Sunday, August 31, 2014

Mining the Tarkine Part 2

August 30/2014

The bad news just keeps coming. The iron ore price has sunk below $90 per tonne, and hopes of the Smithtonites and now Tullanese for local jobs with good wages just down the road have been dashed with the end of operations for Venture Mining at Riley Creek. I can't say I told you so on that one, I had just sadly shaken my head over cynical or brain dead opportunists exploiting community divisions because it too, like any little marginal base metal operation was doomed to fail on this side of the commodity cycle. At least it was on the surface and MAYBE some Chinese angel might have come in or still might to take a controlling stake in the tin prospect. Whichever, it goes to show the business case trumps everything else even if Richard Colbeck ignores it in his calculations. And well he might. He and his party stirred up enmity, garnered support, and arrived safely at their electoral destination. That it was an ugly hoax for all sorts of investors hardly matters. Their misplaced resentments will run long, broad and deep until next time, the bread having been snatched once again from their mouths by the environmentalists.

This may be far-fetched but if some Zen master say had spent years giving classes in the community, flummoxing, beating and humiliating people and enlightenment had eventually flared in a few minds: We aren't just honest working people desirous of bread; WE ARE THE BREAD! Then they could go back to cutting firewood or whatever they usually do, and would thereby know the answer to another famous koan:

A wood-chopper studies long and hard with his teacher. After years of anguish he attains satori. What does he do? 

Hint: these things always have an internal clue. The answer is not a holiday in Bali, or a new second -hand car like I might do.

Unity Mining is to close the Henty gold operation after a $52 mil loss. This company has never been a favourite of mine. When they were Bendigo Mining a relative who lived there filled me in on their activities. That nothing was happening but they were burning lots of cash with an office full of administrators. But like a fool I had ignored that and the due diligence of Harmony Mining, who had walked away from it in their efforts to diversify out of South Africa and then I had taken part in a capital raising from investors– they managed to get $90 million together, were building and due to start up their mill. But when they had the money they shut it down, stiffing their investors and walked away to greener fields which was a pertinent comment on the business they had been promoting; first to Beaconsfield where bad ground is legendary and the orebody is a lot like Mt. Lyell – which is to say there is a lot left but it is getting too dangerous and expensive to access. That was a disaster too and they took up the Henty mine from gold mining giant Barrick, (who was shutting it down) on a punt that the mine wasn't depleted after all, which is to say the unlikely event that Barrick's geologists were wrong. That worked out for them despite it having been an especially dumb and desperate thing to do. I was long gone – a name change after you have been screwed over is one more good negative indicator. Which is a nicer term for a kick in the a****.

I mention my involvement as a speculator or employee in these things to highlight that this is an ugly and risky and short-term industry, definitely not a place for elected know-nothings to be throwing money around -YOUR money, in forms of government assistance, or getting involved in subterfuges to attract capital from investors who are definitely going to do their dough; ninety- nine times out of a hundred is enough to say 'definitely.' And they run interference for these companies at all times. Recently Brian Green put on one of those weak Tony Abbott mouth-only smiles as he explained there had been a 'sulphur spill' from the tailings ponds at Savage River. That expression was used on the news several times; there had obviously been an agreement to use that particular term – sulphur; its that yellow powder, isn't it? Wouldn't hurt a fly that grandma used to mix with black strap molasses as a cold remedy. All's well. Actually it was acid drainage; sulphurous acid if you want to be technical; from weathering sulphides in all those millions of tonnes of waste and tailings. It will be leaching into the river until it is all washed into the sea in a global warming catastrophe or scraped there in the next ice age.

Its a nice mill at Savage River. And I have seen the pit and talked to people who actually know things and listened to the news. The ground is broken and there will never be an underground operation. The pit was designed with a grade that optimized recovery, but when you converge at the bottom there is nowhere left to go without stripping such a huge ratio of overburden you have no choice but to walk away. A landslip is a major disaster because the trucks have to drive out round and round. Another pit has been opened and its claimed they will be viable for another 10 or 20 years. But the clincher is probably the price of natural gas used in the pelletizing operation at Port Latta.

Australia is unique in the developed world in that we have no domestic gas reserves, our companies have been contracting it all for the export market as fast as it is being drilled. Prices on the Asian market are double what we want to pay and Australian manufacturing is shutting down at a horrific speed; if you want long term supply you have to match international prices. So I give them another three years. And yes, I have worked there too occasionally on shutdowns, nary a speck of sulphur in the house.

