Premier Colin Barnett has offered West Australia's emerging magnetite miners hope of royalty relief, in a move aimed at attracting more Asian investment into the fledgling industry.
In a surprise move yesterday Mr Barnett announced to a Mid West mining conference he will back an industry push for a royalty holiday for magnetite miners.
While Mr Barnett said no concrete proposal had yet been approved by Cabinet, it is understood the State Government is considering a three-year royalty holiday for companies once they have begun production.
Under the existing royalty regime magnetite royalties are set at 5 per cent as soon as exports begin. Options for relief include completely waiving royalty payments, or reducing the rate to 2.5 per cent.
The move surprised industry observers, as Mr Barnett had previously waged a long campaign to wring additional payments from BHP Billiton and Rio Tinto by ending a historic differential rate on the Pilbara hematite ore they sell. Other applications for royalty relief, including a recent attempt by Fortescue Metals Group at the height of its financial turmoil, had been rejected.
Compared to traditional hematite iron ore mines in the Pilbara, magnetite ore requires expensive and energy hungry secondary processing before export.
Capital costs of magnetite mines in WA's development pipeline all run to at least several billion dollars.
According to industry figures magnetite mining could eventually contribute up to $700 million a year to State Government coffers, if all of the projects in the State's pipeline are developed.
Though the move came among discussion of the troubled Oakajee Port and Rail project, which would rely on magnetite mines for its customers, Mr Barnett denied the move was an attempt to revive its fortunes, saying the decision was an important step to attract more investment in magnetite projects from China, Japan and other Asian economies.
Mr Barnett has long pushed for greater local downstream processing in the State's mining industry. He told _WestBusiness _ the move was a "modest but important" step to demonstrate the State Government's support for the emerging industry to offshore investors.
Magnetite miners welcomed the move yesterday.
Asia Iron plans a $3 billion development in the Mid West which could eventually export $1.3 billion of ore a year. Managing director Bill Mackenzie agreed yesterday a royalty holiday would send an important message that WA was serious about the industry.
"In overall returns to the owners the royalty burden is not a 'go or no go' decision," he said.
"In our case, it is 5 per cent and I don't think there'd be any investors where if your project didn't fly at 95 per cent revenue you'd make the decision not to proceed."