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Resource companies need royalty certainty to keep investing in WA: CME

The Chamber of Minerals and Energy of Western Australia (CME) is calling on the McGowan Government to give its members the certainty they need to continue investing in the State by keeping royalties and related charges at current levels.

In its annual pre-Budget submission, CME highlighted the strong collaboration between the resources sector and the State Government during the COVID-19 pandemic.

CME Chief Executive Officer Paul Everingham said while this collaboration has enabled the sector to continue to underpin the WA and Australian economies during the pandemic, ongoing global uncertainty around COVID-19 still has the capacity to impact mining and resources operations in the longer run.

“What we are seeking from the WA Government is a commitment to not increase or introduce new royalties, taxes, levies and other charges for the sector,” he said.

“Throughout COVID-19, our sector has managed to maintain strong production volumes, and while we are optimistic this can continue, there are no guarantees when it comes to market conditions such as commodity prices in the face of global economic uncertainty.

“Every additional tonne produced in WA means more royalties for WA. Royalty revenue generated by the WA resources sector in the 2019-20 financial year totalled $9.29 billion, which goes a long way to funding schools, hospitals and essential services across the state.

“WA has proved to be an attractive investment destination, in part because of the stability and long-term certainty of current fiscal settings.

“To increase costs now would be to risk the global competitiveness of a sector that is the lifeblood of WA’s economy. 

“To give some context as to what’s at stake, more than 130,000 Western Australians are currently employed in mining and resources, while a recent survey snapshot showed 53 CME member companies directly contributed more than $67 billion to the Australian economy in 2018-19.” 

CME is also requesting the WA Government consider fiscal and policy settings to stimulate investment in resources projects which will diversify the economy and add value through downstream processing.

Mr Everingham said CME supported the long-standing ad valorem royalty system in WA, but noted the specific royalty tiers applied to certain processed commodities might not be the best fit for modern, high value-add commodities that carry higher risk.

Examples include critical minerals like lithium, heavy rare earths, and magnetite concentrates and pellets.

“This is about having effective and competitive royalty settings to incentivise downstream investment in value-adding mineral concentrates, chemicals and other products,” Mr Everingham said.

“These commodities typically involve higher levels of capital investment, processing intensity and complexity to achieve grades suitable for downstream production and as manufacturing inputs.

“Many are also highly technical and labour-intensive. For instance, lithium sales make up only one per cent of the sector’s total exports but operators employ four per cent of the workforce.

“It’s well-documented how important minerals associated with the battery supply chain, including lithium and rare earths, could be for WA’s long-term economic prosperity. But to ensure that happens, we need to be encouraging investment now.”

CME is also a strong advocate for streamlining regulatory reforms which makes it easier to invest and do business in WA. This includes priority delivery of ‘single touch’ environmental approvals reform, which will result in Commonwealth and State environmental assessment and approvals being facilitated under one process by the WA regulator, supported by robust standards and governance.

Mr Everingham said a bold reform agenda would help drive a quicker return to growth in WA, noting the impacts of COVID-19 are still being felt and are likely to weigh heavily on the global economy for years to come.

“The WA Government has stated on numerous occasions that it wants to reduce unnecessary red tape to drive better decision-making and help stimulate the economy, and the mining and resources sector is welcoming of that approach,” Mr Everingham said.

“We would ask that the Streamline WA initiative is appropriately funded and resourced to continue delivering on its whole-of-government mission in an effective, timely manner.

“There are immediate, low-risk gains that can be made through measures like omnibus bills, while a more effective lead agency or case management framework can also be used to accelerate end-to-end project approvals.”