Wednesday, August 27, 2014

Forestry Renaissance Part 3

This evening on the news we were treated to the new Tasmanian Minister for the Forest Renaissance gloating about the vote in the Upper House; 9 to 5 to end the forest peace deal and turn the Green Tide. MLC Rob Valentine has been nice enough to respond to an email in which I had touted this blog and asked if I thought that it might be possible to log minor species sustainably over a long period, like perhaps a three or four hundred year rotation.
Of course I don't know what the government has in mind and would hate to be inadvertently numbered amongst their supporters on this issue. But here is my answer.

 I know a number of people on the fringes of the industry - Chris Searle at Stanley (now retired), Frank Strie in the Lilydale area who must be close to that and there are others who really care about the larger questions of sustainability and what we are leaving for the future. All of us imagined that somehow we could make positive changes by demonstrating that high value products were worth more than volumes of low grade industrial feedstock in competition with every other desperate regime hacking out whatever resources came to hand and selling them for bottom dollar on world markets. We all agreed that a long rotation system was hypothetically possible.

But as to whether it could happen in a political sense is doubtful. This is about humanity rather than science, economics or even general accounting practice. We have the documented history of Roman times and it was just the same. They had a burgeoning underclass that wanted bread and circuses and didn't care what happened so long as they got it. Long before that Aristotle had noticed that the soils of Greece were slipping into the sea due to forestry and farming practices. The island of Cypress was named after the dominant forest species that was being hacked down to build the commercial and military navies of the time. It was light, and filled with volatile oils that gave it resistance to shipworms and it has been gone long before the historical Renaissance.  Italy and to a lesser extent Greece still have rich farmland in the flat country and volcanic areas thanks to EU subsidies that pay for fertilizer. But generally we have been there too long and its all pretty poor. Cypress is bare and fit for little beside olive trees and marginal grazing for sheep and goats, but the Turks and Greeks are still willing to shed blood over it although their green tide turned and went out a thousand years ago.

Several years ago at a clearing sale I ran into Terry (Snow) Turner who had been North Forest's logging foreman on the Surrey Hills freehold. We shook hands and he shook his head and said, "You were right. It's all gone and I never would have believed it."

Well its not quite gone, the receivers have found a buyer who thinks they can make a bob from exporting woodchips now that the plantations are in place. Its almost like native forest in that regard, they get to reap what they never had to sow. But I remember seeing fifty thousand tonnes of pure red myrtle logs going off over three months as an experimental shipment to see if it would make decent cardboard boxes. The logs weren't smooth enough to woodchip without including bark and there was a lot of rot as it was very old. I also had another experience in which I had organized a load of blackwood sawlogs (by cutting off some pulpwood butts) and was refused same by the logging foreman on that basis; that they were sawlogs. I went to see Nick Sherry to complain that the company was woodchipping sawlogs which was illegal.

"We know that," he said,

"What are you going to do about it?"


I sent some photos of loaded railcars to Robert Bell who tabled them in Parliament; the bona fides of which were denied by Robert Rae. And now it is imperative that new country be opened and exploited to replace what we have lost to stupidity. To be fair only 10 or 15% of that myrtle would have been recoverable as flitches then, perhaps 20% now as shortages have brought down standards. And not too long after Robert Bell was dead. So the 'green tide' has been going out here for some time.

And Chris Searle in his own efforts had spoken to the media about the value of burl myrtle veneer; he was retailing it at 40 thousand dollars a cubic metre. I had been cutting the odd veneer flitch from exceptional wood whenever it came my way but the quality I was looking for was pretty rare, certainly not worth spending your time on solely. Because for people like us the economics were still lousy. It would cost almost half that money to have it sliced at the Somerset veneer mill. If it didn't come off perfectly it was unsaleable at those higher rates but you still had to pay and it was a thin market, especially being a red timber. Doing much of it meant a horrendous outlay for inventory you had no certainty of moving. But lower grade material and offcuts were saleable as turning blocks at $1000 per tonne (cubic metre). This is about the same as sawn green blackwood at the time, and although there was a lot of work involved you could cut a lot out of stumps or big logs in a day on the chainsaw.
I spoke to Brian Hayes, North's logging superintendent and offered $100 per tonne to select the stuff and he said “Oh no. That would imply it has value.” So we agreed I was to pay a royalty of $20. I was already paying veneer rates to contractors to select and load stuff for me; and there were still haulage costs on top. And so we had a gentleman's agreement and I went over to America and drove down the west coast to check out the veneer industry and drum up some business.

