BHP in royalties dispute

An Aboriginal charity that was paid $47 million in mining royalties last year could find itself out of pocket after BHP concluded it had paid too much over an extended period.

IBN Charitable Foundation is paid royalties based on production from BHP’s Mining Area C operation in the Pilbara.

It collects and manages the royalties on behalf of three traditional owner groups - the Yinhawangka, Banjima and Nyiyaparli people.

“BHP have notified IBN that they believe they have overpaid production payments under the MAC Agreement to IBN over a number of years,” the charity stated in its recently published 2023 financial report.

IBN added that BHP “may be seeking reimbursement of these funds”.

“However at the date of this report BHP have not been able to finalise the calculation of this amount or decided whether they will indeed seek to recover the funds.”

The dispute follows a very large increase in royalty payments to IBN.

It was paid nearly $47 million in each of the past two financial years under the Mining Area C agreement.

That’s up from $26 million in FY21 and $9.4 million in FY20.

Its total assets have grown to $211 million, making it one of the largest indigenous charitable trusts in WA, according to Business News’ Data & Insights.

News of the potential overpayment comes nearly three years after BHP commenced production at its giant South Flank mine, which is adjacent to Mining Area C.

South Flank is located on the traditional lands of the Banjima people.

Business News understands the issue arose because one of BHP’s mining pits has expanded beyond the IBN determination area.

The current dispute follows a fractious period in the early 2010s when IBN and BHP renegotiated their original royalties agreement.

BHP said at the time that beneficiaries were not satisfied with IBN’s structure while IBN’s then chairperson Lorraine Injie said it faced “the continuing threat of litigation from BHP”.

After years of negotiation, a new agreement was finalised in 2016, allowing funds to be transferred to five new trusts based on language groups.

That was followed by a three-year period when no royalty payments were made to IBN – instead more than $100 million was back-paid to the new trusts.

At the completion of this ‘rebalancing’ period, IBN said it would receive its allocation of 60 per cent of Mining Area C production payments from BHP.

The new trusts included the Banjima Charitable Trust, which receives royalty payments from multiple BHP and Rio Tinto mines.

It has grown to be a large entity in its own right, with ‘contribution income’ of $29 million in FY23 and total assets of $164 million.

Business News understands BHP is still working with IBN and traditional owners to finalise its review of royalty payments and evaluate whether it will seek any reimbursement.

BHP is not the only big miner managing a dispute over royalties.

Rio Tinto has been enmeshed in a larger, long-running dispute with another Aboriginal charity, The General Gumala Foundation.

Business News recently revealed that Rio had paid $125 million to Gumala after admitting to the underpayment of royalties from its Yandi mine.

Gumala signalled that further payments may be made, noting that “the final amount remains unresolved”.

Like IBN, the Gumala foundation collects royalties on behalf of the Yinhawangka, Banjima and Nyiyaparli traditional owners.

The Gumala foundation is WA’s largest indigenous charitable trust – it was paid $22 million in FY23 pursuant to the Yandi land use agreement and ended the financial year with total assets of $325 million.