Senate Economics Legislation Committee, , 6:58:05 to 7:37:06
The hearing reviews the Industry Growth Program and the financial assistance package for the Mount Isa smelter.
Topics: Grants administration, Manufacturing, Infrastructure
Speakers: Meghan Quinn PSM, Hon Matthew Canavan, Susan McDonald, David Chuter, Hon Tim Ayres, Hon Richard Colbeck, Lisa Darmanin, Louise Talbot
>> all right. We will we will uh recommence. The committee welcomes representatives from the Department of Industry, Science and Resources for Program 1.1, Growing Innovative and Competitive Businesses, Industries, and Regions. Um, Senator Colbeck, you have
>> Thanks, Chair. Screen just went blank. That's good. Um, look, just before I go right into things, and I know I'm flipping back to right to the beginning, but the statement that Miss Quinn that you made with respect to Mr. Warrington, I never um had the opportunity to interact but um I do acknowledge the minister's comments with respect to the national measurement measurement institute a lot of people wouldn't get it wouldn't understand what goes on out the back in that organization but there are is so much that goes on in our economy that's important from that organization so from this side of the table from the committee side of the table I just add um our thanks to Dr. Warrington for what he's done. I saw that in my previous life before here on many occasions, but just so much stuff that we do that we take for granted. The work of that organization is critical, too. >> Thanks, um, Senator Colbeck. I know that Bruce, I appreciate that. Thank you. I was going to go electronic. I'm going We might skip around a little bit through. And here we've done some of these before. I just want to go to the uh industry growth program which we talked about earlier or Senator Canavan talked about earlier. go to the 102 that was cut out of the industry growth program. So, so the effect of that cut, does that mean that there will be a smaller number of expected recipients or that recipients will receive smaller amounts or both? What will be the effect on the industry growth fund
I I'll kind of answer at a high level and then pass to my colleague um the executive director of the industry growth program. Um the fund is a demanddriven program. Uh and the number of grants, the size of the grants and what the grants are spent on is all sourced from the companies themselves. Um the overall effect of the savings is that there will be a reduced uh amount of money for the program over forward years. Whether it's a reduced number of recipients or reduced number of grants is going to depend on the mix of um grantees and their applications and the meritocracy of their actual claims.
>> So the operation of the fund will operate the same way but the bar effectively will be higher if there's applicants than there is
Americas system and and there is a uh an assessment um but I'll hand to my colleague to kind of talk about how the program is running now and we are in the process of um thinking about the application of the savings to the program but over to you David.
>> Yeah thank you. Thank you Senator David Chud executive director for industry growth. Um uh the program has two main constituents. Uh the predominant part of the program is the advisory service that's provided by expert advisers to high growth potential and innovative small and medium businesses. Um the program's already delivered or is delivering that service to around 1,900 businesses today uh all around Australia since it opened. Once they've received the advisory service, they have the opportunity to apply for one of the grant opportunities. So uh as the secretary indicated the department is working through what the impact are of the myof savings are to the program but it remains uh the program remains open. It is business as usual and there are no changes currently to the advisory service and the value proposition that companies can obtain from that. Um the grants themselves are assessed by an independent committee. uh and then the recommendations from that grant committee are are then put to the program delegate within the department who will then assess those recommendations and consider them against available funds as to which grantees are awarded.
So the advisory service element of the program will remain the same with the same capacity
uh subject to the deliberations the department's going through in terms of uh how would those savings translate into any potential changes or reconfiguration of the program. We have 33 advisers in and around Australia at the moment and applications remain open and we are uh supporting businesses all around the country uh as as we've done over the last two years since the program was opened.
>> I'm sure you've provided this before but what's the distribution of those advisers those 33? Um we certainly can
provide that detail but we have advisers uh uh from as far north as Ken's um down through Brisbane uh through um northern Rivers uh into Sydney. Um we have an adviser in Canberra. Uh we have advisers in Melbourne and around regional Victoria, South Australia and Western
>> You're leaving me feeling very sad as a
adviser in Tasmania and we don't have an adviser in the Northern Territory. Um we the advisers were selected through uh two rounds of procurement tenders. Uh they are uh contracted to the department. Yeah, they're contractors. Um and and bringing industry expertise um and the selection process uh dealt with the tenders we had from around the country. And so if there were uh effectively we were supporting where the demand was for the program which has predominantly been in in the major states and and where innovation and manufacturing is looking to grow.
