Miner makes a deal on Kyoto

As it prepares to expand gold miner OceanaGold has squared away one source of risk by reaching a greenhouse agreement with the Government.

Larger firms whose international competitiveness would be put at risk by the unmitigated application of a carbon tax can strike a deal with the Climate Change Office for relief from the tax in return for binding commitments to move to world's best practice in managing their "greenhouse" gas emissions. Companies which exceed their targets can earn tradeable carbon credits.

But there are mounting industry concerns that the process is taking too long and that officials will look to speed it up by reducing how much of the agreements are genuinely negotiable.

OceanaGold's is only the second negotiated greenhouse agreement concluded. The first was done in 2003 for the Marsden Point oil refinery.

The tax comes into being on April 1, 2007.

OceanaGold chairman Kerry McDonald said the company, New Zealand's largest gold producer, planned to spend tens of millions of dollars going underground at its Macraes mine in eastern Otago and developing the Reefton goldfield on the West Coast.

"We needed to have this substantial area of policy uncertainty put into a more manageable framework," he said.

The Macraes ore is comparatively low grade by world standards.

A lot of diesel is required to haul ore to the processing plant, which in its turn uses energy-intensive technology.

Some extra capital expenditure would be required to meet the requirements of the agreement, but they would not be significant.

"It was slower than we expected and in some respects more difficult," McDonald said. "I was very conscious that to be the first cab of the rank posed risks for us. But I don't think the process was unreasonable at the early stage of the regime. Officials were pretty constructive."

The Government is also negotiating with Carter Holt Harvey, Norske Skog, Comalco, ACI Glass Packaging, Newmont Waihi and Silicon Metal Industries. Other firms are also expected to seek agreements.

As the planned carbon tax is little more than two years away there is concern that the process is getting bogged down, and that accelerating it will mean reducing the scope of what is negotiable.

The Climate Change Office's general manager for sustainable industry and climate change, Bill Bayfield, said the Government was considering reviewing its guidelines.

"We are asking some of these companies for their thoughts on how the process might be streamlined."

One point of contention is that the Government is unwilling to conclude agreements stretching beyond 2012, the end of the Kyoto Protocol's first commitment period. "Uncertainty about what the [international] regime will be beyond 2012 makes it very difficult," Bayfield said.