A West Australian Government scheme to defer royalties for junior iron ore miners has been met with criticism from Gina Rinehart.
WA premier Colin Barnett announced late last year that the state government would provide a 50 per cent rebate on iron ore royalties for up to 12 months to smaller mining businesses suffering from the impact of low commodity prices.
Rinehart has gone on record to say that she does not agree with the recent moves by the Barnett Government to ease cost pressures on junior miners.
“Governments shouldn't be bailing out businesses; instead they should be getting out of the way,” she told the Sunday Times, in a discussion about State and Federal governments’ failure to reduce government imposed costs on the mining industry under pricing pressures.
“Government imposed costs are hurting businesses everywhere and making it harder to compete especially in tougher times; Everyone focuses on mining but ask any small business operator and they’ll tell you too,” Rinehart said.
“Government distributing income from business and back again is not the most efficient process. Lower government burdens in the first place would be far more efficient.”
In the midst of plunging iron ore prices and extreme competition driven by massive business expansions by major players such as BHP and Rio Tinto, junior iron ore companies have felt the crunch of high production costs.
An advisor to the Hancock Prospecting director told Australian Mining that Rinehart was frustrated about the government's failure to act despite ample indication of softening commodity prices, and that action should have been taken before companies faced pressures.
West Australia's new Iron Ore Financial Assistance rebate will remain subject to the iron ore price remaining lower than $US90 per tonne.
Requests for the rebate will be assessed on a case-by-case basis by the Department Of Mines and Petroleum, with applications to undergo economic analysis by an independent probity auditor.
Only mining projects with a comissioned iron ore production capacity of less than 20 million tonnes per annum will be eligible for the scheme.
The royalty rebate will need to be paid back after two years, meaning the government will not be out of pocket provided companies remain solvent.
Mines minister Bill Marmion said: “This is not a handout, this is a deferral and is a good outcome for WA.”
Federal industry minister Ian MacFarlane said he agreed with the move to reduce royalties, and urged other state governments to consider changing royalty schemes.
“If states want to see their gas and oil companies continue to explore, then they may have to incentivise that and they best way to do that is to reduce royalties,” Macfarlane said according to Australian Financial Review.
However McFarlane was unable to answer if he thought royalty rebates were the best way to aid troubled miners.
“We could argue the economics and semantics but in the end it's the giving relief to companies then that's good news,” he said.
MacFarlane said despite differing points of view about government support for junior miners, he did agree with Rinehart that the mining sector was over-regulated.
“At a state and local government level, mining projects are inhibited by an extraordinary amount of regulation and co-operatively governments are working on that,” he said.