THE DISTILLERY: Resources royalty

The Australian Resources Conference went down in Perth yesterday, with the industry facing one of its most uncertain periods. Two senior columnists from The Australian Financial Review offer their impressions on the positions held by a collection of Australian mining heavyweights and government officials.

The AFR's Chanticleer columnist Tony Boyd says his takeaway was that Western Australia is placing a great importance on minimising the impact of the resources ‘boom and bust' cycle. Premier Colin Barnett would much prefer the industry as a whole to structure itself so hiring and firing occurs more gradually.

"However, he would be concerned at the reasons local and multinational companies are re­thinking investments. David Peever, managing director of Rio Tinto in Australia, says the deceleration in activity across the sector in Australia is caused by rising costs that are making Australia uncompetitive. While he would not be pinned down on Rio's lowest possible cost target, he made it clear that governments cannot take the company's presence for granted. Rio, like BHP, Xstrata and Peabody Energy, is looking at its costs in Queensland where their coal businesses have been hit with a huge increase in royalty charges. But, in comments that would have been music to the ears of Barnett and federal Resources Minister Martin Ferguson, Peever says Rio has pole position in the iron ore market.”

The same newspaper's national affairs columnist Jennifer Hewett notes the remarks of Ferguson that the mining industry is becoming too costly on a broad basis.

"But the biggest questions are still around the future of the liquefied natural gas market which should be responsible for much of the growth in the resources industry in Australia over the next decade. Ferguson pointed out at the Australian Resources Conference that most of the $230 billion in planned (but not committed) investment in resources in Australia would be in the LNG sector. Australia has already had the benefit of $270 billion worth of resources investment that is committed or under construction. But he argues it's crucial the country can win that second tranche of investment from mid-decade on.”

Meanwhile, Fairfax's Adele Ferguson previews the showdown at Cabcharge, with a first strike for the executive remuneration report already sitting on the company's record.

"After suffering the ignominy of a first strike at last year's annual meeting, investors in 85-year-old Reg Kermode's Cabcharge empire are gearing up to vote for a second strike on executive pay rules on November 28. It comes as Cabcharge is being smashed on the sharemarket after the loss of two bus contracts with the NSW government, which has been seen as a setback in what had previously been perceived as a close relationship. Indeed, until 2010, former NSW premier Neville Wran was a director of the company. Against this backdrop is the impending response of the Victorian government to an inquiry into the taxi industry by Allan Fels, which recommended that the surcharge Cabcharge charges on every non-cash fare processed through its EFTPOS terminals or its Cabcharge charge cards or vouchers should be reduced from 10 per cent to 5 per cent. The Baillieu government has until December 12 to respond to the recommendations.”

Elsewhere, The Australian's John Durie takes us through the speculation of two big chief executive succession plans.

"Chief executive succession planning is back in the news, raising the question whether there is a textbook solution to the issue or if circumstances simply overtake the process. There is a textbook solution, but once the issue becomes public it is very hard to apply. Marius Kloppers' tenure at BHP Billiton and Nick Collishaw's abrupt departure from Mirvac are just two of the present examples. The first point to note about both is there is very little deal flow now and the market likes to talk about something, so the personalities around the chief executive make great headlines. With Cynthia Carroll leaving AngloAmerican and Mick Davis soon to depart from Xstrata, the focus naturally enough has turned to BHP, especially as Kloppers himself has raised the issue.”

In other company news, the AFR's Michael Smith looks at the balance that Incitec Pivot boss James Fazzino is trying to strike between explosives and fertiliser.

Still in resources, Fairfax's economics correspondent Peter Martin reports on a study that concludes the rural exports industry is being short-changed to the tune of $15 billion thanks to the high Australian dollar. The Australian's Barry Fitzgerald lists his reasons to believe in the rush back into gold, following the overselling that took place in July-August.

Meanwhile, the AFR's economics editor Alan Mitchell writes that the need for economic reform is becoming all the more pressing as Australia pivots from a terms of trade boom to a broader engagement with our neighbours in the Asian Century.

And finally, The Australian's Bryan Frith has an interesting yarn this morning about some of the fallout from the NSW Court of Appeals on the James Hardie boardroom saga.

Basically, many company boards are run "along informal collegiate lines,” where unanimity is actually a reflection of a broad consensus amongst the directors. Only when someone has a very specific objection to a matter of business is that noted down.

While it doesn't look like this system of mutual trust will be upended, there is the potential for board decisions to become much more regimented and legalistic.