PERTH (miningweekly.com) – Western Australian gold miners have raised concern about forward estimates for royalty revenue in the state budget, announced on Thursday.

Treasurer Mike Nathan announced that royalty income would account for over 25% of the government’s revenue in 2017/18, up from only 5% in 2003/4.

By 2015/16, an additional A$560-million would be added to the royalty revenue, which the Gold Royalties Response Group (GRRG) was expecting to come predominately from gold royalties, representing an increase of around 85% on the current gold levy.

“Despite repeated assurances by government there is no predetermined outcome from its royalty review process currently under way, it has gone ahead and included a A$560-million hike in royalties in its forecast out years. Previous government statements have made it clear this additional money is expected to come predominately from the gold sector,” said GRRG spokesperson and Doray Minerals MD Allan Kelly.

“This is both disappointing and concerning. Either government has given the gold sector false assurances, or the new budget is based on forecast revenue that won’t be realised.”

The state government has previously admitted that a hike in the gold royalty was not aptly timed, but could still become a reality as the government scrounged for income.

Kelly said on Thursday that the gold sector currently made a substantial contribution to Western Australia’s regional economies through various taxation mechanisms, and directly employed almost 22 500 people in 2012/13 making it the second largest employer in the state’s minerals sector.

“Gold producers’ margins have been seriously eroded by rising production costs and an 11% decrease in the gold price in the past year. Any increase in the gold royalty rate in Western Australia will be an extra impost the industry just couldn’t bear.”

Kelly warned that a rise in gold royalties would cause uncertainty and would be a significant disincentive to future local and foreign investment in capital, exploration and development in the state.

Meanwhile, the Western Australian Chamber of Minerals and Energy (CME) pointed out that the state’s reliance on resource-sector income had never been greater, with the sector expected to contribute some A$7.3-billion in 2014/15.

“The budget papers clearly show that exports from the resources sector will continue to be the key driver of economic growth over the forward estimates period,” said CME CEO Reg Howard-Smith.

However, he warned that with exploration expenditure falling in Western Australia, the state’s increased reliance on royalty income presented some risks to the budget forward estimates.

“Exploration is the lifeblood of the industry. All resources projects begin with a discovery and to that end, CME welcomes the continuation of funding for the Exploration Incentive Scheme,” Howard-Smith said.