Mining tax will threaten SA iron ore industry, SACOME say

The South Australian Chamber of Mines and Energy (SACOME) have called for magnetite iron ore to be exempt from the Mineral Resources Rent Tax after the second draft makes no difference between it and hematite iron ore.

SACOME says that state’s magnetite iron industry is under threat from the MRRT.

“We are disappointed that the second Exposure Draft (ED) of the MRRT legislation, released last Sunday by the Federal Government, makes no allowances for the differences between magnetite and haematite iron ore,” SACOME chief Jason Kuchel said.

Unlike haematite ore which requires little or no processing, magnetite ore goes through downstream processes to produce a saleable product.

“The MRRT recognises the value of the specialist skills miners employ to extract resources to bring it to the taxing point through a special feature called the extraction factor. The Government has allowed a blanket value for the extraction factor of 25%, bringing down the MRRT tax rate from 30% to effectively 22.5% for both magnetite and haematite.” 

Kuchel went on to say that “the problem with applying the extraction rate equally across all taxable resources caught under the MRRT, is that the effort to extract magnetite and haematite is like comparing chalk and cheese. Operators need to extract up to five tonnes of ore to produce one tonne of processed, saleable magnetite compared to hematite DSO which has a saleable product ratio of around one to one.

“If the Government can’t find a way of recognising magnetite in the legislation as a different mineral to haematite, and adjusting the extraction allowance accordingly, then magnetite should be excluded from the MRRT altogether.

“South Australia is on the cusp of developing a significant magnetite iron ore industry with an estimated combined resource in excess of 4 billion tonnes across a number of regions including Eyre Peninsula, the Far North and the North East areas. The MRRT has the potential to stymie investment, add serious compliance costs and puts future jobs and other economic and social benefits at risk, all for little benefit to the Government.”

Calls have also been made to exclude magnetite from the carbon tax.

Speaking at Diggers and Dealers earlier this year, Grange Resources managing director Russell Clark said “as  magnetite producer that processes the mineral in Australia rather than offshore, Grange would be unfairly penalised under the planned carbon tax due to be introduced in July.”

Western Australia recently set a royalty rate for magnetite concentrates, a move which the Association of Mining and Exploration Companies labelled disappointing.

Mines minister Norman Moore said this rate is consistent with the royalty rate that was already within the Mining Regulations 1981 for beneficiated iron ore.

Because magnetite is iron ore, there is no need for a new magnetite category under Regulation 86 and it is intended that the beneficiated iron ore royalty rate of five per cent will apply to magnetite concentrate,” Moore said.

AMEC  said it had been consulting with the government on various options for the future treatment of royalty rates as it relates in particular to the magnetite sector after calling for an relaxation on the rates.

"In spite of this announcement we propose to continue discussions with the government on the future application of royalties in this emerging industry with a view to assisting it come on stream in the most effective way possible," he said.


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