Junior miners offered royalty relief as falling commodity prices hits hard
By Kathryn Diss
Posted about an hour ago
Fri 19 Dec 2014, 9:28pm Related Story: Junior miners looking for cost-cutting assistance Map: Perth 6000
Royalty relief will be offered to junior iron ore miners struggling with the falling price of the commodity, the Western Australian Government has confirmed.
The ABC revealed last week the State Government was in discussions with junior miners to help them keep afloat.
The price of the steel-making commodity fell 50 per cent this year, forcing junior miners to shed hundreds of jobs in a bid to slash spending.
The Government has now revealed it will make temporary assistance available to juniors on a case by case basis as they restructure operations to deal with the tough market conditions.
The assistance would give haematite miners the opportunity to apply for a 50 per cent rebate on royalties for up to 12 months, if the price of the commodity remains below $AU90 over that period.
In a statement, Premier Colin Barnett said the move was essential.
"This is a responsible and carefully considered move and comes on the back of a 48 per cent fall in iron ore prices since January 1," he said.
"The iron ore industry plays a hugely important role in the Western Australian economy, accounting for 56 per cent of the state's exports and employing more than 61,000 people in 2013-14."
The rebate will come into effect from the December quarter, with the first rebates available in February.
After the 12-month period, miners will have to repay the rebates over the following two years. Double whammy on budget's bottom line
The royalty relief would have an impact on the state budget's bottom line.
The Royalties for Regions program will fund 25 per cent of the cost of the rebates, and the funds would be re-directed back to the program once miners have made their repayments.
The relief will shape up as a double hit for the budget with the Government already under pressure from falling royalty revenue.
It is due to update the state's finances when it releases the mid-year review of the budget on Monday, which is predicted to show a further deterioration.
The Government had previously given royalty breaks to magnetite miners in the Mid West, with the Karara project, east of Geraldton, the first to benefit.
Under legislation, companies can ask for royalty relief if they can show the current tax rate is causing them financial hardship.
The ABC understands the Government is also in negotiations about lower port charges, which the industry has long complained are unnecessarily high.
The Association of Mining and Exploration Companies (AMEC) had been involved in some of the discussions which spanned several government departments and ministries.
BC Iron, Atlas Iron and Mt Gibson Iron have all slashed jobs and spending in the past couple of weeks to cope with the price slide.
Both BC Iron and Atlas have cut directors while remaining board members have taken a pay cut.
Fortescue Metals Group (FMG), the smaller of the country's big three miners, has also made cuts, announcing it would slash $US650 million from its annual capital spend, while also axing three senior executive positions.
