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October 20th 2013 print

Michael Kile

Christmas Island’s other industry

Boats, asylum seekers and tragedy have cornered the headlines, so the Rudd government's approval of mining-lease extensions on the environmentally stressed island has gone largely unnoticed

Asylum-seekers are not the only group with a keen interest in Christmas Island. About three months ago, the previous government quietly granted the Island’s only phosphate miner a 21-year lease extension. All that stands between the rock and a hard place for the foreign domiciled entities that now control it is an insectivorous batPipistrellus murrayi – and the new Minister of the Environment, Greg Hunt.

A few hours after ex-Prime Minister Rudd’s return to power on June 26 this year, Labor MPs Catherine King (Member for Ballarat) and Warren Snowdon (Member for Lingiari) coincidentally issued a joint media release. Christmas Island’s economy, it said, had “received a boost with a new lease for its phosphate mine, securing its ownership until 2034”.

The signing ceremony was at Parliament House, Canberra. Mr Snowdon said it would deliver “economic certainty” for the Island’s 2,000 residents and “improve sustainability”. But can mining a depleting mineral resource achieve these objectives?

The timing seemed puzzling, as renewal apparently was not due until 2019. A 21-year extension had been granted by the Commonwealth in 1998 over previously mined areas, with a prohibition on further primary rainforest clearing on the 135 sq km island.

The new lease gives the miner, Phosphate Resources Limited (ACN 009 396 543) – and its controlling shareholder, CI Resources Limited, (ASX code CII) — tenure over 1,755 hectares until June 27, 2034.

But Chairman Clive Brown, a former WA Labor Minister for State Development (2001-2004) with the Gallop Government and trade unionist, wants something else before celebrating with shareholders and PRL’s 155 workers – approval to clear more land.

While we are grateful the former Minister approved an extension of our mining lease to 2034, the medium term plans we should now be able to make are once again being thwarted by uncertainties over access to our resource base. We remain hopeful however that the incoming government, with its commitment to the removal of unnecessary red tape, will see the merits of us not being prohibited from mining on our environmentally approved mining lease.”

In PRL’s 2013 Annual Report, signed off in late September, Brown expressed the hope that the Coalition government would support a plan designed that would deliver “economic and social development” to the 36% of the island outside its 8,719 hectare national park -managed by the Australian Nature Conservation Agency.

As Malcolm Turnbull rejected PRL’s lease extension application in 2007, this could be a challenge; at least compared to getting additional funding for an environmental issue – such as controlling the Yellow Crazy Ants that periodically threaten the island’s signature Red Crab (Gecarcoidea natalis); or improving the nesting habitat for Abbott’s Boobies  (Papasula Abbotti).

PRL reported an annual profit after tax of $24.2 million, slightly more than the previous year, on sales of 672,000 tonnes of phosphate products. Its CIMS subsidiary also won a Department of Immigration tender for maintenance services for another three years.

But how did a small group of determined residents and ex-miners – who became the Union of Christmas Island Workers (UCIW) on March 21, 1975, and are affiliated with the Australian Council of Trade Unions — take on a sceptical Hawke government, win the right to re-open the mine after its  closure in December, 1987, form a company, mount a successful bid, commence mining three years later, and make it into the profitable venture it is today?

The first European settlement was established at Flying Fish Cove in 1888 by George Clunies-Ross. He and Sir John Murray — a Scottish naturalist who identified the mineral – were granted a 99-year mining lease and formed the Christmas Island Phosphate Company Limited.

In 1981, the Phosphate Mining Company of Christmas Island (PMCI), an Australian government entity, acquired the operation, which had been in production since mining began in 1897.

PRL began life on July 12, 1989, when its seven founder-shareholders – Gordon Bennett, Lai Ah Hong, Thye Hin Koh, Ed Turner, Su Yin Lim, Chan Khye Memg and Seet Choy Lan – registered Phosphate Resources NL. PRL’s original 350 subscribers, most of whom were Island residents, raised $3.4 million.

Bennett was a key – and controversial – figure in the transformation. The Englishman – who became the Island’s Tai Ko Seng (Big Brother) — was determined to get a better deal for its Chinese-Malay expatriate workers.

Described by some as “complex”, by others as a “bush-ranger”, a “firebrand” and “thorn in the side of bureaucrats”, he nevertheless did so.

At the site of UCIW’s original office, a plaque lists its (and his) achievements as:

“Elimination of colonialism, elimination of racism, wage parity with mainland Australia, Migration Act (Australian citizenship), permanent residence status for Christmas Island, mine re-opening 1990 and fair housing allocation.”

Bennett, a former WA Water Supply Union secretary, ultimately became UCIW general secretary, Shire president and PRL chairman. A heavy drinker, he died from a massive heart attack on July 30, 1991, at 47, a year after the mine’s re-opening.

The “Union” remains a strong force in island politics. Kee Heng Foo is current president of both UCIW and the Shire. Gordon Thomson is UCIW general secretary and a Shire councillor. In a recent radio interview Thomson said that UCIW still represents “everybody on the Island except the Federal Police.”

PRL had 126 shareholders, as at September 17 this year — a 28% decline from 175 in 2012. While seventy-one were Christmas Island residents, locals now hold only 16.9 per cent of the company.

During the last financial year, it spent $11.1 million buying back 555,200 shares, at $20 per share, which reduced issued capital to 2,868,307 shares.

