Gold Fields to review exploration plans in light of WA royalty increase

South African gold producer Gold Fields is reconsidering its exploration expenditure in Western Australia in light of the proposed 50 per cent gold royalty hike (from 2.5 to 3.75 per cent) by the McGowan State Government.

Gold Fields, a leading brownfield explorer that operates three mines in the WA region, invested $102 million in 2016 (about one-third of total gold exploration in Australia) and budgeted $89 million in 2017 for exploration ventures.

The company’s Australasian executive VP Stuart Mathews explained that the rise in royalty payments would significantly erode profit margins, risking jobs among Gold Fields’ 2200 WA employees and contractors.

“Gold Fields has been investing up to $100 million annually on exploration in WA, if we cut that spending as a result of the royalty increase, there has to be a direct impact on the jobs and livelihoods of those working in exploration,” he told The West.

Graham Short, acting CEO of the Association of Mining and Exploration Companies (AMEC), has expressed similar concerns, reflecting a growing sense of unease within the WA gold industry.

“The drilling industry, their crews and suppliers will be the collateral damage in the government’s short-sighted cash grab,” he said.

“60 per cent of the additional royalty revenue collected will go to Canberra for distribution in the GST carve up, whereas the job losses will be felt in WA […] the McGowan Government and all opposition parties should be looking to support the industry and grow the royalty revenue pie.”

Gold Fields CEO Nicholas Holland had previously expressed that the company’s interest in the region is a long-term one.

“Gold Fields is a global company and we see Australia as an important part of our portfolio. We are here for the long term, and we are looking forward to investing and growing our operations down here in Australia,” he explained at the annual Diggers and Dealers Mining Forum in Kalgoorlie in August.

The company’s $298 million, 50:50 Gruyere gold mining joint venture with Gold Road, which is expected to deliver first gold in early 2019, is expected to become Gold Field’s fourth WA mine.

Western Australia’s Liberal opposition has not yet made a decision regarding the royalty proposals.