10/11/2011 - 10:38

Iron ore royalties hiked $1.9bn

10/11/2011 - 10:38

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Iron ore royalties hiked $1.9bn

The state government says it will reap an extra $1.9 billion over the next three years after finalising agreements with BHP Billiton and Rio Tinto to increase the royalty rate payable for their iron ore fines product.

“The changes will see all iron ore mining companies in WA pay the same royalty rate whether or not projects come under a State Agreement or whether they mine lump iron ore or fines,” Premier Colin Barnett said in a statement.

“These changes recognise that fines ore has become the main iron making feedstock, and will bring the rates in line with those charged for lump ore."

The government had previously announced its intention to lift the royalty rate but had to negotiate changes to 13 State Agreements in order to implement the new policy.

In the case of BHP, the Premier publicly rebuked its chief executive Marius Kloppers earlier this year for BHP’s approach to the negotiations.

The package announced today includes changes to Local Participation Plans and Community Development Plans and provides for greater flexibility to accommodate third party infrastructure in areas covered by State Agreements.

The Premier said these "will only enhance BHP Billiton and Rio Tinto’s strong involvement in their mining and port communities, as both have impressive records in supporting indigenous businesses and employment”

As the name suggests, fines are a grain-like variety of iron ore.

Lump-form iron ore used to be a higher valued product but the price gap has closed in recent years as the steel sector soaked up virtually all available supply.

The royalty rate applicable to iron ore fines will increase from 5.625 per cent of sales revenue to 6.5 per cent from July 1 next year, and to 7.5 per cent from July 1, 2013.

BHP Billiton Iron Ore president Ian Ashby said the changes to the state agreements would give the miner greater certainty in planning and executing growth projects, particularly the proposed Outer Harbour development near Port Hedland.

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