Royalty increase seems imminent

Increasing royalties will hurt the mining industry which is already suffering from the ongoing economic crisis, a spokesperson for the NSW Minerals Council has told MINING DAILY.

Increasing royalties will hurt the mining industry which is already suffering from the ongoing economic crisis, a spokesperson for the NSW Minerals Council has told MINING DAILY.

The Council’s CEO DR Niki Williams met with the NSW Premier on Friday afternoon to discuss the effect a potential increase on royalties would have on the minerals industry.

Williams said although the meeting was constructive, the Council remains concerned that the Government is still considering implementing an increase.

“The State government needs to recognise that the world has changed in the last three months and that there is a fine line between a fair return and taxing an industry into oblivion,” Williams said.

The NSW mining industry is delivering $920 million in royalties to the people of NSW this year, rising to more than $1.3 billion next year. Coal represents 90% of this royalty take.

“The additional half a billion royalty windfall is a function of an unprecedented price surge that is now far behind us, a product of a previously growing and optimistic world rather than one of a collapsed global financial market, international recession and investment paralysis,” Williams said.

A spokesperson for the NSW Minerals Council said the mining industry was still trying to grapple with the new circumstances they find themselves in following the economic slowdown.

“The industry is concerned about what the ramifications will be for future growth as well as what opportunities there will be in regional industries.”

The Council said the government should not contemplate any increase in minerals royalties, but rather invest a proportion of the windfall royalties in NSW mining communities such as Newcastle and the Hunter Valley, the Illawarra, Central and Far West of the State.

Critically, port constraints at Newcastle must be resolved before a single additional cent is extracted from the industry. Resolving this issue will deliver immediate benefits for the industry and NSW taxpayers. For every 10 million tonnes in additional capacity at the Port, the people of NSW will receive a further $110 million in royalties.

According to the spokesperson, uncertain and depressing forecasts for global commodity demand and pricing, existing constraints at the Port of Newcastle, regulatory burden and the high and rising cost of doing business, all reduce the industry’s capacity to pay.

“Any increase in royalties will raise the spectre of sovereign risk both for existing and potential entrants in the NSW minerals sector.

“Disincentives to investment which creates highly paid jobs in rural and regional centres across the state and sustains 15% of the total NSW workforce should be avoided at all cost.”

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