Minerals Council warns of royalty rise consequences

IN THE lead-up to the New South Wales mini-budget which will be handed down tomorrow, the NSW Minerals Council is “extremely concerned” about a widely tipped coal royalty hike.
Minerals Council warns of royalty rise consequences Minerals Council warns of royalty rise consequences Minerals Council warns of royalty rise consequences Minerals Council warns of royalty rise consequences Minerals Council warns of royalty rise consequences

Australian Coal Association chief executive officer Nikki Williams.

Blair Price

With some media reports indicating the state government may need a miracle mini-budget, the council has noted the tough economic climate but cast a warning on the consequences of a hike in royalties.

“Just as the industry is well aware of the economic realities which the government faces, the government needs also 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,” the council said in a statement.

Meanwhile, the council said the state’s mining industry was already delivering $920 million in royalties this year, with this rising to more than $1.3 billion next year.

“Coal represents 90 per cent of this royalty take,” the council said.

“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.”

In addition to avoiding any rise in royalties, the council would like to see more royalty revenue flowing through to mining communities such as Newcastle and the Hunter Valley along with the Illawarra, central and far west of NSW.

“Critically, port constraints at Newcastle must be resolved before a single additional cent is extracted from the industry,” NSWMC said.

“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.”

Aside from the port’s constraints, the council said uncertain forecasts for global commodity demand, regulatory burden and rising business costs also reduced 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,” NSWMC said.

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

ILN sought direct company comments with regard to the issue, but those contacted wished to not yet discuss the matter publicly.

Bloomberg reported that a council spokeswoman said senior representatives of the state’s mining companies had met over the issue of mining royalties, led by Minerals Council chairman Colin Bloomfield, who is also president of BHP Billiton Illawarra Coal Holdings.

In June, the Queensland government pushed through a $600 million royalty rise.

NSW Treasurer Eric Roozendaal was reported by the Age newspaper as saying the state needs to take "strong medicine" in the mini-budget, even though it cannot prevent a slide towards a billion-dollar deficit.

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