Mining and Heavy Industries

Miners see red over proposed iron ore tax

Australia’s iron ore mining giants are in lock step against a newly-proposed $5 a tonne tax designed to remedy Western Australia’s revenue woes as a result of long term lows in the commodity price.

The tax, proposed by new Nationals WA leader Brendon Grylls, would only apply to BHP Billiton and Rio Tinto. But even Andrew Forrest, whose Fortescue Metals Group would be immune to the tax thanks to its more modern agreement, has objected to the idea.

Grylls is suggesting the state increase the “production rent” figure, currently listed in state agreements with BHP and Rio, from 25c per tonne to $5 per tonne.

Rio and BHP have rejected the idea, with a Rio spokesman reportedly telling the AFR there were “no grounds for a new mining tax in Western Australia,” referencing the almost $11 billion paid in taxes to WA by the miner since 2010.

“If Brendon Grylls does become the leader of the Nationals,” the spokesman reportedly said (prior to Grylls’ election on Monday), “we would be very surprised if this proposal has any Western Australian government endorsement.”

Despite his company not being the target of the proposed tax hike, Forrest also slammed the idea this week.

A spokesman for Forrest reportedly told Fairfax the mining magnate had contacted Grylls and outgoing WA Nationals leader Terry Rodman, prior to the Monday election, to discourage the party from progressing the idea any further.

Forrest reportedly told the pair the mining tax would be a “unilateral variation” of state agreements, which would set a “bad precedent”.

“Mr Forrest says it would be unfair to discriminate against individual companies in this way,” the spokesperson reportedly said.”

Despite Forrest’s warning, upon being elected on Monday, Grylls formally announced the policy proposal as his major platform.

“The state agreements have afforded enormous benefits to Rio Tinto and BHP Billiton, however they are now out of date and do not reflect modern practices including Singapore trading hubs, contracting, fly-in-fly-out workforces and automation,” he said.

“It is unfair that this production rental that has existed in the original state agreement has never been changed since it was created in the 1960s.”

Grylls says the miners’ profits have been “facilitated” by WA, and now it is time for those miners to help the state deal with its finances.

But taking a fixed $5 per tonne slice out of the big miner’s profits, especially in an era of iron ore mining where the spot price of iron ore has closed in significantly on even the most efficient miners’ per-tonne costs.

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