Gold

Changes to gold royalty arrangements part of Budget repair task

The 2017-18 State Budget includes two changes to gold royalty arrangements in Western Australia to help with the difficult task of repairing the State’s finances.

  • A tiered royalty rate for gold will be introduced from January 1, 2018
  • Small producers and prospectors not affected by these changes
  • Royalty exemption for the first 2,500 ounces of gold per year will be removed for large producers from July 1, 2018
  • The changes are estimated to raise $392 million in additional royalty revenue over the forward estimates period to assist with Budget repair
  • Changes are part of the State’s Budget repair program, shared across the community

From January 1, 2018 a tiered royalty rate will be introduced, with the royalty rate determined by the Australian dollar price of gold.  The current 2.5 per cent rate will apply for each month when the gold spot price (averaged over a month) is A$1,200 per ounce or less, and an increased rate of 3.75 per cent will apply (on the full royalty value) when the gold spot price is above A$1,200 per ounce.

Based on the current gold price, the increased rate equates to an additional royalty of about $20 per ounce.

In addition, the current exemption for the first 2,500 ounces of gold produced each year will be removed from July 1, 2018 for miners who produce more than 2,500 ounces per year.

These changes are broadly consistent with the previous government’s Mineral Royalty Rate Analysis, which recommended that the royalty rate for gold be increased to 3.75 per cent and the 2,500 ounce exemption be removed for large producers.  These recommendations reflected that:

  • the gold industry has consistently provided a lower return to the State than other major commodities in WA;
  • mining costs in the gold industry are, on average, no higher than mining costs of other commodities;
  • the gold industry is able to adjust project costs in response to changes in price;
  • WA’s gold royalty rate is low compared with other Australian jurisdictions; and
  • the 2,500 ounce exemption does not reduce compliance costs for miners producing more than 2,500 ounces per year.

The changes will affect gold miners that produce more than 2,500 ounces of gold per year, which impacts about 50 gold mines in WA.

Treasurer Ben Wyatt stated, “WA’s gold royalty rate is currently at the lower end of rates levied in Australia. At current price levels, increasing the royalty rate to 3.75 per cent equates to an additional royalty of about $20 per ounce.  This is a modest increase for the industry. Introducing a tiered gold royalty rate provides a safeguard against future gold price reductions by ensuring producers will pay the current 2.5 per cent royalty rate if the gold price falls to A$1,200 per ounce or below. The task of Budget repair needs to be shared across the State.  Everyone will need to share the burden to help fix the mess left behind by the Liberal and Nationals.”

 

 

 

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