>> So how are those two other two jurisdictions serviced?
>> They're serviced by advisers. Uh so in Tasmania's case for example, they're serviced predominantly by advisers in Melbourne. Um and in Northern Territory uh they're serviced by they have been serviced by advisers from either South Australia or from uh Queensland and far north Queensland. Okay.
>> So approximate B effectively what's the time frame of the contracts for those advisers? when do they cycle through?
>> So, the first advisers that were contracted by the department, uh the way the the process works is advisers are contracted and they they put in a tender for a 2-year contract with the option for the department to extend for one further year and then up to one further year beyond that. uh the first uh cohort of advisers that came into the program, their two-year contracts were due uh their two-year contracts to finish around about that December January period. We have two this >> that we've just been through. Correct. Uh we also then broadly doubled the number of advisers in the February March period last year and their contracts will be running through to um February March 2027.
So potentially you could well how many of those expiring December January have been extended by one or two
years? Uh they've been extended by 6 Um and I can uh provide the exact number on notice but around about 10 advisers have been extended through that period.
So, they had a 2-year contract with an option for another one year plus another year, and you've given them six months. >> Is that a um not so subtle smoke signal?
>> Uh, Senator, can you clarify what you
mean by that? Well, if I was sitting there with a a contract with the government department that ran for two years and then I had a one-year option of a one-year extension, then another one year on extension on top of that, and the government came back and gave me six months, I'd be looking over my >> thinking that at the end of the six months, that was it. Because my contract says your extensions are one year and another one year. That's why. So, do those do those 10 have a future after the six months?
>> So, at this point, we've said that um the government has taken savings from this program. We're looking at uh where it's at. We've we we've been doing an evaluation uh constant monitoring of how it's delivering for the government's needs. Um it's prudent on us to manage the contract workforce in a way that's appropriate for the our um financial obligations. Um the one-year extension was entirely at the department's um ability to extend or not. That was part of the contract to start with. Um and so uh the two years was the certainty. The extra was always uh depending on uh the shape of the program. Their performance also uh and whether they were delivering the services we needed uh across the distribution of of businesses that were coming through the door. They're not all they don't all have the same expertise in all the different sectors. So we always wanted flexibility to be able to meet the demand of the program. Uh and and that have has turned out to be slightly different than we expected. We've had more micro businesses. So we've we've had to kind of think about the distribution of services. So I I I wouldn't say that there's anything other than us being prudent contract managers in the decisions that we've taken.
>> Okay. Um so are have there been any or are there going to be any further rounds of contracting for the advisory service or that's
>> it's going to be we have we have the advisers on the two years and we have the advisers on the six months uh we will there was always the intention to roll over the advisers over time um and that will be subject to any design parameters that we we make which we're
considering now. So, so you don't you can't really tell us at this stage what um $102 million cut will be. What proportion of that would go to advisers and what proportion of that would go to grants?
Uh in very round numbers um uh the proportion of funding that's going into advisers is in the order of 9 to 10 million. that was for uh it's probably about nine million. We can get you the the exact number and happy to take that on notice. >> That's for the adi the contracted advisers and that would be the sum of their annual contracts. Uh we also have at the moment industry partner organizations and so senator to your comment about um regional uh reach. Uh we've got six industry partner organizations that also have partnerships around the country including organizations for example in Northern Territory and Tasmania. Um there's around uh in round numbers $5 million peranom that is granted to those organizations as well. So in very broad terms uh around about 14 to$15 million peranom for the advisory service element uh in terms of contracted advisers and industry partner organizations but I'm happy to take on notice the the the exact details around that.
>> And what does that leave for grants?
Uh it changed over over the years um because we had uh there was there was some the profile was different uh for the program over the over the years. Um if my colleague doesn't have it off the top of his extra detail, happy to take it on notice, but there was a um there's a profiling issue in terms of the the scheme and and how it distributed the money over the [snorts] financials.
>> Yeah. Senator, when the program was first announced and launched in November 2023, um the program was $392 million, of which at that point in time around about 287 was earmarked for grants. Um that changes at any point in time based on the number of grants awarded, the spend profile of those grants, the the uh the payments to the grantees and grants that are in process with the grant committee and those being recommended. So at any point in time in any given in any given fiscal period that number will change.
