The Australian mining industry is in the news for the wrong
reasons yet again after it was revealed in February that Mining
Resource Rent Tax (MRRT) tax only raised A$126m ($129m)* in the
first six months of operation a far cry from the $2bn
the Gillard government predicted.
The revelation, made by
Treasurer Wayne Swan, led the opposition, The Green Party, to
announce that it wanted to fix the loopholes in
If Labor fixed the mining
tax, we could create the jobs of an innovation-led, twenty
first century Australia," Greens Deputy Leader, Adam Bandt,
The party continues to argue for
raising the tax rate to 40% and cutting Commonwealth refunds of
state royalty increases.
The last time that raising MMRT
was discussed, by then-Prime Minister Kevin Rudd, it led to him
step down, mainly due to the harsh opposition from the
The MRRT was at 40% and was
expected to cover all minerals, when first proposed. The end
result was a watered down mining tax legislation, which raised
the tax to 30% for iron ore and coal operations.
The threat of raising taxes
again has caused some concern for miners in Australia.
With respect to the future
of mining in Australia it is fair to say that the mining
industry here has been badly impacted by the rising cost of
doing business (wages, power, transport, etc) and the continued
threat of new taxes by the current government, David Fox,
study manager for Minotaur Exploration, told
Whilst the MRRT was
introduced only for the iron and coal mining sector, its
failure to generate significant income for the government
merely adds to the threat of a broader implementation of the
tax across the entire mining industry, he added.
Minotaur are developing a number of kaolin deposits near
Poochera, including one in Careys Well, which holds a
measured resource of 16.3m tonnes of kaolinised granite with an
ISO Brightness R457 cut-off of 75 for 45um product.
The company has a further exploration target of an
additional 570-810m tonnes of kaolinised granite containing
40%-60% kaolin of ISO Brightness R457 80+ in a further five
identified deposits on the tenement.
The Minerals Council of Australia has argued that the tax
should not be changed.
|Kevin Rudd stepped down as Prime
Minister following the MMRT announcements
Source:Australian Civil Military
Harking back to a 24 March 2011 speech made by Minister
Martin Ferguson, in which he said "enough is enough" in
relation to the speculation about increasing minerals taxation
in Australia, the body said: We agree with Minister
Enough is enough in relation to the continued
obsession with increasing taxes on mining in Australia. We
should be looking at how we can be internationally competitive
for investment and jobs for the benefit of Australians today
and future generations rather than how we can keep carving up
the pie, Ferguson said.
minerals industry tax take from company tax and royalties over
the period from 2001-2002 to 2011-12 has been more than $124bn,
the body pointed out, adding that the effective tax rate is in
excess of 42% against a global average of 39%.
Australias carbon tax has
also been hotly disputed in the news this month. On 25 February
a study undertaken by lobby group Responding to Climate Change
(RTCC) showed that coal fired power stations in Australia were
making profits from the carbon tax scheme and, the group
alleged, passing these onto the consumer.
Since the introduction of
a carbon tax in July 2012, electricity generators have passed
on over 100% of the carbon price to retailers, while keeping
$1bn in cash compensation payments aimed to help heavy
polluters make a transition to low emission generation,
the study claimed.
This is a different argument to
that offered by mining companies, who claim that the carbon tax
can make projects uneconomical to run.
Indeed, some projects have
stalled because of rising costs. Global glass maker
Owens-Illinois said it was restructuring in Australia at the
tail end of 2011, citing carbon tax increases. The company
closed two furnaces in Australia in 2012.
Iluka Resources meanwhile made 65 workers at
its Eneabba mine redundant in January this year, but this was
attributed to slumping demand.
Iluka's Robert Porter says economic conditions have been
difficult and it is not yet clear if the operation will reopen.
In the past, Porter has warned shareholders on the impact of
In February the company announced its intention to slash
another 200 jobs, only adding that more workers could be
rehired once commodity prices improve.
|Iluka Resources has slashed 200 jobs in
One of Australias
few globally significant competitive advantages was our cheap
and abundant power. This has now been trashed with a carbon tax
specifically designed to drive up the price of power (with the
aim of making expensive green power more palatable) and without
any regard to its impact on an export-oriented industrys
global competitiveness, Fox told IM.
According to the Association of
Mining and Exploration Companies (AMEC), which spoke at an
industry event in September, the bulk of mining funding raised
on the Australian Stock Exchange (ASX) was now being directed
towards Africa, Mongolia, and South America.
"Clearly, more ASX raised funds
are heading overseas than being spent in Australia, AMEC
CEO Simon Bennison said at the AMEC Convention in Perth.
"The amount of drilling on new
deposits has flat-lined in recent years and the greenfields
spend is now half of that of brownfields exploration," he
Marking the mining tax and
carbon tax as contributing to market uncertainty, Bennison
called on the government to work harder to make Australia a
more attractive place to do business.
"There needs to be an
exploration tax credit scheme to make Australia internationally
competitive and to streamline regulatory approvals and
of course AMEC favours the removal of the carbon tax and MRRT
[Minerals Resource Rent Tax]," he said.
FIFO and DIDO under the
The prevalence of fly in/fly out
schemes, known as FIFO, and drive in/ drive out, known as DIDO,
were put under the microscope this month also.
FIFO/DIDO is used for mine sites in remote areas. Rather
than relocating the employee and their family to a town near
the work site, the employee is flown to the work site where
they work for a number of days and are then flown back to their
home town for a number of days of rest.
Generally, such sites use portable buildings since there is
no long-term commitment to that location. Usually a FIFO/DIDO
job involves working a long shift for a number of continuous
days with all days off spent at home rather than at the work
A report released in Parliament
in January entitled Cancer of the Bush or Salvation of Our
Cities, compiled over an 18 month period by The Standing
Committee on Regional Australia, made 21 recommendations to
government and 14 to industry. Among these was removing tax
benefits for companies using transient workforces.
According to Mining
Australia, the report focussed in on the Pilbara region,
which not only has a large iron ore and salt deposit operated
by Rio Tinto, but is also home to junior miner
The report has received a mixed
reaction from the Australian government. Most affirm that FIFO
and DIDO arrangements are a necessary way of life, while others
press for proper infrastructure in the remote areas.
Michael Roche, CEO of Queensland
Resources Council, meanwhile said that evidence presented to
the reporting body was ignored.
report ignores the evidence that we provided to the committee
by the way of results from a survey of 2,300 workers with both
non-residential and residential workers, Roche told
survey found was that FIFO and drive in drive out workers are
very happy with their option and wouldn't change, and the
residential workers also wouldn't change, he added.
*Calculated February 2013