company, attributing the reason for their initial popularity down to an enthusiastic community base; with word spreading between the tightly knit populous as to the quality of the goods MakMak produces. “I think it’s the encouraging response we got just from selling directly to people. Everyone seemed to repetitiously come back, even twice a day which was nice!” “We’re towards the south end of King Street, so there are a lot of families that live round here. We get a lot of mothers with their prams that come in or people just coming back from work, so we’d build that rapport with them so they come back to us with requests for dinner parties,” he said. “There seems to be quite a good support network within the local community here for us, so that was encouraging.”

First steps It’s an inspiration to anyone with a desire to go develop their own business ideas, with MakMak having begun in a residential kitchen space, and still retains its sense of duty as a dependable communal food service to this day.

Now they have a dedicated kitchen space in which to operate in. The company thrives on the opportunity for creative ingenuity and room for experimentation with a busy kitchen mixing and baking around 5000 fresh macaroons weekly. With flavours inspired by the natural herbs of each particular season as an added unique selling point. Heng’s initial epiphany leading him to this point came when reading a food magazine picturing pink macaroons on the cover. He tried the adjacent recipe and quickly developed an obsession with this small, simple, yet curiously enticing pastry product, seeing there were few good quality iterations either locally or overseas. A lot of time and effort went into perfecting the recipe, culminating in a successful showing at The Bobby Goldsmith Foundation’s Annual Bake Off, and convincing Heng that this was the business he should be involved in permanently. “We’ve had the business since April 2010, but it’s like every small business, every year seems to be a big change. I was running things from home because we weren’t doing such large business, but by the end of the year we found ourselves in the position where we were getting more demand, so I couldn’t do it from home anymore because it was too hectic and took up a lot of living space in the house.” “I think we started the business with about $500, so I think everything has been built initially on that capital. We’ve had to go back and put some more in where cash flow is a bit of an issue, because we’re dealing with companies that have a payment window of 45 days so we’ve had to bridge that gap every now and again.” “That was mainly for ingredients and also just to get minor equipment like baking trays and a mixer and things like that. Eventually we salary sacrificed for a year so that we could buy a proper oven by the end of the year.”

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“I’m glad those days are over, but I think anyone starting a business will have to go through something like that.” “When we began it was initially pretty quiet. Then we began getting some serious wholesale business, so we moved on to a shared kitchen in Marrickville with a catering company. We were pretty much operating out of that till we found this space in Newtown.” Shifting food trends means treading carefully. MakMak have appeared to strike gold, operating within their means on a low budget, with customers raving about the product to their social circle. Despite an organic rise to prominence in the Sydney food market without much risk taking, Heng still remains wise to the fact that he relies on forever varying food trends to stay afloat. Media hyperbole leaning on the next big food development could see MakMak’s honeymoon period as the talk of the town, but a growing business such as MakMak recognise good publicity has allowed them to continue operation in the first place. Heng isn’t afraid to utilise modern tools such as social media where appropriate in order to keep their loyal customer base informed of the latest news and promotions. “We’ve had quite a burgeoning wholesale front for quite a while, but we also did a mainly online business that sold directly to the public so we would deliver to people’s houses.”

“Initially there was a lot of just going up to cafe owners and event companies, but there was also a lot of social media involved. We used Facebook and twitter mostly, but also recently Instagram to get us out there.” Smart business acumen ensured the company didn’t make any knee-jerk reactions based on a surge in popularity. A trial ‘Beach Christmas’ pop-up store was set up in order to gauge public reaction from a solely home-based online delivery business, to a fully fledged retail store. The increased visibility and customer outreach Heng has decided to pursue allows customers to fully engage in macaron fervour. “A pop up store was really just our attempt at seeing what having a retail shop front would be like for our business. Because macaroons are a food trend, it’s hard to see when food trends will die out, so we wanted to see if there was a demand.” “It’s been done before; I’m not trying to pretend it’s the only macaroon shop, so it was good to see whether it would work out in our area. The pop up shop was at our production kitchen, so we had this production space that opened up onto King Street. Until the pop-up store we never actually had any retail space available within the shop. It was an experiment that provided good results, so we decided to stick with it.”

Australian Business Executive Q1 2014 Hands on approach Despite wholesale deals and increasing interest in trading partnerships with MakMak, Heng still has his feet fixed firmly to the ground, with a work ethic that many small business entrepreneurs will be acquainted with. Attention to detail in making sure deliveries are made on time without getting locked down into temperamental courier contracts is a testament to Heng’s continued allegiance to a business he’s seen constructed from the ground up. “We operate primarily within Sydney, because it’s a very fragile product. We have tried a few courier companies but it’s also very difficult to organise that with them because delivery times are not fixed. Customers might be waiting for a product to arrive before 12 and sometimes it wouldn’t arrive till 6 o clock in the evening.” “But we do have one interesting focus, we deliver to a cafe in Canberra called Farmer’s Daughter, so at least with that one we really worked out the courier, so there’s no dramas there.” Crucially, Heng recognises the importance in providing a reliable service in order to breed a continuous customer foundation for ensuring the long-term health of MakMak. “I still do a lot of deliveries myself so that way I can see when I deliver to my wholesale stockists that they’re looking after products, to encourage good turnover of the product.” “I jump in where I’m needed as our business is still small. I think all small business owners will relate to this when I say you are needed where you are needed.”

Future of MakMak The tale so far has seen a predominantly old fashioned business rise to the top, much like his macaroons themselves, but Heng still dreams big when imagining the future of the business. He signifies more capital as a means of improving the company’s image, although there’s no sign of the MakMak founder outgrowing his endearingly practical and economic attitude. “I wish I had massive capital to buy new things and make it shiny but I can’t, so as a result of that I’ve had to make very calculated decisions with buying shop items.” “A lot of things in our shop at the moment have been bought from second hand auction shops, our display fridge we had to buy second hand. It still works perfectly fine and costs less than half of the price to buy as if it was brand new.” Smart business decisions have seen MakMak rise to the top as one of Sydney’s leading macaroon providers. Much relies on whether macaroons come to be seen merely as an alluringly colourful party piece, or a long-term foodstuff which could see the company selling macaroons to loyal customers for many years to come.

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