In the new world order of resources, with almost unimaginable distress across most commodities, all assumptions should be examined.
These should include the obvious: what is core business, what is necessary to deliver core products, and what will long term resources industry dynamics look like?
Gloom abounds today, but the optimists in the industry have sound arguments for a more positive future. Only time of course will tell when and if the changes we are facing are permanent and what a future structure of the industry might look like.
In the meantime, as the fires burn across boardrooms and operations throughout the resources world and across commodities, urgent action is increasingly necessary.
Astoundingly, it appears that one of the most valuable assets of many resources firms in our current market is largely forgotten - similar perhaps to shares held by a grandparent left in a vault which when discovered might be worth millions.
I suspect we all would like to have long lost shares in some industry that valued equity. Well, fortunately many resources firms do.
In the frenetic days of the boom, many operations acquired land assets to avoid delays with land owner consents, and to simplify and expedite operations by removing one more party from the table.
Indeed large agricultural stations were acquired - not just small parcels. Some mining houses in Queensland, for example, have title to well in excess of 50,000 hectares of land, much in rich agricultural country. These assets for many have been "non-core" and therefore forgotten.
Now is the time to dust off title documentation and have a fresh look.
Cogent arguments applied during the boom that the minor expense to acquire these landholdings for relatively insignificant costs would improve speed to market.
Now that the market has collapsed, these land holdings may have a significant new found value.
Some mining houses continue to hold on to land because of joint venture arrangements, or concerns over environmental off-set provisions.
More importantly, mining firms want to preserve access to mineral deposits for exploration, development and operations for the future. Yet each of these arguments can be systematically addressed, and capital quite literally sunk into the land might now be sold to bullish agricultural investors for significant valuations, particularly in comparison with the returns the "core" mining assets are providing.
Disposals can be structured with put and call options such that when and if resources development and operational rights are granted.
Resources firms can have certainty that they could acquire the land back if necessary (it may not be if conduct and compensation arrangements are sufficient).
Similarly, agricultural investors may seek put options to return portions of agricultural interest to resources firms when mineral development decisions are taken.
Firms in distress should be allocating what limited human resources are available to assess their land holdings and consider divestment strategies while the market for agricultural land remains robust. Long lost title might bring in some needed cheer to the new year!
Robert Milbourne is a partner at law firm K&L Gates and adjunct professor of law at the University of Queensland School of Law.
