NT govt cash grab angers miners, puts $6b worth of projects at risk
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The Northern Territory government is facing a growing backlash after demanding substantially higher mining royalties.
A royalty is the price placed by governments on the resources that are dug out of the ground. Miners are required by law to pay the royalties once a mine is in operation.
Scroll down for a list of ASX stocks with projects in the NT courtesy of leading ASX data provider Mak Corp.
The government plans to introduce what industry bodies have labelled a “massively” higher royalty from July 1, 2019.
The new hybrid scheme requires mining companies to pay the greater of the assessed amount under the current profits-based system, or a minimum value-based royalty on their gross mineral production revenue at a rate of:
The move was part of a raft of measures introduced by the government to repair its Budget.
“These measures are needed and are additional to the targets set in the 2017 budget,” Treasurer Nicole Manison said on Friday. “They will result in around $800 million in total savings by 2021-22.”
The mining tax increase comes as the Territory government today won $259 million in extra GST funding from the federal governent following its decision to end a ban on gas fracking.
Ms Manison described the mining tax changes as a “fair and balanced approach to Budget repair”.
But the resources sector didn’t see it that way.
“This decision immediately threatens the viability of $6 billion of new mining projects that would have delivered 4000 new jobs and hundreds of millions in new royalty revenue for the government,” said Warren Pearce, CEO of the Association of Mining and Exploration Companies (AMEC).
“Many of these mining projects will simply no longer go ahead.”
If these projects did not go ahead, it would see the government lose $70 million each year in new royalties, according to AMEC.
Drew Wagner, executive director of the Minerals Council of Australia’s (MCA) NT division, says if the NT government introduces the new royalty scheme it would be the only mining jurisdiction globally to have hybrid system of both ad valorem and profits-based elements.
“The current royalty system will see $350 million royalties from this year alone contributing to NT Government’s revenues – a substantial contribution from the mining industry which is twice the build cost of the Palmerston Hospital,” he said.
“However, the proposal announced today is still a very long way from a realistic policy proposal.”
In 2017, the NT slipped seven places to 27th of 91 jurisdictions in the Fraser Institute’s Annual Survey of Mining Companies.
Domestically, the NT ranks behind Western Australia (5th), Queensland (12th) and South Australia (14th).
Mr Pearce says the NT is already a high cost jurisdiction for mining compared to other Australian states.
NT hitting the brakes instead of the accelerator
Junior ASX-listed Emmerson Resources (ASX:ERM) recently started producing from its Edna Beryl gold mine, part of the larger Tennant Creek project, in the NT on a small scale.
The company, which has a market cap of $38 million, has been exploring there for 10 years and spent somewhere north of $50 million on high-risk exploration.
“Our understanding was the Territory government are keen to promote mining and exploration and this is really a step backwards,” boss Rob Bills told Stockhead.
“We’ve just come into production in a very small way and all of a sudden the goal posts have changed. All of that money that we’ve spent now potentially under this new scheme is at risk. It’s not as costable as we would have thought.”
Both AMEC and MCA are lobbying government to rethink the decision.
But Mr Bills is not confident the industry can convince the government to change its mind.
“It seems like the government is very determined to bring it in and there has been very little consultation, which is very, very unfortunate,” he said.
Here is a list of ASX stocks with projects in the NT courtesy of leading ASX data provider Mak Corp: