THE AGE: Australian taxpayers will lend $US100 million ($110.6 million) to a mining joint-venture run by BHP Billiton and Rio Tinto in Chile, under the latest funding deal by Australia’s controversial Export Finance and Insurance Corporation.
The loan to two of Australia’s largest and most profitable companies comes despite recent criticism of EFIC from the Productivity Commission, which advised the corporation to focus more on small exporters unable to secure finance, rather than big multinationals.
It also comes at a sensitive time for the Abbott government, which has denied financial aid to Holden and others amid its campaign to ”end the age of entitlement”.
Under the terms of the loan, the $US100 million will be lent to a holding company called Minera Escondida Limitada, which is 57.5 per cent owned by BHP and 30 per cent owned by Rio, with Japanese companies Mitsubishi and Nippon Mining owning the rest.
Minera Escondida is the joint venture through which the miners operate the Escondida copper mine in Chile, and the money is designed to help Australian companies win work on a multibillion expansion of what is already the world’s biggest copper mine.
EFIC is ultimately a government body, but operates with a significant degree of autonomy, and is controversially exempt from freedom of information laws.
EFIC spokesman Peter Field said the big miners were the conduit to supporting about 80 Australian companies win export contracts on the Chilean project.
”From our perspective this is all about Australian jobs,” he said.
”Our funding is very much tied to the incremental provision of exports from Australians.”
EFIC did not disclose the interest rate being charged on the loan, but said it was at ”commercial rates” and pointed to the fact it pays an annual dividend to the Australian government.
”This has opened up an opportunity to these 80 Australian companies to pitch their wares and they have all now been contracted to provide their inputs,” Mr Field said.
Australia is just one of several nations that supplied loans through export credit agencies to Escondida’s expansion, estimated to cost about $US3 billion.
Greens senator Lee Rhiannon said the loan was “nothing short of corporate welfare”.
“The Prime Minister says the age of entitlement is over but this handout is going to BHP and Rio, two companies that should not be getting any handouts at all,” she said. “EFIC is exempt from freedom of information and environmental protection laws but government money is being used to assist this copper mine. People should be able to find out how this agency operates.”
Senator Rhiannon said the loan highlighted the need for the organisation to focus on small and medium enterprises.
Trade Minister Andrew Robb said the loan decision was made by EFIC from its commercial account not by the government and insisted it was not a handout.
“Eighty per cent of EFIC loans are provided to SMEs [small and medium enterprises]. Any loans that may benefit larger companies are only provided if they lead to a significant number of Australian SMEs gaining access to export opportunities that would not otherwise eventuate,” he said.
“This is certainly no hand-out. EFIC operates independent of government within an established commercial framework supporting viable companies where there is a financial gap in the market. In this case the finance will be to the benefit of some 80 Australian companies … who are engaged in the global mining supply chain.”
BHP is Australia’s largest company and recently reported an $US8.1 billion profit for the six months to December 31.
Rio Tinto is the 11th largest company trading on the ASX and made underlying profits of $US10.2 billion in the year to December 31.
BHP paid about $US9 billion worth of taxes to state and federal governments in Australia last year while Rio Tinto paid $US5.7 billion.
by Peter Ker and James Massola