Key Points: Although the magnetite iron and uranium oxide royalties
will be imposed soon, the Government says it might consider
temporary exemptions on a case-by-case basis.
The Western Australia State Government has announced plans to
apply a 5% royalty to magnetite iron ore and uranium oxide
concentrates extracted from WA mining tenements.
WA's Minister for Mines and Petroleum Norman Moore announced
the State Government's intention to apply these royalties at
the Australian Uranium Conference in Fremantle last week.
Regulation 86 of the Mining Regulations (WA) 1981 provides that
when any of the minerals prescribed in the Regulation are obtained
from a mining tenement, or from land the subject of an application
for a mining tenement, royalties shall be paid by the holder of, or
applicant for, the mining tenement.
The State Government intends to introduce uranium oxide as a
prescribed mineral before 1 July 2012 and amendments to the
Regulations to effect this are already underway.
There is no need for legislative amendment in respect of the
royalty applicable to magnetite as it is already subject to a 5%
royalty by being "beneficiated iron ore" under Regulation
Based on the production schedules of the State's current and
emerging magnetite producers (including Crosslands Resources
(Murchison Metals/Mitsubishi Development), Gindalbie
Metals/Ansteel, Grange Resources, Sinosteel Midwest and CITIC
Pacific), the State Government has estimated that the magnetite
royalty will yield approximately $60 million per annum between 2011
and 2012 and $160 million per annum between 2014 and 2015.
In observing that a number of the State's magnetite deposits
include significant vanadium resources, Mr Moore noted that
companies mining magnetite may need to implement a separation
circuit to avoid paying a 5% royalty in respect of any vanadium
pentoxide which naturally occurs alongside magnetite.
The Federal Government has announced that any magnetite
royalties paid will be credited against its proposed Minerals
Resource Rent Tax Act (MRRT) set for commencement
on 1 July 2012. The MRRT also applies to magnetite iron ore despite
miners lobbying for an exemption due to the capital-intensive
nature of magnetite mining.
Although the WA State Government's six-year administrative
ban on uranium mining was lifted in 2008 following the removal of
the Federal Government's "no-new-mines" policy in
2007, there are not as yet any operating uranium mines in WA.
Based on the production schedules of the leading uranium mining
proponents in WA (including Cameco/Mitsubishi Development, Toro
Energy, Mega Uranium/JAURD-Itochu and BHP Billiton), the State
Government estimates that the uranium oxide royalty will yield
approximately $10 million per annum between 2013 and 2014 and a
further $28 million per annum between 2014 and 2015.
There are currently only four uranium mines operating in
Australia, three in South Australia and one in the Northern
Territory. Government royalties are applied to uranium in each of
Assertions that the application of royalties may delay or
discourage investment in the magnetite and uranium sectors does not
appear to have influenced the State Government.
Mining companies and industry representative groups (including
the Magnetite Network, an association of WA's magnetite miners,
and the Australian Uranium Association) have appealed to the State
Government for concessional treatment for the uranium and magnetite
iron ore industries. For example, a deferral of the imposition of
Government royalties for the first few years of production would
give these emerging and capital-intensive industries a chance to
Mr Moore has stated that the State Government would consider
individual circumstances on a case-by-case basis, granting
temporary exemptions to applicants where the Government considers
Thanks to Naomi Gearon for her help in writing this
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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