Rick Wilson (O'Connor, Liberal Party) Share this | Hansard source

Today, I would like to speak about one of the current threats to the Western Australian resources industry: the WA state government's current review of mining royalties. I am specifically concerned about any changes to the gold royalty rate. The WA government's royalty system is designed to capture 10 per cent of mine head value, which translates to a different royalty rate depending on how much processing a mineral requires. Gold is subject to a 2.5 per cent base rate, based on a gross value of the metal. The iron ore royalty rate is 7.5 per cent of the value of crushed and screened ore, and base metals, such as nickel and silver, attract a rate of five per cent of the value of the concentrate at the smelter. Excuse the pun, but it is a minefield just to keep up with the rates for each mineral.

The mining royalties review started in 2013 and was scheduled to be completed by the end of last year, but we are still waiting to hear what the recommendations are. I agree with the Gold Royalties Response Group in that the review, after dragging on for almost three years, needs to be resolved, and quickly. Potentially, this uncertainty is causing even more harm to the industry. The Chamber of Minerals and Energy of Western Australia manager of economics and tax, Shannon Burdeu, said the report's details need to be released soon to ensure security for the sector. I completely agree with her. The Gold Royalty Response Group, which is made up of eleven goldmining companies, was formed to offer its members a platform to address the gold royalties issue with a united voice. Spokesman for the GRRG Allan Kelly said the current rate was fair and the effect would be devastating if it were increased. He said

Immediately there'd be some mines that are marginal at the current gold price and if you increase the royalty rate you'll see those mines shut down but I guess longer term you'll also see a reduction in investment in keeping existing mines going and new mines opening.

In the last financial year, the gold industry lost 4,000 jobs, a clear indication of the current tough operating conditions they are already working in.

Goldmining is a very important industry in my electorate of O'Connor. It is an industry that has sustained Western Australia since the late 1880s. In WA alone, the goldmining industry employs approximately 20,000 people. The gold sector pays more than $300 million in taxes and royalties to the government in Western Australia, which helps build our roads, schools, hospitals and police stations. Any increase to the gold royalty, though, could put jobs, and ultimately communities, at risk. Any royalty rate increase will have a significant impact on the region.

According to a study by Deloitte for the GRRG, over the past six years the average cost of gold production for WA goldmines has doubled from $511 an ounce to at least $1,100 an ounce. As production costs have risen, companies have had to shed staff. Doray Minerals Managing Director Allan Kelly has claimed that industry cannot bear any additional costs. Mr Kelly said:

WA gold miners continue to face tough operating conditions. Any increases in royalties will see mines close and jobs lost. More than 4000 direct jobs in gold were lost last year as a result of miners being forced to downsize and the reality is that any additional costs will result in more job losses and seriously damage our industry.

At last year's WA Liberal Party state conference, a motion to oppose any change to gold royalties was introduced and passed. The motion came from the Kalgoorlie branch of the Liberal Party. They know the value that gold mining has to their town.

The Super Pit, the biggest open mine pit in Australia, is located right next to Kalgoorlie-Boulder and has been operated by Consolidated Gold Mines since 1989. It produces up to 850 ounces of gold every year. Any increase in the gold royalty rate will put more pressure on mines such as the Super Pit. As it is, there are no surplus profits being made in the mining industry to sustain an increase in the royalty rate. In fact, from a revenue point of view it could end up being a negative for the government. This is because it would scare off investors and potential start-ups and even see some existing operations close down.

We cannot keep hammering our productive industries. I will oppose any move that places more pressure on the gold industry. I urge the Western Australian government to seriously consider the impact that any changes to gold royalties will have on the viability of small to medium mining operations and, therefore, the communities in my electorate.

See this speech in context