Canada had just signed the North American Free Trade Agreement, NAFTAA. It was the kind of thing that puts dollar signs in the eyes of fools and quislings. But within months the big American forest giant Weyerhauser was suing and Canadian timber products were being held up on the basis of unfair trading advantages, to wit Canadian stumpage rates (royalties) were lower than rates in the US. So Western Canada's major forest corporation MacMillan Bloedel was hamstrung. After this had dragged on a few years, MacBlo had suffered enough and was a bargain. It was swallowed by guess who. Unless you are pretty dumb you will have guessed Weyerhauser.

But driving through the US opened my eyes on a related facet. Motor fuel was only a fraction of the price it was in Canada and this was because of (once again) an excise tax differential. And this constituted a trading advantage not only on timber products of which it is a substantial impost, but for every American product every step of the way.

And if you are pretty dumb about the dynamics of power you might suppose the Canadians even raised the issue.  There was a peripheral lawsuit related to motor fuel but it was simply a damages claim – Canada had banned a noxious gasoline additive that was contaminating ground water via leakages and spills and the American producer wanted compensation.

On my return I was informed that North Forests was going to veneer burl myrtle themselves and I couldn't have any after all unless it had been rejected by the guy from the veneer mill. And they produced a very large quantity – they were slicing anything dark red that had a few deep burl spots on it.

But .6 mil veneer on a chipboard substrate is hardly the sort of material that makes lasting high end products. A lot went into flavour-of -the-month architectural concept work. I even used a bit myself later when I was working in Sydney and put together the bar in the new gambling development downstairs at the Concordia (German) Club in Stanmore. Which is now defunct and boarded and you don't hear any more about burl myrtle than German-Australian relations. The war vets with grudges had gone broke or died and the veneer price had crashed.

I did find a customer for turning blanks in Seattle. Chris and I collaborated on a shipment (mostly burl myrtle) which was lost on the Melbourne dock for some months and then I received notice from the US that it was going to be confiscated at its destination because of some detail in the bill of lading which I managed to fix up. When it arrived (green waxed blocks) it was all covered in black mold which they cleaned up and said it was the best shipment that they had ever received but not what they had expected. Could I send samples of something else?

Despite the specialness of our special timbers they aren't really special to anyone else.  And the human tide is flattening the primary forests of the world, 90% is gone now, mostly within my lifetime.  As the Amazon is converted to short-lived cattle operations, subsidized by clearing the timber, the same thing is happening in Indonesia for palm oil, Africa for drying tobacco and subsistence crops like sago, and the international market in morally dubious luxury materials is booming.  Beside my burl myrtle blocks in Seattle sit a smorgasbord of things like wenge, bubinga, cocobolo, teak, mahogany, ebony, zebrawood and for my counterparts in the source countries, a thousand dollars a tonne is a small fortune.  Men will kill you for that so its pretty hard to protect.  And there is a worm in the minds of our species, which goes beyond supply and demand - scarcity actually exacerbates demand for reasons of social display.  The demand for prestige sells the most ordinary crap from art to abalone, shoes and handbags on the grounds of little more than that it is already expensive and is recognizable as such to most of us who my son tells me are referred to in alternative circles as 'brand whores'.

There was a special timber poaching problem here twenty years ago.  Even now they are cutting down nearly worthless nesting trees for orange bellied parrots just for firewood.  All you need is vehicle access and anything becomes worthwhile if you are on a pension with time on your hands.  So if you open up areas with the best of intentions and provide a legal but restricted  (and thereby expensive) market in which the illegal product can seamlessly disappear extinction will subsidize itself.

Some time after the burl myrtle business when the satellite chip mill was finished, North Forests kicked all of us off the freehold right down to the firewood cutters who had refused an offer to fill containers on low contract rates for the Melbourne market. Reportable earnings would have been the final straw anyway as far as they were concerned. Some months later I was offered the opportunity to continue if I wanted to match the highest bidder which much higher than crown millers get charged for sawlogs. And my business would be more successful if I learned to keep my mouth shut. I chose neither option.

Then North merged with Gunns and kept all the headkickers in a final winnowing out of the decent. After that the story is near enough in time that everyone can remember, a pyramid of taxpayer- subsidized plantation development and subsequent failure that ended for the same reasons it had for so many of their over-leveraged contractors.  And this is the story of the privatized and profitable part of the industry. The publicly owned, loss-making socialized bit that is Forestry Tasmania has once again been given a 'get out of jail free' card. As did the Gunns CEO who sold out of millions of dollars worth of shares on privileged company information before it was public -nearly free anyway and he didn't do jail time thanks to his infirmities. 

