Magnetite, uranium royalty hit

WESTERN Australia’s magnetite and uranium sectors are concerned the state government’s recent decision to set royalty rates at 5 per cent could affect their fledgling industries. 

Mines Minister Norman Moore said the royalty rate for magnetite was consistent with the rate already within the mining regulations for beneficiated or processed iron ore. The magnetite sector was thought to have been pitching for a maximum of 3 per cent, at least in the first few years, as well as having its own status within the regulations.

Mr Moore said that, because magnetite was iron ore, there was no need for a new magnetite category under Regulation 86, and it was intended that the beneficiated iron ore royalty rate of 5 per cent would apply to magnetite concentrate.

The royalty for magnetite had previously been set at 5 per cent under the ‘other minerals’ category of the mining regulations.

Royalties for fines iron ore, which were previously set at 5.625 per cent, were also stepped up recently to match the lump iron ore rate of 7.5 per cent in 2013.

The Magnetite Network, or MagNet, which represents five magnetite hopefuls, had previously asked for a lower start-up rate for new producers in order to make the sector more attractive.

MagNet executive director Megan Anwyl said a concessional start-up rate was necessary because of the capital-intensive nature of the projects. 

“There should be royalty relief for the first five years of start-up of each individual project and there are a swag of other projects looking for investment,” Ms Anwyl told WA Business News. 

“And what I would say to the federal and state governments is that it would be appropriate to recognise that this is an emerging industry and it needs to have government support.” 

Production at WA’s first magnetite project, CITIC Pacific’s $6 billion Sino Iron project south of Karratha, is expected to start next year and pay $125 million per year in royalties once fully operational.

Others in the MagNet alliance are Gindalbie Metals, Atlas Iron, Asia Iron and Grange Resources, which together with CITIC Pacific represent projects worth more than $16 billion at various stages of development.
Gindalbie and Ansteel’s Karara project, which is due to start exporting magnetite at the end of this year, is expected to generate $50 million a year in royalties once fully operational. 

Mr Moore said these companies could make a business case to the government, which would then consider whether a royalty moratorium was appropriate.

It is estimated the state will receive around $60 million in 2011-2012 from magnetite royalties, with expected increases to more than $160 million a year by 2014-2015.

In addition, the 5 per cent royalty will also apply to uranium oxide concentrates.

Australian Uranium Association CEO Michael Angwin said the uranium mining sector in WA was still developing and this was the first time the industry had a royalty rate struck for it.

“We argued strongly for a royalty rate of 2.5 per cent, which was based on the high degree of processing of the ore to be undertaken in WA, as well as the highly competitive international market this new industry will be entering,” he said. 

“The government chose to apply the mainstream royalty rate and the companies planning uranium mines in the west will now assess the likely impact of the royalty on their projects.”

Uranium royalties are expected to bring into WA more than $10 million in 2013-2014 and $28 million the following year.