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Royalty battle looms

Saturday, 10th September, 2011

It is not yet clear what impact an increase in State mining royalties will have on local mining companies.

The NSW Government this week announced it would raise mining royalties to offset the cost of the carbon tax in the absence of an alternative compensation proposal from the Federal Government.

CBH Resources’ Chief Operating Officer, Visko Sulicich, said the company would discuss the impact of the decision at an executive meeting in Sydney on Wednesday.

Although CBH is not paying royalties at the Rasp Mine because it is not yet in production, the company pays royalties from its Endeavor Mine in Cobar.

The NSW minerals industry has called on the Federal and State governments to put their differences aside and talk about the impact of the carbon tax and State royalty changes so that NSW doesn’t become “the biggest loser” in the latest Budget battle.

The increase in royalties announced in this week’s NSW Budget is the second since 2008 and follows a 154 per cent increase in royalty returns over the past four years to $1.24 billion in 2010-11.

NSW Minerals Council CEO, Dr Nikki Williams, said that NSW could miss out on $2 billion in unallocated Mining Resources Rent Tax infrastructure funding, GST revenue, investment and economic growth as a result of the decision.

“This State is crying out for infrastructure spending, but the people of NSW and the State’s mining industry could end up as collateral damage if this tussle between Canberra and Macquarie Street isn’t resolved,” Dr Williams said.

“Both governments need the NSW economy to grow and they both need a strong mining industry to deliver the revenues that they are banking on to fund infrastructure projects in Sydney and in regional NSW and company tax cuts and investment in superannuation across Australia.”

The Minerals Council said mining was critical to Broken Hill.

ABS figures (May Quarter 2011) indicate that around 1000 people are directly employed in mining in the Far West and another 3000 in indirect mine jobs.

NSW Premier Barry O’Farrell said the offset increase will apply only to those companies subject to the Commonwealth’s proposed Mining Resources Rent Tax.

Treasurer Mike Baird said that given the commitment of the Commonwealth to reimburse these companies for their state royalty liabilities, the Commonwealth will bear the cost, not the mining companies.

“We will work with the mining sector on the implementation of the carbon tax offset increase, and will finalise details once the Commonwealth’s Mining Resources Rent Tax legislation is finalised,” Mr Baird said.

“We are determined to stand up for the people of NSW. In the absence of an alternative proposal from the Federal Government, NSW is left with no other choice,” Mr Baird said.

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