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2008 WASM graduation ceremony address – Luke Tonkin

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Distinguished guests, graduates, relieved families of those graduating, ladies and gentlemen – it gives me great pleasure and is a tremendous honour to have this opportunity to address the graduates of 2007.

It is rare but a wonderful opportunity to return to the home of my youth and to the School of Mines which established the firm foundations of my career.

I understand that not all the graduates tonight are entering the resources sector however my key messages are as applicable to you as they are to the others. The key messages are unlikely to resonate initially, however as you progress through your career they may. I do not seek to inspire but provoke thought.

Twenty plus years ago it was me sitting as you are this evening. The late Sir Lawrence Brodie-Hall gave this address and I hung from this revered industry icon’s every word.

Few can be compared with Brodie however we share two qualities:

1.Pride in knowing we are part of the WASM legacy; and

2. Passion – a passion for this wonderful industry that has created, and continues to build on the wealth of this nation.

It is said that nothing great in the world has ever been accomplished without passion – speaking of which I remember my first mining lecture which was held at night, catering for students working on the mines. The late Fred Watson, head of mining, assembled us in the Hobson lecture theatre and commenced his lecture with the statement:

“Tonight we begin to determine whether or not you have a brain, the industry will teach you how to use it”. This has been my experience and I’m sure many of you will share a common experience”.

The graduates of 2007 are commencing a journey of learning, discovering that the “pillars of learning are seeing much, suffering much and studying much. Those of you that seek power and fame should bear in mind that even their partial fruition is gained by very few and at the expense of social pleasure, health, conscience and life.” It is worth remembering that the most successful in life are those who seize opportunity when it comes and are armed with the best information.

The graduates of 2007 are entering a sector experiencing unprecedented growth which, to a large extent, is underpinned by the remarkable urbanisation and modernisation of China. Prices for commodities have increased substantially since 2004 with demand outstripping supply. There has been a pull back in some commodities but in real terms there has been a step change in the longer term outlook for commodity prices.

The capacity and capability of the resources sector is lagging demand placing enormous stress on operating and capital expenditure. Large projects are being delayed and their costs to complete have escalated substantially. Intellectual capital is at a premium whilst employee conditions have moved to lunar levels.

I’ve been in this industry a long time and experienced the depths of commodity depression and the highs of commodity peaks and I express a word of caution.

The industry and consequently the State and Nation are benefiting from this, dare I say it, SUPER CYCLE. Unsophisticated investors however are speculating on resources stock rather than analysing the fundamental value of the business. This is a dangerous practice and can only lead to tears. Graduates of 2007, ensure your due diligence is thorough and you chose your “horse” wisely, particularly in this time of financial market volatility.

It is compelling to become absorbed in a heated market however the fundamentals of finance and economics continue to apply today as they did yesterday and as they will tomorrow. Of the many large scale marginal mining project proposals touted today, few will see the light of day in the near term or during this cycle. This is the case today as it was yesterday and as it will be tomorrow. It is true that large upward movements in commodity prices makes “moose pasture” appear attractive however over the cycle and given incremental costs of marginal supply of current capacity the sustainability of commodity prices will determine the fate of any project.

This leads me to the subject of Geology, Mining and Metallurgy. The resources sector, by its very nature, is an environment for opportunists. “Spin” and entrepreneurial licence has the ability to create a silk purse from a pig’s ear. This being said “some ones trash is another’s treasure and by way of example I am reminded of my appointment as General Manager of Kambalda Nickel Operations. For many years Kambalda had struggled against a backdrop of industrial turmoil and subdued nickel prices.

On my appointment the “powers that be” wanted to know my plans to turn around the flagging fortunes of Kambalda. Some words of advice graduates of 2007 … “Mediocrity can talk, but it is for genius to observe”… and as a consequence I reserved my response.

Management at Kambalda feared my arrival for my reputation preceded me. However for the record, this was the best mine management team I have ever had the fortune of working with.

To cut a long story short I took a few days out with the management team, here in Kalgoorlie to establish the operational strategy for Kambalda. For two days we focused on cost cutting, efficiency improvement, resource optimisation, driver tree analysis, rationalisation and restructuring. And on the subject of restructuring – In 56AD Pretonios wrote…

“We trained hard, but it seemed that every time we were beginning to form up into teams, we would be reorganised. I was later to learn in life that we tend to meet any new situation by reorganising and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralisation”.

Late on the last day we looked at our plan and marvelled at our combined intellectual capacity. Just one problem, our plan could never be implemented.