>> Um I have actually just found the total administrative budget which is in round numbers around 40 49 million for 2425 90 um6 in 2526 uh 88 roughly in 2627 and 45 round numbers in 2728. So they're the sort of rough orders of and then 38 million in 2829 and so you if you sub subtract the round numbers for the advisor element of about 14 million you you'll get the element for grants. It is the case that um we initially had more funding in 2425 but as I said the grants that came through the door were smaller in amounts than we were anticipating and so we have moved some of that into forward years to uh to adjust for the demand. Okay.
>> You rotating?
>> Yes, I am. Uh, Senator Canavan.
>> Okay. All right. Um, well, uh, I might go back to, um, that, uh, the contingency bit with the, uh, Mount Isa ranch from my EO. Um,
>> we have got my colleagues here. Um the the the give you the detailed answer but the high level answer is the announced funding uh is is around 300 is correct. The contingency is a stage gate. Uh it's the third year's payment is contingent on the outcome of the transformation study. It's part of the agreement. And so the this is a budget treatment. It's not there's not a contingency for any uh overruns or any expected changes. It's all accounted for in the in the
Um I'm just not really following that. isn't the contingency reserve an amount of funds?
>> It is. Yes. >> And it and and it's in the and it's in the contingency rather reserve rather than given to the department because it's contingent on
>> part of the 300 million. Is it?
>> It is part of the 300 million. It is
part. [clears throat] Okay. Gotcha. Okay. All right. So it may be less than 300 million is
>> if the stage gates not met.
>> Well, I did I did. Okay. Well, what are the stage gates?
>> It's I hand to my colleague.
>> Thank you, Senator Luis Talbert, acting head of division industrial transition response team. Uh so there are a number of stage gates. The one you're talking about is the one for the third year of funding uh which is contingent on the completion of a transformational study. Um and so the the the pattern of the expenditure up to a maximum of $300 million is outlined in um in some detail in the federation funding agreement uh with Queensland government which is published.
>> Okay. Uh [clears throat] uh is any of the amount well actually before I get to that let's take a step back. I want to ask about this. Uh when this issue cropped up uh uh probably a little bit less than a year ago now uh well it was probably about a year ago uh the I think they were called the treatment charges for copper from memory uh had gone negative or at least were very very low. Uh there's been quite a lot of movements in the copper market at least for finished copper products. uh what's happened with treatment charges in the
>> So I don't have that in front of me but there is there are changes in treatment charges as the market changes um as you'd be aware. So um the the funding under the agreement is for a range of you know activities not just you know not just related to treatment charges.
>> Okay. Well yeah [clears throat] that was going to be my next question. Is any of the funding to Glen Core contingent on on well on treatment charges for for
>> So so not exactly contingent on treatment charges for for copper. No.
>> Is it contingent on the returns that Glenor are achieving from copper
production? So there are a range there are a range of um you know conditions and stage gates etc in in the funding agreements related to to a number of things including the finances. Yes.
>> Okay. And I'll just come back but is the okay let's be more direct if if because when Glen core came to almost all of us I think and and made these issues clear yes they had a reasonable case given the change in the market conditions and they were making huge losses understandable huge losses and those losses seemed somewhat due to uh predatory behavior from particularly China. Uh there was always the potential though for those market conditions to turn around. Uh there's obviously a fairly uh optimistic view about long-term demand for copper uh uh uh around the world and that as I say the Finnish price of copper as my understanding has surged in recent months that now it's different. I know from the smelting uh prices that Glen are exposed to, but given the potential volatility in the market, I'm just wondering whether you designed this contract, this funding uh with a view uh to protect taxpayer value in the event that the market turned towards Glen
So absolutely that's a that's that's a fundamental premise of of any agreement that we have with companies and in that particular agreement there's a number of performance milestones um including uh and and there there is details set out about the timing and what those those milestones are in that federation funding agreement including confirmation uh that the cost claim for reimbursement in in respect of the working capital funding are in are in accordance with the financial assistance agreement conditions. So, so the things you're talking about are
>> cover that's not quite where I'm going. I'm more talking are there are there any links um from Commonwealth funding uh to uh metrics of Glenor's profitability so net profit or IBIDAR or uh something
>> So there certainly
>> not simply that they spent the money but I'm more interested in actually the the
there is there are certainly review points around the ongoing need for the financial assistance. I think that is your question.
