South Australian mining industry fears being stranded by new tax

In a stinging attack on the RSPT, the South Australian Chamber of Mines and Energy (SACOME) warned that no other state stood to lose so much of their economic potential as South Australia, under the proposed new tax.
To push its claim, SACOME is undertaking an immediate “RSPT impact audit” of existing and currently proposed mining projects across South Australia.
“The results will provide a measurable economic impact figure for this exasperating impost,” SACOME chief executive, Jason Kuchel, said.
“We expect preliminary results in about two weeks time,” he said.
“While the perception may be that the big mining states of Western Australia and Queensland will lose out more than any, on examination, it is South Australia on a likely project, economic and per capita impact basis that will bear the brunt of the RSPT.
“No other state faces the position that half of its known expansionary projects are in one project – in South Australia’s case, the much awaited further development of Olympic Dam.”
Kuchel said Olympic Dam’s $20 billion expansion is under an ever-darkening cloud with the RSPT expected to “chop off the expansion plan at the knees”.
“BHP Billiton has many projects worldwide in its development pipeline and this RSPT-based regime would see their Australian projects pushed down their internal priority list,” Kuchel said.
“Critically, the Federal Government has to recognise that as resources capital takes flight and is invested elsewhere other than in Australia, bank lending will tighten and BHPB will be the only source able to bankroll Olympic Dam from internal cashflow.
“It can hardly be expected to do that if the proposed tax impacts the net present value models for Olympic Dam, which already faces tough hurdles in terms of project returns in acceptable timeframes.”
Kuchel said the pre-stripping operation alone for Olympic Dam’s expansion would take five years before BHPB could access the ore body and more than 10 years before achieving project payback.
SACOME added that South Australia’s plight under an RSPT regime was also worsened by its reliance for minerals growth on new discoveries, rather than expansion of large brownfields projects - and inadequate mining infrastructure.
“We do not now expect South Australia to meet its end of 2010 target of having 16 mines operating or construction underway and SACOME expects this horizon will blow out until at least mid 2011, if not longer.”
As part of its opposition to the RSPT, the Minerals Council of Australia has released a report it commissioned from Deloitte. It explains the role that the mining sector played in shielding Australia from some of the worst consequences of the global financial crisis.
The report presents and analyses a range of economic indicators which suggest that, but for the standout performance of Australia’s mining sector, the economic downturn in the latter part of 2008 and early 2009 in Australia would likely have been far more severe.
Gross value added, industrial production, exports, employment, wages, and investment all grew more rapidly in the mining sector than the same indicators for the economy as a whole during 2008-09, said the report.