“The state government announced in the budget it will be conducting an analysis of state royalties over the next 3 years and will be consulting with industry throughout the review process. Whilst AMEC does not support changes to the current royalty system which could detrimentally affect the industry, we do strongly support and appreciate the government consulting with industry and industry bodies throughout the process.

The budget reflects that this process will result in revenue of $180m in the third year. The Department of State Development and Department of Mines and Petroleum will also take a role in this review. Magnetite will be exempt from this process.

AMEC is keen to see this analysis resolved as soon as possible, so that any uncertainty in the minds of companies and investors concerning changes in royalties can be avoided.

Today’s state budget also announced a number of initiatives that will affect AMEC members, such as:

• Infrastructure – AMEC supports the total allocation of $443m for mid-west energy power requirements. This initiative will greatly assist those mining projects in the mid-west region. The government has put on hold the $339m earmarked for the Oakajee Port and Rail project.

• Future Fund – the resources sector will be the major contributor to the $1bn Future Fund scheme through the Royalties for Regions Program (RFR). This is not additional money but money that has not been spent through efficiency measures from the RFR. In future, 1% of all royalty revenue will be directed into the fund. Access to the fund will not be available until 2032 and will only be allocated to key infrastructure projects in the regions (50%) and metropolitan area. AMEC considers that such an initiative will provide longer term benefits for the state.

• Training – the government will create an additional 33,000 training places at a cost of $99m, which will contribute to the forecasted shortage of skilled labour in the resources sector.

• Aboriginal Heritage – funding for the Aboriginal Heritage Electronic Lodgement Project will significantly improve the current labour based systems and help streamline project approvals across government agencies. There has been a push by AMEC to improve the online lodgement and tracking processes within government as identified in the Approvals Blueprint launched by AMEC which supports this budget initiative.

• Research Institute – AMEC endorses the government’s initiative to establish a Minerals Research Institute, as the allocation of $7.5m over 3 years will provide an excellent opportunity for companies and institutions to come together and work collaboratively. AMEC is pleased to see the state government support research which will help promote the long-term international competitiveness of WA’s minerals industry through innovation, increased productivity and investment attraction.

• Cost of Electricity – the government has announced an increase of 3.5% in power costs, which will further add to operating expenses and will affect the overall bottom line of small and emerging producers.

• Payroll Tax – companies with a $15m per annum payroll (or less) will be exempt from paying payroll tax for new indigenous employees qualifying for a payroll tax rebate for their first 2 years. Small companies with a payroll of less than $1.5m will receive a once only refund of $41,250.

“The state government is taking a long-term approach to its budget and policy development which is welcomed and encouraged by AMEC. AMEC is also pleased to see the state government’s willingness to involve industry in future consultation processes regarding state legislative policies that affect the industry.

“AMEC will continue to work with government to develop policies that look towards the long term growth of Western Australia,” said Mr Bennison.

While AMEC supports the need for a robust planning framework which provides clarity and certainty for stakeholders AMEC’s submission raised a number of concerns, including the regulatory overlap between all levels of Government and the unnecessary creation of barriers to exploration due to uncertainty in the ability of a proponent to develop a project.

AMEC’s submission to the NSW Strategic Land Use Plans

Appendix A – AMEC Submission to NSW Aquifer Interference Policy

Appendix B – AMEC submission to Murray-Darling Basin Authority

AMEC supported the draft policy providing conditional exemption from the need to hold a water license or aquifer interference approval for low risk aquifer interference minerals exploration activities that intersect the water table but do not take water.

Click here for a copy of the submission.

“Ongoing media speculation that there will be an announcement in the forthcoming Federal Budget adopting another Greens policy to further reduce or remove, the diesel fuel credit for mining and exploration companies is alarming and of intense concern to AMEC and its hundreds of members”, said Simon Bennison, AMEC CEO.

“Our members are already facing a reduction of 6.21c/L in the diesel fuel credit effective from 1 July 2012, as part of the Carbon Tax package.

“The likelihood of a further reduction in the diesel fuel credit will be a severe blow to many businesses, with diesel fuel representing up to 25% of total costs for base and precious metals. An increase could severely affect the viability of some companies.

“Mining and exploration companies working in remote areas have little option but to use diesel, and energy generation comes at considerable and impossible costs to some companies.

“The diesel fuel credit system was put in place because mining, exploration, agriculture, forestry and professional fishing entities do not use public roads for which the fuel tax was intended to pay. It is an essential component of these businesses particularly noting the volume of diesel fuel used off public roads and for processing purposes.

“The imposition of a new tax on off road diesel use will put at risk thousands of jobs in the mining and exploration industry.

“Not all mining companies are the same. The Australian small and mid-sized mines generally operate on tighter margins and are more sensitive to input cost changes than the large scale mines operated by global majors. This is an important factor which should not be overlooked or ignored by the government.

“There are over 3,000 Australian exploration and mining companies who have significant assets, infrastructure and employees.

“The government must therefore take care with any new taxes or amendments to existing tax arrangements to ensure there is no collateral damage and unintended consequences for these emerging mining and exploration companies and their employees, contractors and suppliers. The government should also consult with industry prior to any proposed changes.

“The viability of Australian base and precious metals mines are particularly sensitive to changes in diesel costs and will be hit the hardest by any change. The pressures on these sectors is already being seen with recent mine closures.

“Driving up costs of production in Australia by the Federal Government continues to take investment offshore”, said Mr Bennison.

Driving investment offshore will inevitably lead to a smaller mining industry in Australia and jeopardise state government royalties and taxation revenue for local, state and federal governments.

In this regard, it should be noted that a large proportion of AMEC members could be defined as ‘small business’, and in many instances would have a staffing complement of between one and ten. AMEC is also supportive of any initiatives that will result in lower costs to industry and government agencies, as well as increased efficiency and productivity through those agencies; and of the subsequent flow on benefits to small businesses.

AMEC has therefore made a number of recommendations in a submission to the Coalition Deregulation Taskforce. Click here for a copy.

AMEC is satisfied that the current state and territory-based regulatory arrangements are adequately addressing the interaction between minerals, coal and coal seam gas exploration, mining and extraction and water resources. Commonwealth regulation in this area is unnecessary and unwarranted.

Furthermore, the Amendment Bill is also at complete odds with the outcomes of the 12 April 2012 meeting of the COAG Business Advisory Forum which agreed to reduce regulatory red and green-tape. The Amendment Bill effectively adds another regulatory layer to the environmental approvals and assessments for the coal seam gas and coal mining industries.

Click here for a copy of AMEC’s submission to the Senate Committee.