Mining continues to strengthen state budget

THE mining industry continues to do the heavy lifting in Western Australia, accounting for 17 per cent of the resource-rich state’s revenue.

Last Thursday’s state budget revealed $5.3 billion in mining royalties was propping up the state’s coffers, in addition to the 110,000 people directed employed in the resources sector.

Industry will be pleased there was no change to the royalty regime in WA, following the successful fight to fend off plans for a hike in the gold sector.

However, in his budget speech to state parliament, Treasurer Ben Wyatt fired another somewhat ominous warning shot at the gold industry.

“In last year’s Budget we committed to a 1.25 percentage point increase in the gold royalty rate, reflecting that the gold sector’s discounted royalty rate equated to just half of the benchmark return for all other commodities,” the Treasurer said.

“Since that time the gold price has risen by $142 an ounce, completely undermining the claims that a rate increase would have hurt the industry and cost jobs.

“While the Government is not seeking to reintroduce the royalty increase in this year’s Budget, we believe an increase in the rate remains justified.”

The proposed increase was foiled by LNP and Crossbench MPs after industry opposition to the changes. However, the Treasurer’s most recent comments are likely to rekindle concerns among the sector.

Sales of the precious metal were recently reported to have exceeded $11bn for the first time, more than twice what it was 10 years ago. The gold industry’s growth was a key contributor to total reported sales of $108.8bn  in 2017, a 16 per cent increase from 2016.

Other budget measures affecting the sector included around $65 million of increased fees, charges and levies across the broader mining industry.

Association of Mining and Exploration Companies (AMEC) Chief Executive Officer Warren Pearce was disappointed the highly successful Exploration Incentive Scheme (EIS) will now become fully cost-recovered through increases to the Mining Tenement rentals.

The structuring of the increase (6 per cent in 2018/19 and 6 per cent in 2019/20) for existing and older mining tenements fees will minimise the flow-on effect to property valuations for shire rating purposes, and mitigate the impact for exploration companies with newer exploration leases.

Mr Pearce said a government funded ACIL Tasman study into the effectiveness of the program found that every $1m invested stimulates exploration activity generating $10.3m in direct benefits for Western Australia.  The study found that every $1m spent under the EIS generated 12.5 full-time jobs in minerals exploration for three years.

“Key discoveries resulting from the EIS, include Nova nickel, Gruyere gold, Tropicana East gold, Handpump gold, Webb diamonds, Oxley potash, Camelwood nickel, Yeneena copper, McIntosh graphite, Dusk Til Dawn gold and Millennium zinc,” Mr Pearce said.

In a statement, the WA government said the continuation of the $10m EIS program would help companies seeking support to explore mineral deposits and frontier petroleum basins in remote underexplored regions.

“In 2018-19, a six per cent increase in tenement rents will raise $5m and an additional six per cent increase in 2019-20 will meet the ongoing scheme funding requirement of $10m per annum, and improve and enhance the quality of services for industry provided by the Department of Mines, Industry Regulation and Safety,” the statement read.

“For the first three years of an exploration license (graticular blocks), rents will only increase by 1.5 per cent in 2018-19 and 2019-20 to protect the junior sector in finding the deposits of the future.”

Changes to the Building and Construction Industry Training Fund are also forecast to raise $25m over the Forward Estimates for training purposes and there is also a 5 per cent increase in the mine safety levy, on top of last year’s 33 per cent increase as the Government works to reduce the deficit in a Trust Fund.

The budget also outlined miners would contribute $1.2bn more than expected over the next four years, noted by Treasury as mostly due to “mostly higher royalties from lithium, gold and other commodities, and higher North West Shelf grants”.

Iron ore continues to underpin the WA economy, however royalty income from all other commodities is forecast to rise by $160m to a record $724m in 2017-18.

WA banking on lithium

FORECAST royalty income growth in the budget (for commodities other than iron ore), is largely due to the $65m jump in lithium royalties.

It is expected non-iron ore commodities will increase to $834m next year, mainly due to Treasury factoring in a $41m increase in lithium royalties to $131m and a $36m increase in gold royalties to $315m.

The surge in lithium will catapult it past nickel, copper and alumina in just two years to become WA’s second biggest royalty winner behind iron ore ($4.22bn in 2018-19) and gold ($315m).

The WA government is pinning its hopes on the lithium boom and included $5.5m in the budget towards developing battery technologies in the state.

Provisional funding of $5.5m to the Minerals Research Institute of Western Australia (MRIWA) has been allocated to support development and manufacturing of technology metals and renewable energy sources.

MRIWA will invest the funds, if successful, in its bid to establish a New Energy Industry Cooperative Research Centre (CRC) in WA.

The New Energy Industry CRC’s objective will be to create value, through industry-led research, and drive global demand for local products, services and solutions.

To manage record state debt, the government is banking on the lithium industry’s $4.7bn investment in projects under way or in the pipeline to create new jobs, the Australian Financial Review reported.

The investment is seen as a boost to the long-term development and attractiveness of the lithium and battery minerals industry and would build on the already 15 lithium projects either in construction or in various stages of planning.

The CRC’s bid would nurture breakthroughs in technology and innovation to help drove down costs.

Lithium refinery a step closer

PLANS to build a new lithium refinery with the potential to create 400 jobs in Western Australia are also pressing ahead.

Western Australia Lithium, a 50/50 joint venture between Sociedad Química y Minera de Chile and Kidman Resources, last week signed an agreement to enter into an Option to Lease with LandCorp for the selected site set to build lithium refinery in Kwinana.

The construction phase is expected to start in mid-2019 and is tipped to require a workforce of 400 people, while the company’s lithium mine and concentrator will create about 300 jobs during construction and 150 jobs during the operational phase.

The refinery will produce about 40,000 tonnes per annum of lithium carbonate and/or lithium hydroxide from the mineral processed at the proposed mine and concentrator at Mt Holland, south-east of Southern Cross.

Read the full statement here.

WA update: Reporting process

PERFORMANCE reporting by the Department of Mines, Industry Regulation and Safety (DMIRS) and government agencies will now include the time taken for project approval planning.

The performance of proponents will also be included in the new approach to highlight opportunities for efficiencies with resource sector approval performance reporting.

DMIRS will continue to report on its performance, but will also report on the time the department, other agencies and the proponent have taken.

Senior Advisor Graham Cobby said the department’s new ‘whole of approval’ reporting will assist proponents with project approval planning and highlight opportunities for further efficiencies.

Read the full statement from DMIRS here.