What a blessed state it is to be miner in Australia. When it’s all boom you get to dictate your own tax rates and when it goes bust you get handouts. From The Australian:
Acting WA Mines Minister Ken Baston told The Australian that the royalty rebate was intended to provide temporary relief for junior miners while they restructured their operations “in the face of a sudden and dramatic commodity price fall”.
“All applications for royalty relief will be carefully assessed to ensure each applicant is implementing measures to reduce their operating costs,” Mr Baston said.
“These assessments will be overseen by an independent probity auditor.”
And I thought they were in the commodity business, in which “sudden” price falls are the norm. The stupidity of this handout is apparent in the rationale. “Temporary relief” is not going to do anything for Australia’s structurally stuffed high cost producers. Oversupply is set to soar from 50-100 million tonnes per annum (mtpa) last year to 300mtpa within two years. The Australian juniors are next on the chopping block on the global cost curve and if they don’t go out of business then the iron ore price is going to sink much further, much faster.
By my calculations, junior output represents only 5-6% of total WA iron ore production in the year ahead. Keeping the juniors alive will hit royalties on the other 95%, adding to the cost of the handout. Any jobs that are saved will be displaced elsewhere as government spending is cut more deeply and then the juniors will die anyway as the handout goes back to China as lower prices.
As well, the handout works against Comrade Colin’s own attempts to keep the boom going in West Pilbara. The proposed development of rail and port infrastructure to open up the region will be retarded by the lower prices that the WA Politburo is contributing to.
Moreover, it only eggs the big producers on to produce more and crash the price sooner. It’s not in their interests to let the juniors or the West Pilbara upstarts survive.
The lobby is happy:
…Simon Bennison, head of the Association of Mining and Exploration Companies, helped argue for the royalty relief and said the government “should be applauded” for rolling out the program.
Applauded by the rent-seekers, sure. With help from the WA communists, they’ve just reamed the taxpayer.
