New WA gold royalty proposal announced, miners unimpressed

JOHANNESBURG (miningweekly.com) – The Western Australian government has made a fresh attempt to increase the gold royalty rate, but the state’s gold miners are unimpressed, describing the new proposal as “no more than a repackaged version of the original” plan.

Treasurer Ben Wyatt on Tuesday unveiled a revised gold royalty rate, after the government’s initial attempt failed to pass in October, when opposition parties blocked the move in the Upper House of Parliament.

The new royalty proposal is said to take into account the concerns about the pressure on jobs and the impact on the exploration and drilling sector that were raised through the initial proposal.

The new gold royalty, which will come into effect from January 1, 2018, will deliver the same tiered rate, an increase from 2.5% to 3.7%, but will only apply when the gold price is above $1 400/oz, instead of the previously planned $1 200/oz. 

The initiative also includes an assistance package for marginal gold mines, which government said would address industry claims about job losses at marginal mines. The assistance package will allow marginal miners with all-in sustaining costs above 85% of the gold price, to be refunded the increased royalty rate paid. 

The government has also reinstated the 2 500 oz royalty free threshold to assist medium-sized producers with production between 2 500 oz and 10 000 oz, which would have been unduly affected by the royalty hike.

Producers with output less than 2 500 oz are exempt from paying royalties.

The royalty rate increase is expected to generate net revenue of A$332-million over the forward estimates, which the Western Australian government say is needed to contribute to budget repair.

"I understand that the gold industry is opposed to any increase in their royalty rate. However, we have listened to their concerns, and have addressed them in a reasonable way, while also ensuring that the industry is contributing towards budget repair,” Wyatt commented.

The Chamber of Minerals and Energy (CME) and the Association of Mining and Exploration Companies (AMEC) said in a statement that they “strongly” opposed the proposed increase in the gold royalty rate.

“This massive increase still puts at risk new and existing projects, jobs in the gold mining industry, and supporting services such as exploration and drilling,” AMEC CEO Warren Pearce said.

“And it does absolutely nothing to address the fact that approximately 60% of the revenue collected will be sent to the eastern states, via GST distribution.”

CME CEO Reg Howard-Smith said there had to be a better solution to the government’s debt problem.

“We acknowledge the financial position the state government faces, and agree that everyone needs to share the burden. However, a gold royalty increase is not the answer as it would just threaten jobs, affect local communities, and impact the growth of Western Australia’s economy – all counterproductive measures when you are trying to repair the state’s finances,” Howard-Smith commented.