WA Premier revives plan to scrap iron-ore levy as it seeks upfront cash

PERTH (miningweekly.com) – Western Australian Premier Mark McGowan has revived the possibility of scrapping a 25c/t levy on iron-ore produced from the state, in exchange for up-front payments.

The Premier over the weekend admitted that the state government was weighing the option of a ‘buy-out’ of the lease rental fee in an effort to combat the budget issues facing Western Australia.

The current rental fee is estimated to contribute some A$125-million a year to state coffers, from majors BHP and Rio Tinto.

“Obviously, we have a very major budget issue in Western Australia and it is quite catastrophic the financial situation that we have been left,” McGowan was quoted by the Australian Financial Review.

“We are looking at many options as to how to address that.”

However, the Premier noted that the ‘buy-out’ would only be considered if the companies involved agreed on the proposal, and if it were in the interest of taxpayers.

“But, you don't do these things unless you are going to make a lot of money and the taxpayers are well rewarded for it."

BHP on Monday told Mining Weekly Online that the company was not in talks with the Western Australian government regarding the buy-out, with a spokesperson pointing out that the company had paid some A$11-billion in royalties to the Western Australian government in the past decade.

The Association of Mining & Exploration Companies (AMEC), meanwhile, said that, if implemented, the buy-out would limit future investment in Western Australia, and would not benefit taxpayers.

“The government’s concept is increasing Western Australia’s sovereign risk,” AMEC CEO Simon Bennison said.

“As was established during the debate around the National Party’s ill-conceived $5 tax - every dollar raised through this ‘cashing out’ will head east via the Commonwealth Grant’s Commission’s redistribution.”

“It creates a strong incentive for mining companies to curtail their investment in Western Australia to less than 15 years. This is not a good policy decision, and is unlikely to raise the revenue that the government hopes it will.”

McGowan’s plans echoes those tabled by former Premier Colin Barnett last year, which saw the Western Australian government approach both Rio Tinto and BHP with a proposal to pay out their lease rental in a lump sum.

Both iron-ore producers declined the offer, with Rio Tinto saying at the time that it was already making a significant contribution to the Western Australian economy, having paid A$13-billion in royalties since 2006.