>> Okay. So, when's the first review point?
>> The first review review point is the 30th of April 2026.
>> Right. So, potentially if the markets improve by 30th of April 2026, the
>> The funding is for a particular purpose to support the operations of the of the smelter. Um and we have worked through uh diligently with not just us but with the Queensland government to protect taxpayers money. Um if the purpose for which the money is provided is no longer needed then there are abilities for the u mechanisms to
>> Okay. I'm just trying to get you to spell me that out like what is it what is the you can see where I'm going.
>> Well let officials sort of answer on the treatment charges um believed to go right through 2026 at the very least. I'd just say [clears throat] that uh movements that may or may not happen and officials will be able to take you through uh how the uh Queensland Commonwealth Glenor agreement deals with those issues. Um the point is that it's a concentrated market that doesn't function like a market should. uh and taking steps to secure the viability not just of that facility but the broader region is uh the you know is is what underlies our approach to that agreement. Um it's not like a sort of temporary shift in a market. That's a market that operates like a pure market. That is not that is not the copper market. We're acting to protect Australian capability here.
>> Yep. I I I got that. Um I'm just I'm also very much aware that cause a very savvy uh business. Um and good luck to them. But but [clears throat] yeah, I suppose what I'm wanting to know is that if the market improves appreciably for Glancor and suddenly they're making good profits again that we aren't still handing them over taxpayer dollars and just adding uh to their profitability. Uh so I'm just trying to get a bit of clarity on exactly how that would happen. And so say on the 30th of April u there's a market assessment done and this asset is back in profitability does that give the comm the right to to say okay no more taxpayer assistance um for
>> so senator the exact details of the agreement are are commercial incompetence and so I can't go through the exact details but what I can u provide you with is assurance that there are um ongoing review points in in the agreement um and regular review points and that um they they do relate to understanding the ongoing need for
>> Right. Can can the funding completely cease? Surely you could tell me that.
>> Is there's different elements of the funding. Some of it's related to um capital investments uh and capital you know sort of so there's different elements of the funding package. um some of it is contingent on the overall performance of the company and some of it's related to specific funding. So it's a mixture of both.
Okay. And what exactly when you say [clears throat] is it when you say assessment or these review points is that defined in the agreement for towards particular financial metrics or is it simply there'll be an assessment at the time and and the details of that left left up to when it's done.
>> So Senator there are a range of details in the contract um but I'm not at liberty to reveal those. They are commercial incompetence the contract with
>> well I'm not asking for the particular threshold
>> specific arrangements
>> is it linked to specific financial indicators >> like net profit evida anything like that
there are specific negotiated measures which are clear to all parties about what the uh terms of the review points are um and particularly for the first two years um that is all specified in a specific legal document that is commercial and confident um the high level arrangements are available ailable through the uh federal funding arrangement uh information that's uh available but the specific commercial details um for the reasons that you would understand because it relates to the Glen Call's actual business model and arrangements they've also provided a set of um uh arguments uh related to their actions capital uh capital outlays employment outlays uh those sorts of things. So, there's obligations on Glenor in there. There are obligations on the Commonwealth in there. There are obligations on um the Queensland government. Um this was a three-way negotiation all determined and tease cross denies dotted in a legal document that has very specific terms in
I would say it's I mean broadly uh there's been there's a history here uh and and what what what is required um in addition to what the secretary's just indicated is um both a confidence at in in terms of the facility itself certainty about the next three is uh provide some basis for investment decisions and confidence from workers in the future of the facility but also a collective effort to get a grip on the uh industrial economics of that region. um together with the not just that facility but the other facilities that relate to it and the um larger and smaller miners and prospective mining operations in the region. Uh how we chart a course for that industrial region. That is what this agreement is designed to do. That's what the uh effort is is all about. Um it's it's uh it's it's an effort to balance some of those competing issues to try and chart a real future for the region.
