Gold sector still nervy on royalties

The gold sector claims the looming threat of an increase in royalties could undermine immediate investment, despite the State Government’s recent decision to keep rates steady.

The State Government opted against raising royalties from 2.5 to 3.75 per cent, as mooted in a recent review, and moved to dampen industry concern by removing $560 million booked in revenue from royalty changes in the Budget forward estimates until 2017. But Gold Royalty Response Group spokesman Allan Kelly, also managing director of Doray Minerals, and Northern Star Resources boss Bill Beament said the industry was still nervous about a future hike.

Mr Kelly said while the Budget was a great result for miners, he wanted the State Government to acknowledge that the report proposing the hike was fundamentally flawed because it did not reflect the true cost of operations.

Mr Kelly said the looming threat of a royalty hike would make it harder to raise money for projects and exploration.

“We talk to investors overseas in London, New York and Europe and they are looking at where they can invest funds in companies,” he said.

“WA in particular is quite a high-cost country for mining because of labour costs, but where we do well is a stable political and tax and land ownership regime.

“If we start eroding away the things that we’ve got that are competitive, like taxation, it makes it harder to attract funds.

“The Government might get a short-term win with a higher royalty rate but then when those mines finish there won’t be any new ones to come on, so that royalty will stop.”

Mr Beament said the report’s formula for calculating cost inputs was flawed and did not reflect the true cost of operating a gold a mine.

“The current Government says that it’s parked it.” he said. “But what if the next government gets in and says we should increase royalties?

“When things like gold royalties potentially get thrown on the table, that scares the absolute bejeezus out of people like myself because increases in that directly affect exploration budgets — because that’s the first thing that goes.”

“We’ve had a partial win (at the State Budget) but it would be nice to take it well and truly off the table forever. I don’t know if we’ve got that confidence yet.”