Nevertheless John Gay has been allowed to continue as a director of the family's veneer business. As Brian Green apologetically explained, he is making all those jobs. So I presume he isn't out there himself; cutting veneer flitches from the unwanted rubbish that was supposed to be the province of the woodchip industry and humping the stuff out on his back.

So I have this residual sadness; like when I asked my son if I could be his friend on Facebook.

"Maybe I don't want you to know what I am getting up to,” he said.

"How would you like it if I slashed my wrists," I answered. "For that kind of a knockback by people you love its de rigueur."

Monday, August 25, 2014

Forestry Renaissance Part 2

The idea of a forest peace treaty and a sustainable industry has been around for quite a while. In the late 90's there was an attempt based on the acronym CARS , which is to say a Complete And Representative Sample of each of the different pre-settlement vegetative types that would be preserved, and scientific opinion was that 15% should provide for adequate biodiversity. Government and industry pressure reduced that to 7%, but according to Forestry Tasmania even that was too much and would mean the cessation of logging in commercially valuable old growth stands on which so much of their mandated sawlog production depended. And a lot of the remnants were on freehold land and landholders would be asked to make generous covenants to top up particular categories.

Agriculture had been a major part of the problem. If trees are to do well they need pretty much the same conditions as other crops and so most of the tall forests, especially on red soils, had been cleared for the purpose. Deep weathering occurs quickly with volcanics so they are relatively fertile. Other rock types are so slow that fertility tends to exist only where it can come in from elsewhere, like the sediments in valley bottomland. Elsewhere you only need look at the tree rings. A lot of our species have adapted to the slow availability of nutrients from the continual recycling of the forest within itself on virtually worthless subsoils. Huon pine for instance – some of those bigger trees are pushing a thousand years old and you will find them growing anywhere protected but very wet and bleak, surrounded by detritus but often with nothing more underneath them than white quartz sand. And when and if it is logged to the point of opening up the canopy it is replaced in the short term by cutting grass and other nutritionless shrubs that make do on leaf litter remnants. When that burns, as it all will – once or twice and the whole plant community is history. 

It seems to be part of our normal mental function that belief trumps mathematics and general common sense. Those CAR percentages add up to 100 and no more. And it is amazing that a large percentage of the population believes that a number like 40% can apply to remaining economic stands of native timber whereas in fact this country has been 'locked up' because it has no economic value other than recreational or quarrying and grossly over-represents communities of stones, alpine mosses, dunes, and stunted shrubbery in the high country.  

When I built my sawmill and began organizing my minor species salvage/retail operation Mike Peterson of FT took me around the plantation at North's Hampshire freehold which they were converting to eucalyptus nitens. A casual observer wouldn't have noticed, but he pointed out the sensitivity of growth rates to fertility and microclimate. The trees were doing well near the partially burnt windrows where they had wind protection and fertility. On most of the ground the trees were only a fraction as tall and struggling and this was only the first rotation after native forest. On the next rotation all that windrow material would be finally burnt and smoothed out. Subsequent plantings in their 17 year projected cycle would have no advantage at all . So projected growth rates were a dream and a few years later the woodchip companies with the help of generous tax concessions for investors began acquiring farmland. This was in lower elevations than the freehold and years of fertilizer applications had enriched the soil. Native timber up there on the other hand had been superlative albeit slow growing.

At one point there was a question as to whether some of it should be protected as rainforest. Our federal MP at the time was Chris Miles and he worked hard to show that it was in fact unworthy of protection, having been degraded by previous logging operations. These had mainly been billet cutting for the Burnie paper mill. This was before modern forest practices and billets for chipping and papermaking were produced as follows. Trees were selectively felled and cut into eight foot lengths with dragsaws or chainsaws. Contractors chose the biggest, best and cleanest trees because the sections had to be split with wedges so they could be loaded by hand crossways onto their rigid flat tray trucks and carted down to the coast. Local people around my age (just retired) remember their fathers coming home exhausted in the cold wet winters. After splitting and loading their quota they would often as not have had to winch the trucks out through the mud and sleet to get home. There is a lot of civic pride in Burnie's paper making heritage in spite of the fact it was murderous from those early years and not only in the bush. My neighbor told me about working in the lower level of the mill where they made the chlorine.

