WA government warned to ‘go cold’ on push to lift tax

At the Paydirt Gold Conference, Chamber of Minerals and Energy of Western Australia chief executive Reg Howard-Smith, said that any such move would put at risk the sector’s post-GFC resurgence.
He said there was on a conservative basis, some $135 billion worth of resource projects currently committed or under consideration in Western Australia.
“The implications in Western Australia of any mooted higher local state taxes on mining, are severe - and have their own impacts quite separate from any national rise under reports the Henry Tax Review will further tax resources,” said Howard-Smith.
“The WA resources sector pays some three billion dollars in royalties per annum - a 137 per cent increase in royalties over past five years - and it comes from gold and all other minerals sectors in WA.
“While there are areas of WA mining that have been doing very well, the resources sector is not homogenous - and the WA Government should be engaging with the mining and exploration industry if a State mining tax hike is being mooted,” he said.
Howard-Smith said that an increase in royalties would be “folly” to the success of existing and start-up mining projects.
“If the sector has to succumb to a higher state and Federal tax impost, not only will the industry be paying more but it is also hardly the much touted simplification of Australia’s taxes on mining.”
Howard-Smith said the Chamber would continue to oppose any push to have the approvals process for mining infrastructure in Western Australia, handed over to Canberra.
“The WA Government has been largely responsible for multi-user mining infrastructure and there is also undoubtedly a lot of private infrastructure developed - and it has been a good mix of private and public infrastructure, even though some bottlenecks are looming.

Australia “losing the plot” on mining incentives
Australia has “lost the plot” in its backing for greenfields minerals exploration and is continuing to slip in world rankings on support for discovering new mineable deposits, said Integra Mining’s Chris Cairns.
Addressing the Paydirt conference, Cairns said Australia had slipped from being a world leader in share of world exploration spend in 1993, losing its crown to Canada in 2002.
At risk the sector has been warned, is the survival of at least 25 per cent of Australia’s junior explorers.
“The one single differentiating factor was Canada’s introduction in October 2002 of a 15 per cent exploration tax credit for flow-through shareholders,” Cairns said.
“Australia’s failure to do likewise since has only resulted in Canada continuing to be the world leader in exploration spend - and therefore discovery - while Australia has continued to decline - to a point it and third placed United States are both a long way off the Canadian pace,” Cairns said.
“The impact is no better illustrated than at grassroots level where the short-term funding for explorers in Australia’s junior sector - who now account for more than 60 per cent of national exploration expenditure - has left them cash strapped,” he said.
“Most have barely more than one year of cash reserves in hand at any one time. At the cash burn needed for successful exploration, these juniors need to be able to work on at least a five year timeframe to allow meaningful exploration and meaningful discovery.
“They remain very under-funded in the type of exploration they need to do and alarmingly, 25 per cent of Australia’s junior sector will be out of business if they do not raise more money in the next six months.”
Cairns warned against the falsehoods employed by Federal Treasury and inquiries such as the Henry Tax Review in defining the “strength” of Australia’s gold inventory and the related argument that it warranted the impost of higher taxes.
“The current level of Australian gold production is underpinned by a handful of gold deposits discovered decades ago and diminishing exploration success, related to lower exploration expenditure for gold,” he said.
In addition, significant project permitting and land access restrictions mean that the future production profile for gold and other metals looks “bleak”, according to Cairns.
“The reality is that many deposits reported to Treasury as being part of Australia’s Economic Demonstrated Resources (AEDRs), through their location and the capital hurdles required to develop these deposits, many will never be economic,” said Cairns.