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Miners warn new NT royalty proposal to hurt investment

20th April 2018

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – The resources sector has warned the Northern Territory government that adjustments to its royalty system could hamper investment in the region.

Northern Territory Treasurer Nicole Manison on Friday announced the introduction of a hybrid royalty scheme as part of the territory government’s plans to increase revenue after more than A$800-million in critical funding was lost owing to cuts in goods and services tax payments.

Manison said that the hybrid royalty scheme would ensure all operating mines in the territory paid a minimum royalty to territorians for the value of minerals they extracted.

From July 1, 2019, the new scheme requires mining companies to pay the greater of the existing 20% profits-based scheme, or a value-based royalty on their gross mineral production revenue at a rate of 1% in a mine’s first mineral royalty year on or after July 2019, 2% in the second mineral royalty year, and 2.5% in the third and following mineral royalty years.

Furthermore, government fees and charges linked to revenue units will increase by a minimum of 3% a year, or consumer price index (CPI) from July 1 this year. Due to the Territory’s low CPI, revenue units have not increased for three years, the Treasurer said.

In addition, stamp duty exemptions have been abolished for the transfer of a petroleum lease, pipeline interest, licence, or permit. 

“This brings treatment into line with other similar property transactions in the Territory which are subject to stamp duty,” Manison said.

The Minerals Council of Australia (MCA) on Friday warned that changes to the royalty regime would likely put future investments and jobs in the Northern Territory’s resources sector at risk.

The MCA’s executive director for the Northern Territory, Drew Wagner, said that the changes would add uncertainty and complexity and would further damage the region’s attractiveness as an investment destination by hitting mining operators with more onerous royalty arrangements than in comparable jurisdictions around the world.

“With nearly A$5-billion of investment at stake and potential massive growth of the resources sector at a time when the government says it wants to boost economic growth and jobs, the challenge for the government should be to expand this industry, not impose measures which reduce its investment attractiveness,” Wagner said.

He noted that the current royalty system would see A$350-million royalties from this year alone contributing to the Northern Territory government’s revenues.

“However the proposal announced today is still a very long way from a realistic policy proposal,” he warned.

The Association of Mining & Exploration Companies (AMEC) has labeled the royalty increase an “absolute disaster”, with CEO Warren Pearce saying the decision immediately threatened the viability of new mining projects that would have delivered around 4 000 new jobs and millions in royalty revenues.

“Many of these mining projects will simply no longer go ahead,” Pearce said.

“At a time when the Northern Territory desperately needs industry investment to stimulate the economy and create jobs the government has effectively taken the decision to close the door on investment.”

“The mining industry in the Northern Territory was finally showing signs of recovery. This massive royalty increase will put an end to the economic recovery before it begins.”

Pearce noted that the Northern Territory was already struggling to attract investment and was widely recognised as a high-cost jurisdiction, which is one of the major reasons for the decline in mineral exploration and mining activity in the Northern Territory over the last decade.

“This decision will make it one of the most expensive places in the world to develop a mining project. Regrettably, today’s decision may well see investors and industry turn their back on the territory for another decade.”

Pearce added that there was still time for the government to reverse this decision, stressing that the industry have offered to engage with government to develop a modified proposal.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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