Sunday, August 9, 2020

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Home Issue 24 CLP on royalties: Would miners still call the tune?

CLP on royalties: Would miners still call the tune?

By ERWIN CHLANDA
 
The CLP says it would make changes to the mineral royalties but their plans seem to fall short of stopping customary rorting by the system by mining companies.
 
A salt mine, such as the one proposed for Tijikala.
 
Opposition Leader Lia Finocchiaro says a CLP government would introduce “ad valorem” costing of minerals, using their values at the mining tenement or wellhead for calculating the percentage to be paid to the government in royalties.
 
Trouble it, she is not saying what that percentage will be – not before the August election, that is.
 
And the Association of Mining and Exploration Companies (AMEC) says: “The percentage can be adjusted to reflect the amount of local processing that has occurred.”
 
The Gunner government, while suggesting revenue from mining will be the answer to its scandalous $7 billion deficit, is in fact spending taxpayer’s money to support the industry.
 
The current system is a classic slight of hand: “Mining royalties are 20%,” we’re told.
 
Brilliant! But 20% of what? Of the Net Value. And that can be close to zero.
 
The Net Value, part of the current hybrid system, is calculated according to this formula: Add up items downstream from the mine called “costs, capital recognition deduction, eligible exploration expenditure and additional deduction”. Then deduct that sum from “Gross Realisation”. The royalty percentage is applied to that result.
 
If it is less than Gross Realisation then the loss can be brought forward to the next year, diminishing the royalties due then.
 
That’s the nifty scheme that may leave nothing to which the current 20% royalty charge can be applied, so the government and the public miss out.
 
“People like McArthur River Mine did’t pay any royalties for years because of that reason,” says CLP President Ron Kelly (pictured in March 2016 at a cattlemen’s conference). He was the NT Mines Department CEO during part of the Adam Giles government.
 
He says the present profit based arrangement will be replaced solely with an ad valorem system similar to the one in WA.
 
But what will be the royalty percentage under a new CLP Government’s ad valorem system?
 
“When elected that will be developed,” says Mr Kelly.
 
This means the policy is of little use for people trying to work out for whom to vote in August.
 
But Opposition Leader Lia Finocchiaro is claiming: “The new system will make it easier for existing mining operations and prospective businesses to forecast royalty expenses.”
 
Yes, after the election they will be.
 
“Mining is such an important part of the Territory’s economy, contributing $5.7 billion and supporting more than 7,000 jobs, but the Gunner Government isn’t allowing it to reach its potential with its hybrid tax model,” says Mrs Finocchiaro.
 
Recent events and comments suggest the Gunner government is doing its best to achieve the opposite.
 
The change will be made “in consultation with industry,” says Mrs Finocchiaro.
 
“Last year’s Fraser Institute ranked the NT behind jurisdictions like Botswana and Turkey on investment attractiveness on policy perception. It’s not good enough.”
 
AMEC CEO Warren Pearce welcomes the CLP announcement: “A pure ad valorem regime increases certainty and transparency for companies making investment decisions, treasury officials budgeting, and the community about what they get back for their minerals.
 
“The percentage can be adjusted to reflect the amount of local processing that has occurred.”
 
That would mean, far from an independently determined, market guided mining tenement or wellhead price, the companies will still be able to manipulate royalties by making claims about “processing that has occurred” – pretty well what’s happening now, under a different name.
 
“The Territory currently has only eight operating mines, and there is incredible opportunity to grow the mining industry, grow jobs and grow government revenues,” says Mr Pearce.
 
What’s in it for us? That’s what Territorians are likely to be asking.
 
The News is inviting Mr Pearce to comment further.
 
 
 

2 COMMENTS

  1. “People like McArthur River Mine did’t pay any royalties for years because of that reason.”
    No surprises there.
    McArthur River Mine isn’t likely to pay any royalties ever, despite the McArthur River lead-zinc deposit being, I believe, the largest lead-zinc deposit in the world.
    You know the old joke?
    Company CEO: “What is our profit?”
    Accountant: “What would you like it to be?”
    It isn’t at all practical or likely to happen but I think the only way to ensure full payment of royalties is to receive them as product (a percentage of strenuously monitored production) which is then independently sold at auction.

  2. It makes me feel so inspired, warm and fuzzy when people use Latin to show their superiority (especially pollies). Makes is all rush for google and enlighten our ignorance and feel so much better for understanding Polly Speak.
    Calculation of royalties is not that hard. We don’t need any Latin in the calculations I don’t think.
    Everyone just needs to be fair and honest.
    Agree on the formula and miraculously you can work out the numbers from there or if fortuna favet audaci, you can use an abacus.
    For goodness sake why do we waste so much time on political nonsense when it could be so easy.

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