PERTH (miningweekly.com) – The Western Australian government has launched a public consultation on the state’s mineral royalty rates, which would form part of the Mineral Royalty Rate Analysis.

The analysis aims to identify anomalies in the current structure, rather than consider major changes to royalty arrangements, to examine the efficacy and appropriateness of existing policy, and to consider the equity and efficiency implications of any proposed changes to the royalty rates.

Premier and State Development Minister Colin Barnett and Mines and Petroleum Minister Bill Marmion on Monday released the terms of reference and a stakeholder consultation paper for the Mineral Royalty Rate Analysis.
 
Barnett said the aim of the review was to ensure the state’s minerals royalties operated fairly and efficiently, both for the mining industry and the resource owners, West Australians.

“Royalties are vital to the state’s ability to provide the services and infrastructure West Australians expect,” he said.

“It is important that royalty rates deliver a reasonable return to the community without discouraging production or acting as a disincentive to new investment.”

The state collected A$5.1-billion in mineral and petroleum royalties in 2012.

Marmion noted that mineral royalty rates were designed to deliver a return to the state equivalent to about 10% of the mine-head value of a resource.

“For most producers, mineral royalty rates operate on a three-tier system reflecting the degree of processing involved in production,” he said.

However, the current system also took into account historical considerations such as rates negotiated as part of major project agreements. For coal, salt and basic materials, a rate per tonne is applied.

Petroleum royalties, which are returning 10% of value at the well-head, do not form part of the review.

Industry representatives and other interested parties would have until October 31, to consider the paper and make submissions.

The Western Australian Chamber of Minerals and Energy (CME) has welcomed the consultation process, with CME CEO Reg Howard-Smith saying that the industry body had always believed a state-based royalty regime was best placed to ensure revenue and infrastructure investment is returned to the communities from where minerals were extracted.
 
“Royalty income from the sector now accounts for 21% of government revenue up from only 5% in 2003/4,” said Howard-Smith.
 
“The Western Australian resources sector has brought long-term economic benefits to Australia and in order for that to continue, we must remain internationally competitive,” he added.

The CME was expected to provide an industry voice to the Industry Reference Group, which will also consist of senior representatives from both the Department of State Development and Department of Mines and Petroleum.
 
“CME looks forward to working with the state government to ensure that industry’s views are taken into account and that Western Australia's resources sector remains internationally competitive, ensuring the continuing wealth of our state and the national economy," said Howard-Smith.