In reviewing Kambalda’s recommended strategy it became evident our assumptions relied on management being given the imprimatur to make significant changes to Kambalda’s operating practices and management which were not consistent with the company’s organisational culture. Show stopper!!!

The culture of an organisation is established by its leadership and you either use it to your advantage or move on if it’s unpalatable.

Kambalda was strategically important to the company and sustaining feed from Kambalda was vitally important to the nickel business. So, with a clean sheet of paper we set about devising a strategic plan that was consistent with this objective. Our plan was implemented and written into Kambalda’s history which is a sad reminder that organisations can lose the ability to mine and manage resources that established “their” credentials.

“Sometimes in life and business you must give a little to gain a lot.”

It is absolutely imperative that the graduates of 2007 fully comprehend that, all things being equal, operational success is determined by the quality of the geology, mining and metallurgy. Fully understanding these fundamental inputs and how they relate to financial performance is pivotal to superior decision making. In a world of financial engineering you ignore the basics of your business at your peril. Like the credit market the resources industry is awash with examples of enterprises that choose to or failed to fully comprehend the limitations of their own organisational culture and fail to comprehend that geology, mining and metallurgy are omnipotent.

It’s said there is no education like adversity whilst acknowledging, that fear makes us feel our humanity.

I started my career as an underground labourer at CNGC. During my first six months underground I was engaged as a scraper driver and train driver at the Ajax shaft.

I was on afternoon shift late in March and my role was to transport the crews to and from their work areas on the level, scrape out stopes, bog headings and tram ore and waste to the passes.

The shift was no different to any other in that it progressed with the normal trials and tribulations of working underground. At the end of the shift I worked my way out of the mine picking up crew members as I went, until we came to the 10/1080 access where a miner would normally be waiting. Generally he was always on time however he had not appeared and the remaining crew were becoming impatient and requested I transport them to the shaft and come back for the miner. It was a short run to the shaft so I agreed.

When I returned to the 10/1080 access there was still no sign of the miner. I ascended the ladder-way into the stope to see what was keeping him however it was very quiet and visibility was very poor. I called out but no response so I began searching the stope and came to an area I had worked early in the shift which looked nothing like I remember it.

I raised the alarm and seven hours later we recovered the body of the miner from under a significant rock fall.

Although I had experienced this tragic event after only four months full time employment underground, I hardened to a tough an uncompromising industry until 14 May 1991.

I was the manager of the Scotia mine outside of Norseman and received a phone call from the Mine Superintendent asking that I return to Norseman because there had been an accident at the OK mine.

On arriving at the OK mine the Mine Superintendent approached my car immediately and with an enormous burden told me that the man who had trained me as an underground miner and with whom I had spent so much time had been killed underground in a shrink stope.

Steve Fitzroy was the best of the best, Norseman’s GUN miner, had honed my survival skills and taught me that there was only one way of mining and that was the right way.

I stood shoulder to shoulder with a legend and I was devastated at his tragic loss and even to this day I am drawn to his memory. Steve remains ever young in my thoughts as do the many men I’ve seen lose their life in this industry. Their faces, their voices, their youth is forever etched into my consciousness.

The death of Steve Fitzroy cemented my disciplined and uncompromising approach to operational behaviour ensuring life is valued not prioritised.

Graduates of 2007 you enter an industry that continues to challenge even the most disciplined practitioner. Areas of the industry remain laden with testosterone whilst a vital survival tool, common to the fairer sex, the ability to multitask, is rare.

As you embark on your career remind yourself that “fools wonder, whilst wise men ask”. The environment in which mining takes place is neither homogenous nor isotropic. It is constantly on the move, forever changing. Combine testosterone, male behaviour and the environment in which we operate and disaster becomes your constant companion. Your challenge is to ensure that only the highest standards of discipline and behaviour are maintained. You will be the leaders who, by example, will establish the culture in the work place. Poor leaders who condone unsafe acts and behaviour create a new benchmark for poor performance and in turn allow their people to gravitate to the lowest common denominator. The result of poor leadership and behaviour can be devastating.

Experience is always a costly thing to buy, as I have found, but it is a commodity that is difficult to pass on to others. The more extensive a persons knowledge of what has been done, the greater will be a person’s power of knowing what to do.

Skill, knowledge, experience, wisdom, temperament, how one values their role and mental processing ability will determine your progress within your chosen career. Next to knowing when to seize an opportunity, the most important thing in life is to know when to forego an advantage.

Graduates of 2007 I live my life being inspired by a simple verse:

“Press on! Nothing in the world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not: unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent”.

Graduates of 2007, “you will never realise the strength within unless you feel deeply, act boldly and express yourself with frankness and passion”.