Mining companies with operations in Western Australia, such as Rio Tinto, BHP, Fortescue and a string of gold miners, will be hit with a bigger tax slug under changes announced in the WA state budget.
The WA government, which is grappling with ballooning debt and a significant budget deficit, unveiled a hike in payroll tax and a jump in the gold royalty rate.
Under the changes, gold miners will face a 3.75 per cent gold royalty when the gold price goes above $1200 an ounce. Currently, the gold royalty rate is set at 2.5 per cent.
And under the payroll tax changes, businesses with a national payroll of more than $1.5 billion will face payroll tax of up to 6.5 per cent, up from 5.5 per cent. For businesses with a national payroll of between $100 million and $1.5 billion, payroll tax will rise from 5.5 per cent to 6 per cent.
WA Treasurer Ben Wyatt said the payroll tax increases were temporary, and would finish in the middle of 2023.
Miners such as Rio Tinto, BHP and Fortescue Metals Group, which have significant iron ore operations in WA, are likely to face a sizeable hit from the higher payroll tax rates.
Gold miners, which are much smaller employers than the likes of Rio and BHP, face greater costs via the higher gold royalty.
The managing director of gold producer and explorer Intermin Resources, Jon Price, hit out over the new tax regime.
“For small-scale miners and explorers like Intermin that are generating cash to fund large exploration programs, this is a double whammy where we now incur higher royalties and lose the 2500 ounce exemption,” he said.
“If the government wants the junior sector to flourish, generate regional employment and find the mines of tomorrow, this is not the way to do it.
“My fear is these additional costs will impact on our industry, ultimately leading to reduced revenues to Treasury and damage the regional economies in which we operate.”
Meanwhile, Rio Tinto on Thursday announced a substantial increase in the size of the estimated coal reserves at its Kestrel underground mine in Queensland, lifting its estimates by 62 million tonnes to 185 million tonnes.
The announcement about the mine, which is about 40 kilometres north-east of Emerald in central Queensland, helped propel shares in Rio up 50¢ to $68.75.
Based on last year’s production figures for the Kestrel mine of almost 5 million tonnes of coking and thermal coal, a further estimated 62 million tonnes of reserves would translate to many more years of production at the mine. Reserves are known deposits of fossil fuels that are considered commercially recoverable with available technology.
Rio Tinto told the ASX that the increased estimates came after extensive research. It also said mineral resources at Kestrel, “exclusive of ore reserves”, had decreased by 65 million tonnes.
“The increase in ore reserves reflects a continuation of work on Rio Tinto Coal Australia deposits previously announced on 3 March 2016. The updates are based on a rigorous examination of leases that included an updated geological model, updated mine layout, revised coal product classifications and revised loss and dilution and productivity assumptions,” Rio said.