>> Okay, I've got this I'll just ask one question. You might have to just might come back to it because this is a little bit detailed, but I've got the uh the federal financial agreement now. There's milestone one 30th of April 2026. There's a number of dot points the comwalth has to accept and in summary form including confirmation that MIM is entitled to payments confirmation of continued operations and costs. I think you sort of mentioned that earlier. Uh confirmation that costs claim for reimbursement in respect to working capital or accordance with the financial assistance agreement. Evidence of financial assistance provided by Queensland. Fair enough. Commencement of a transformation study and establishment of a governance arrangement in accordance with the FF fa. I just don't see there. I'm struggling to see where of those conditions actually relate to the profitability of >> That's my question, but maybe we can come back to it.
>> Yeah,
>> because we're at 10 minutes. So,
>> my team will correct me, but I'm
>> Sorry.
>> Uh the team will correct me, but that first I haven't got it in front of me unfortunately, but the team might but the very first item.
>> So, the financial assistance agreement is something we don't have.
>> Yes. and it's encaptured in there. So, they have to conform to that uh which broadly speaking um is related to their financial viability.
>> All right. Thank you, Senator McDonald.
>> Well, this is tidy because my questions are following on on the same topic. So, does the uh the the bailout package include the the capital cost for the re-bricking of the smelter this year in
2026? It does have capital components related to to the to the operation of the business. Yes.
>> Specifically though, the re-bricking.
>> So the specific details are commercial and confidence, but it does have uh capital items in there as as just mentioned um through the list that Senator Canavan mentioned. So it supports capital, it supports operating capital, and it's got a transformation study.
>> Okay. just that the re-bricking of the smelter uh at Mount Aiza is something that um holds the the city and the region um on tent hooks every 3 years
and >> and getting and and part of the [clears throat] transformation study effort is is an effort to try and get a hold of this so that there is a not that three-year cycle but that is we understand that acutely.
>> Terrific. So, so just because you've spoken broadly about the capital, I just want to be very specific that the um 200 million I assume that it is still broken into equal amounts year 1, year 2, year three, 200 million each. >> Yes. >> Yes, that's correct. >> And so in this first year that would include money for the capital works for re-breing of the smelter.
>> So we haven't broken down the specifics publicly. It involves supporting capital to m maintain the ongoing operations of the facility.
>> Okay. So if Glen core was to come back and say uh that they're going to ask for money to be for re-bricking this year, you would be surprised.
>> Uh yes.
>> Okay. Um the next uh part I want to turn to is there was a media release um I think it was today the MAD eyes a transformation study to shape region's next chapter expressions of interest. Um that's a joint media release between the minister and the Queensland Minds Minister. Uh can I ask you some details about that? It was my understanding when we had this conversation at the last estimates that Glen Core was going to be involved or carrying out that study. But I should step back and say no, it is actually the two levels of government federal and state who are carrying out that study and Glen Core will make input to the study as opposed to having any carriage of it.
>> We'll we'll all be part of it. There's a there's a shared approach uh to that. Glen Core will play uh its part in that work. Um I'm looking forward to those discussions to the extent that um you know I will stick my head into those. Glen Core has committed to as part of that process playing a uh a direct role uh and it is um uh it is a process that's going to be uh that will assist the parties to um you know flesh out the details of what the industrial future what a credible uh competitive industrial future for the region looks like
>> given that Glen Core uh owns the lease that the smelter is on. Um, how do you see it will work that there be a proper examination of new technology, alternate sites, buy or a ac acquisition of the site should Glen Core decide that they know what a I'm spitballing here, but you know, should the the that operator no longer want to uh operate the smelter, how do you think that will all work. What what role will there be for that input if Glen Core has obviously got a vested interest in what those opinions might be?
