Rebuilding investor sentiment key to New Zealand's push to double mining exports

Overcoming damaging investor perceptions is crucial to New Zealand's aim to build a coal industry and critical minerals sector, according to Resources Minister Shane Jones.

The new government elected in October 2023 launched controversial mining reforms this year in a bid to double minerals exports to NZ$2 billion by 2035, provide over 7,000 direct jobs and support other sectors through the "stable supply of essential minerals," Jones told S&P Global Commodity Insights in an email interview. Essential to these reforms is the Fast-track Approvals Bill introduced in May that drew thousands of environmental protestors in Auckland on June 8.

After several decades of mining promoters being "sidelined or stigmatized," the new government wants to shift investor sentiment by creating "confidence, certainty and enduring commitment" to the industry, Jones said.

"The length of time it takes to deliver mining projects in New Zealand is costing us — in inflated costs, delays and in terms of our international reputation for doing business," Jones said.

"Much of this relates to the state of our Resource Management Act, but we have also suffered from negative signals through changes to Crown Minerals laws introduced by previous governments and unclear positions on conservation laws," Jones said. "New Zealand has long lacked clear policy direction on minerals extraction, making it harder to create enabling policies and creating investment uncertainty."

A critical minerals list is being prepared for the government by Wood Mackenzie and will arrive by year-end to help facilitate a more positive investment environment, Jones said.

Investment climate

In a 2023 mining survey by Canadian think tank Fraser Institute, 88% of respondents in New Zealand's mining sector expressed uncertainty about areas to be protected as wilderness, archeological sites and the like, which was the highest of the 86 jurisdictions in the survey. The country ranked 43rd in the survey's investment attractiveness index for such uncertainty and other factors.

"Jurisdictions that match their mineral endowment with a competitive set of policies are the ones that become attractive in the eyes of investors," Julio Mejía, a policy analyst at the Fraser Institute, said in an email interview. "However, uncertainty is hampering investment attractiveness in New Zealand's mining sector."

New Zealand's Crown Minerals Act was changed by former Resources Minister Megan Woods in 2023 to erase the word "promote," thus removing the government's imperative to foster mining. Jones pledged June 9 to bring the word back. He is also set to travel to Australia in July to meet mining industry and government figures, a spokesperson said.

The policy approach by the previous government was "not conducive to attracting the investors," Josie Vidal, CEO of industry association Straterra, told Commodity Insights. Vidal said the industry can easily meet the new government's target of doubling the value of mineral exports in a decade if the projects that are currently planned get underway.

Santana Minerals CEO Damian Spring at the Bendigo-Ophir gold project in Otago, New Zealand. Source: Santana Minerals Ltd.

The change of government "has certainly allowed us to demonstrate to potential investors that New Zealand is doing a U-turn in terms of its mineral extraction direction," Damian Spring, CEO of gold explorer Santana Minerals Ltd., told Commodity Insights.

Since the new government was elected, Australian pension fund AustralianSuper agreed in April to invest A$75 million in Federation Mining Pty. Ltd.'s Snowy River gold project in the northwestern area of New Zealand's South Island.

Coal to receive a boost

Boosting both gold and coking coal exports was cited as a key priority in the government's mineral strategy.

Jones' New Zealand First party campaigned on "actively investigating the potential of former coal mines, rather than the importation of inferior coal from other countries to ensure a sovereign energy supply," the minister told Commodity Insights.

New Zealand exported 1.2 million metric tons of coking coal in 2023 and imported only 37,837 metric tons, according to government data. For thermal coal, New Zealand exported 23,282 metric tons and imported 202,468 metric tons.

About 13% of the country's thermal coal demand in 2023 was met with imports, Jones said. The share of imported energy coal varies year to year depending on demand from Genesis Energy Ltd. for the Huntly power station.

The reforms are to "ensure New Zealand is not reliant on overseas suppliers of essential energy resources, to explore and enable extraction of other material such as critical minerals, that will boost the economy through more exports, more jobs, higher GDP and regional prosperity," Jones said.

The government will change Resource Management Act rules around coal mining to ensure industrial processors will "have access to domestic coal and not be forced to rely on imported coal to meet their needs," Jones said April 16.

At the end of 2023, New Zealand had 11.2 million ounces of gold in reserves and resources, 144.5 MMt of coking coal in reserves and resources, and 69.3 MMt of thermal coal in reserves and resources, according to government data.

As of June 17, US$1 was equivalent to NZ$1.63.