Miners won’t get a leg-up from state

Gold and nickel miners will not get a lifeline from West Australian premier Colin Barnett, who said he will not be handing out royalty assistance to those affected by falling commodity prices.

Barnett argued modifying royalties due to price variation was not a good idea, saying the cyclical nature of the mining industry is a well known fact.

“I know this is a tough time and some of the high-cost producers struggle. [But] at the end of the day the state government owns the minerals and companies pay the equivalent of 10 per cent of the value of the mineral. I think that’s a pretty good price.”

Miners, small and large, have had to cut the fat from their companies as commodity prices fall. They have been curtailing capital expenditure, cutting jobs and slashing operational costs.

BHP recently slashed 100 jobs across its six Nickel West operations in WA in May. The company said many operational roles will feel the brunt.

The company also flagged in July it will move service contracts in-house in the Pilbara as it looks to cut contractors to cut costs.

Peabody Energy announced last month it would slash 400 jobs across its NSW and QLD coal mines. A spokeswoman told Australian Mining the cuts would impact all of the company’s Australia’s operations.

Newmont cut 29 jobs at its Granites gold mine in the Northern Territory while Newcrest said it will slash jobs at its Telfer mine in Western Australia.

Miners are hopeful the falling Australian dollar and a change in government at next month’s election will improve outlook for them.

With Diggers and Dealers starting today, the AFR spoke to miners who were upbeat about the future and revenue as the Australian dollar goes down.

The event will not be as upbeat this year as during boom times, but there may be more discussions and dealing compared to previous years.

 “I think the currency still has some way to come down – I mean, people are talking US75c,” nickel miner Panoramic Resources’ CEO Peter Harold said.

“That’s enormous relief there. Every one cent, for us, is about $2.5 million a year extra revenue.”

Nickel prices were at $US6 a pound during the 2008 global financial crisis, similar to the present. But the company was earning $9.20 a pound since the dollar stood at US65c.

“At the moment, the Aussie dollar nickel price is 30 per cent below where it was in the global financial crisis,” Harold said.

“And costs have gone up over that period.”

The mining industry is hoping for a pro-business Liberal government emerge victorious at this year’s election in order to benefit the industry.

“We need substantial reforms in productivity and conditions for us to remain a significant industry,” Kingsgate Consolidated CEO Gavin Thomas said.

“I have more confidence that the Liberal Party will understand and address the issues around productivity. Industry needs changes, not just mining, but the whole industrial relations situation in Australia needs more balance.”

Junior miner BC Iron’s managing director Morgan Ball is looking forward to the eradication of the mining and carbon taxes under the Liberal Government.

“The past three years have been challenging for business in Australia for a number of reasons, so it would be great to have certainty around the election,” he said.

“The Liberal Party has gone on record as saying they would repeal the carbon and mining tax, which would be great for business as well.”

Queensland coalfields lost more than 1000 jobs in a matter of a week in June. The cuts came as companies looked to survive under challenging market conditions.

Barrick Gold cut 32 jobs from its Perth head office and five jobs from its Lake Cowal mine, pointing to slumping gold prices and rising operating costs.

Peabody Energy cut 42 jobs from Helensburg's Metropolitan coal mine as part of its plans to cut 400 jobs from its operations across NSW and QLD.

Gold miner Northern Star Resources’ Bill Beament thinks Diggers and Dealers may be an opportunity for miners to come together to discuss how to progress under current conditions.

“So hopefully Diggers is a bit of a catalyst in the industry for a bit of consolidation and a bit of things coming under one roof,” Bearment said.

“I think people are going to be forced to move forward. You know, balance sheets are looking shakier and shakier by the day.”

Australian Mining is at Diggers & Dealers the entire week, with journalist Alex Heber providing live coverage.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.