>> Well, well, the release uh what what it really does is say we're going to um identify uh somebody to um run that process. Uh, of course, um everybody who's engaged in that at a commercial level has different interests. I don't want to um spitball as you say Senator McDonald about what the what the potential uh views that people might bring to that but uh it is a it is a region that's rich in mineral resources uh where there's uh you know in some places junior miners who have really made a go of resources that uh that other um operations have struggled with. um you know so there's there's room for optimism but it won't um happen by itself. Um and so that facilitation is designed to get a hold of what the medium and long-term issues are that that the two governments uh and the industrial and resources players in the region need to commit to. So, you've
drawn my attention to something that I'd perhaps uh very optimistically um filled in some gaps that weren't weren't correct to do. This media release is calling for an exp express expression of interest to be the proponent to carry out the transformation study. I had in my enthusiasm read it as expressions of interest to make submissions to the study. But where's
>> No, no, no. And I'll let the department just talk to the timetable for that. But it is envisaged um you know this is a um this is moving fast to get a process uh up and about um uh over to I I'll I'll get the the officials to go to the completion date of the transformation study but it's not certainly not an
level there there's the all proponents to the agreement so Queensland governmentworth government and Glen core are parties to the transformation study the expression of interest is for the technical expertise uh to be able to assist in doing the transformation study but the timets and things I'll let the
>> sorry just to clarify that so it will be for company XY Z to to draw in the submissions to write the technical paper and to
>> and to and to work with um the Commonwealth, Glenor and the Queensland government and others
>> and others
>> to to to look at the opportunities in the region. So it is it is the analytical support for the process but there is a governance to the process and there you know and so it's asking for people to help in the process but it's not the whole element of it
>> and that's funded from the the 200 million for the first year and can I ask oh how much is going towards the transformation study
>> so so that is commercial and confidence and particularly if we've put out an expression of interest um we're going to we wouldn't want to there's commercial discussions uh in terms of paying for it. So,
>> okay. So, so but you'll be giving some guidance to whoever is making the application whether it's 50 cents or 50 I'm I'm still struggling to understand a little bit that if Glen Coror is a party to the transformation study and then the study starts throwing out things that's not in Glen Coror's um their perceived best interest. uh will you have a a process that they are you know that it's a national interest comes first and that they don't get to rule in or rule out uh studies or ideas that they may not want
>> So So Senator, if I may, that that that's correct. The study's purpose is to provide a comprehensive assessment of the whole of the region's economic potential um and of the northwest minerals province in Queensland. So it is much broader than just Glen Core. Um the expression of interest just to clarify is uh has been put out by the Queensland government for somebody to undertake the transformation study. Um and that does include a range of scope and terms of reference which of of the things that will be covered in the study which are much broader than just the copper smelter itself.
>> And will Glenor make a financial contribution to that study given that at the moment they're in receipt of funds from the state and commonwealth.
>> So the first um year of funding that you've identified the transformation study will be um funded out of that first year of
>> Right. So they're not making a contribution per se. They are the happy recipients of um of that study being done. That's a characterization. That's fine. Um so just back to the study. So we've identified that it's going to be an external contractor doing that work. Um can I just
>> not be entirely just to be clear the commonwealth will bring its capabilities um the state the state will bring its capabilities will be drawing on uh other areas of people contribution but but clearly you need someone to kind of orchestrate and help combine like sort of a secretariat service almost but we will be providing uh analysis from the department into that process as well and we would expect the Queensland government in terms of its information it holds on opportunities in the area um and so it was It's not going to be sent off uh to do some analytical research in the corner. It's going to be a live uh dynamic process. And you've raised some issues about conflicts um in terms of different proponents are going to have different views about what they want uh to happen in the region. Um and the the view is is a need to have a proper rigorous process about what the options are to look at the different scenarios. Uh and so it's unlikely that it's going to say this is the one true solution. And it's going to be much more of a scenario analysis.
>> Yes. And that's I mean this external contractor or whoever's the successful proponent for providing the secretariat for the study. I mean I'm very keen that there be um uh some of that expertise as you say which you know isn't housed in government departments. It's housed in in um you know the the brightest of uh industrial minds. So,
>> I've discovered that there's a lot of people who've had uh a lot of experience in that facility and around it who've got strong views and expertise and um
>> it's it's not a slight but it's just not normally governments that come up.
>> No, no, I'm just saying there's there's people there's there are there is expertise around and people who are all sorts of um you know people are engaged in this process who've got an iron in the fire in terms of some of these things but people who are engaged in it because they actually just deeply care about the region
>> I'll just finish up on this point.
>> You know we want to bring as much of
you know for example the port of Townsville has just built a new temporary uh hard load stand. Uh the rail operators are bringing on additional um to support not Glen Core but other miners in the region. So yes I think there's a lot of uh interest in making sure we get this right and I'll come back in my next round. Thank you.