We used to roll the mercury around in our hands. And the collecting hoods above the tanks were stainless steel lagged with blue asbestos.”

Which they would push into the joints with a blunt chisel tool if the smell of chlorine got too strong. The mercury in the bottom of the tanks of salt water was the electrode. And of course much of it ended up in Emu Bay.

Is anyone still alive.” I asked.

No, only me.”

Did anyone ever sue?”

Not a one.”

Sunday, August 3, 2014

Plus ca Change

Personally I am not complaining about my own part in shouldering the burden for the budget emergency.  As an old-age pensioner its hard not to feel like some kind of useless charity case and yes, this is a new day in a smarmy resurgence of bone- heads but that doesn't mean it isn't time to give something back.  My benefit reductions will barely make half the nominal sacrifice of the Prime Minister on his  half mil, not counting what I will lose on state concessions for local rates, power bills, and whatever extra heavy lifting I will be liable for locally; or his foregone wage hike.

And no this is not unjust. There is no-one more contemptible than the entitled but undeserving poor.  We have to stop giving them things.  There is nothing more worthy of adulation than the entitled wealthy.   We have to keep giving them things so they can be the drivers of economic growth in this country.  I recall Bronwyn Bishop explaining it once in those smug John Howard years; how she would hire a maid if wages were low enough.  Well, if she lived close by and could keep her damn mouth shut I would hire HER to do the vacuuming if her wages were low enough.  But the funny thing about these Ayn Randian ubermenschen is that for all their talk of free enterprise and the self-regulating magic of the markets they are neither innovators nor do they want competitive market discipline to set their own incomes.   Having spent a lot of time in the construction industry I have known and worked for a great many; where they call themselves 'developers'.  All have claimed to be visionaries, and proudly flaunt their credentials in their quest for elected positions in local government and more. They have wonderful dreams for our communities.  But I have worked endlessly it seemed putting that crap together and it was generally devoid of any of the touted revolutionary aesthetics or quality.   And they were all psychopaths.  The best thing you can say about them was their socially desirable focus on making money rather than strangling young women.

Land is purchased or optioned at a market price or better in view of existing zoning and other restrictions.  To make a big leveraged investment work they have to get finance which means to first lock in a profit.  So maybe you thought your swampy pasture was agricultural or a protected wetland when you took his offer; which it was for you or anyone else who didn't have powerful friends in local or state government, or make political donations or hire an architectural firm to draw an idealized artist's concept of your dream.   After that it goes to the following plan.  During the pre-Olympic boom I worked for subcontractors in Sydney on the tools on several major projects.  All my bosses had tendered for a particular job against many others.  And some optimist can always be counted on to  make a mistake.  On some projects all the subcontractors were going out backwards.  One who wasn't was fingered by the CFMEU.  He had imported Korean stonemasons.  They wouldn't speak to you (if they could have) and had been packed into cheap rented houses six or ten to a room including meals.  That's how 'price discovery' works (for labour).

On our next job I and a couple of Irish boys were exiled out to replace rotten floors in a far western suburbs pub for talking to the union rep over a salvage attempt on the contract's financial viability.  It would have required us to become self- employed contractors and work for peanuts and we weren't willing to budge.  That's the trouble with us entitled poor.  We are geared and driven by self interest, just as surely as the family dog.  In a moment of weakness you let the bastard inch himself past the doormat and next thing you know he is hogging your favourite chair and sleeping in your bed.  Unconsidered largesse transforms instantly to inalienable entitlement.

But the new government's austerity budget has already started to bite fevered imaginations and subsequent market behavior.  My Melbourne son was moving house and  it coincided  with 'hard rubbish day' in his suburb.   As he was clearing out his garage and depositing unwanted worn-out old power tools and what- have- you on the curbside, a couple of steel-eyed junkies on pushbikes rocked up and parked by his pile.

"Oh wow man does this old drill work?  Wow!" and they piled their selections over to one side.  But then they got distracted on the neighbour's garbage and turned to see not only that their pile had been  plundered but their bikes were gone as well in one of the many utes and vans that had converged from all over town for the bonanza and were buzzing up and down the streets.

"Stop! stop!," they shouted as these vehicles passed from both directions and of course the drivers paid them no notice.  One rushed out into the centre of the street screaming after a suspicious-looking load;

"Don't mess with a schizo, mate, I'll effing kill ya!"

The future is now, mate, and its a jungle out there.