There were mounting fears last night that the cash-strapped State Government was eyeing WA's battered gold sector after Premier Colin Barnett told State Parliament he believed its royalty rate was "light on".
Speculation about a royalty increase came as the sector, which has been hammered by a falling bullion price, enjoyed some rare good news with the first gold pour from AngloGold Ashanti and Independence Group's giant Tropicana gold mine, 330km north-east of Kalgoorlie.
Mr Barnett's comments risk re-opening a war with the beleaguered gold sector, which ran an aggressive campaign against royalty hikes when the State Government last flirted with the concept in 2010.
Asked about the review in Parliament yesterday, Mr Barnett said idea of the review was to ensure WA's royalty rates were consistent with the principle that royalties were 10 per cent of the mine head value of the mineral.
"The first marketable point in the production chain for gold is gold bullion. At that stage there is a high level of mining, crushing, processing and producing through to the 99.9 per cent or whatever the grade is," Mr Barnett said. "When the gold royalty is levied at that point when there is actually a commercial price, it is well below 10 per cent, I think it works out to about 2.5 per cent."
"I can't tell you what the final result will be because the review hasn't been undertaken - I can't. But I would expect there will be some adjustment of royalties. And there is a general view that perhaps the royalty as it is applied on gold may be a little light on."
State Budget papers show the State Government expects to collect $173 million in royalties from gold producers in 2015-16.
It shows an extra $180 million as a result of the review - a coincidence that has led to widespread industry speculation the Government will simply double the gold royalty rate.
More than 10 per cent of that figure is expected to come from Tropicana, the biggest WA gold discovery in the past decade, and the largest mine opened since Boddington in 2009. Operated and 70 per cent owned by South Africa's AngloGold, Tropicana cost about $845 million to build and will produce 470,000 to 490,000 ounces of gold a year in its first three years. Fully ramped-up, it will be the third-biggest Australian gold mine, behind Boddington and the Kalgoorlie Super Pit.Under the existing royalty regime AngloGold and Independence Group are expected to pay $22 million to $24 million in royalties to the State Government each year, depending on the gold price.