Barnett tells BHP to ‘get real’ on royalty hikes

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Western Australian Premier Colin Barnett has threatened BHP Billiton will not be able to expand its iron ore operations unless it agrees to pay the state government’s higher royalties.

Barnett told the Australian Financial Review the state was not interested in negotiating with resistant BHP CEO Marius Kloppers over royalties.

“As is said to Marius, you need to understand that I am not much interested in selling you iron ore at half price,” he said.

“He is not going to be expanding his iron ore mines unless he does agree, he has got no choice.”

BHP declined to comment over Barnett’s threat but said it was negotiating with the Government over the royalties hike.

“We are in discussions with the WA government on the proposed royalty increases,” a spokesperson said.

Unlike newer companies such as Fortescue Metals, BHP currently operates under old “state agreements” with lower royalty rates.

Smaller miners have long complained that BHP and Rio Tinto pay less than others, and BHP appears to be holding out for concessions from the state to allow it to make productivity-boosting changes.

But the state agreements BHP currently operate under govern all aspects of company operations and give the Government a blocking strategy if BHP refuses the royalty increase.

Barnett said the royalty rise was small in comparison to the prices BHP was selling the ore for.

“While the world price of iron ore is $170 a tonne, we are talking about a royalty increase from $10 to $13 a tonne,” he said.

“We are not going to be selling them iron ore at discounted prices when they are selling at high prices internationally. Get real.”

Barnett said Kloppers had to realise that the state government owned the resources and had a right to raise royalties.

“He has got to understand the state owns the iron ore,” he said.

“We are no different to any other business partner in a commercial project.”

Last week the NSW government followed WA’s lead and increased mining royalties in the state budget.

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