PRL’s controlling shareholder, CI Resources Limited (CIR), participated in the buy-back, increasing its interest from 53.41 to 63.05 per cent.  Since early 2008 — when CIR had about 38% and Island residents 32% — it has increased its share of PRL by 25%.

CIR’s principal activity is “investment”. The company – whose name is derived from “Christmas Island resources” — was incorporated on June 18, 1987. Originally operating as Asset Backed Holdings Limited, it listed on the ASX on July 24, 1987.

The group’s key asset is its PRL holding. It intends “to build its interest in Phosphate Resources Limited” and “to increase its shareholding at a pace permitted under the Corporations Act”.

The Act has a three per cent per annum “creep” provision, which allows gradual acquisition – without making a full takeover bid – under certain conditions.

But who owns CIR? According to page 67 of its 2013 Annual Report , the following Malaysian registered companies were substantial shareholders as at September 17 this year:  Prosper Trading Sdn Bhd (19.98%), Keen Strategy Sdn Bhd (16.46%, and Destinasi Emas Sdn Bhd (10.20%), with Poo Ah Lam holding 5.04%; collectively 51.7% of the company.

Prosper Trading is owned by CIR director, Mr Tee Lip Sin. It shares the same address as PRL subsidiary, Phosphate Resources (Malaysia) Sdn Bhd.

Keen Strategy is half-owned by another CIR director, Mr Kelvin Keh Feng Tan. On October 3 this year, it spent $344,262 buying an additional 600,000 shares off-market at $0.57 and increased its interest to 17.29%.

CIR has only 336 shareholders, 18% (60) holding less than a marketable parcel of ordinary shares.

The top twenty largest shareholders today own 93.8% of the group, hence 59% of PRL.

Three CIR directors – Mr Tee Lip Sin, Mr Tee Lip and Dato Kamaruddin bin Mohammed – represent it on the PRL board.

Christmas Island is 2,623 km northwest of Perth, 2,800 km west of Darwin and only 184 nautical miles south of Java. The Cocos (Keeling) Islands are 2,768 northwest of Perth, 3,700 km west of Darwin and 1,300 km southwest of Jakarta.

Much has been said about island “sovereignty” since the Hawke Cabinet’s January, 1984, review of Indian Ocean policy endorsed Australia’s “enduring interest in protecting….the Cocos and Christmas Islands.”

Singapore and Indonesia apparently showed “some interest” in Christmas Island at the time. However, Territories Minister Tom Uren argued for integration – “to demonstrate to our neighbours that the Island is regarded as an integral part of Australia, not simply as a phosphate source”.

Cabinet agreed on a staged package two months later – which included establishing local government, wages, welfare and voting rights similar to Australia, with income and company taxes. The rest is history.

The first group of asylum-seekers seeking refugee status arrived less than a decade later in 1992, just as the island came under WA legislation.

Then came the Migration Amendment (Excision from Migration Zone) Act 2001An Act to excise certain Australian territory from the migration zone under the Migration Act 1958 for purposes related to unauthorised arrivals, and for related purposes, and subsequent amendments. The 2001 legislation applied particularly to Christmas Island, which continues to attract most asylum-seeker boats due to proximity to Indonesia.

Increasing numbers of arrivals forced construction of an Immigration Reception and Processing Centre in 2005.  Capital works estimates indicate the Howard government spent more than $500 million on it and related infrastructure.

As the Island’s most profitable activity (excluding asylum-seeker processing) is now controlled by Singapore and Malaysia-registered entities – not residents – who have been granted a new Commonwealth mining lease extension until 2034, why stop here?

Why not take the next step and cede the two Indian Ocean Territories to Indonesia?  Given the government’s commitment to “taking the sugar off the table” and to combating people-smuggling, the pragmatic course surely is to gift them to our nearest neighbour; thereby resolving an unratified border issue here.

Ironically, the desk officer involved in Australia’s 1958 acquisition of Christmas Island from Singapore for 2.9 million pounds sterling raised the issue of ownership last year.

Richard Woolcott, AC, a distinguished diplomat and DFAT Secretary (1988-92), put it this way during an Expert Panel discussion (pages 135-136) last year on the Casey Era (1951-60), arranged by the Australian Institute of International Affairs.

Woolcott: “The transfer was part of the British mindset. Singapore was going to become fully independent, so it was necessary to keep Christmas Island in good safe British hands by transferring it to Australia.”

Moderator: “So you were involved in buying that island?”

Woolcott: “Well, I suppose we bought it. We’re paying the consequences right now in terms of refugee problems. But there was really no reason why it should have been transferred to Australia.

However, the transfer was done and I think Casey was very keen on keeping it in safe hands. Logically, of course, Christmas Island was part of the colony of Singapore, and more logically could have been transferred to Indonesia, to which it was much closer. But I just mention that in passing.”

Nationalistic notions of sovereignty should be weighed against the fact that these remote territories will remain not only mere “crumbs from the British Empire’s table fed to us when the age of colonialism was drawing to a close,” but also will continue to be refugee magnets as long as they are considered part of Australia.

Woolcott added that felt a “sense of guilt by association” whenever the islands were misused, and so ought Australia.

Whether his logic would appeal to PRL, CIR and the UCIW – and all involved with the asylum-seeker “business model” – is another matter.

 

Michael Kile –  October, 2013