Gold miners in Western Australia (WA) are dismayed at the government there reintroducing a higher production royalty with modified terms. The move will affect companies such as Gold Fields and AngloGold Ashanti.
"There has been no consultation with the gold industry and we are disappointed by the media release by the government on resurrecting the gold royalty," said Stuart Mathews, the Gold Fields’ executive vice-president of the Australia region.
"We remain opposed to a royalty increase that will impact jobs, investment in the WA gold industry, exploration and growth, and the sustainability of gold in WA. A royalty increase will reduce mines’ life, reduce production, cost jobs and ultimately mean much less revenue for WA. A strong gold sector where investment is encouraged will greatly assist growth for the state," he said in a statement.
The West Australian government, which is looking to bolster its overstretched coffers by A$332m over four years, has proposed the introduction of the same royalty rate that was shot down just a few weeks ago by opposition parties.
The rate will increase to 3.75% from 2.5% from the start of 2018 and will kick in once the gold price goes above A$1,400/oz compared with A$1,200 under the previous proposal. There are concessions for small and marginal miners, but even with those opposition parties and the industry opposed the higher charge.
The prevailing price is about A$1,700/oz.
The increased royalty demand comes after Gold Fields hived off three deep-level gold mines in SA to form Sibanye Gold three years ago and focus heavily on its international portfolio, with Australia by far the biggest source of gold and an area of high expenditure on the Gruyere gold mine and exploration.
AngloGold Ashanti has also cut its exposure to SA, agreeing to the sale of its Moab Khotsong mine to Harmony Gold and its Kopanang mine to China’s Heaven-Sent, reducing SA’s contribution to the group to 13% from 40% a decade ago.
However, it is clear SA is not the only challenging mining jurisdiction.
AngloGold referred to a statement issued by the Chamber of Minerals and Energy of Western Australia (CME), of which it and Gold Fields are members, rather than issuing its own comment.
"CME remains opposed to a gold royalty increase. Any increase will still likely threaten jobs, affect local communities, and impact the growth of Western Australia’s economy. CME acknowledges the financial position the state government faces, and agrees that everyone needs to share the burden. However, CME does not believe a gold royalty increase is the way to proceed," the CME said.
Gold Fields CE Nick Holland said in early October a 50% increase in royalties would result in an additional cost of A$20m a year that the company was likely to deduct from the roughly A$100m a year it has earmarked for a five-year exploration programme in Australia.