REGULATING THE GOLD RUSH
WITH the gold price at an all-time high, and Victoria’s largest mine at Fosterville forecast to produce 550,000-610,000 ounces of gold in 2019, there’s been a significant resurgence in domestic and international interest in Victorian gold.
In response, the Victorian state government budget 2019-20 will introduce a 2.75pc gold royalty from January 1, 2020, which will bring Victoria in line with other states and is expected to generate $56m.
Small miners will be exempt but Minerals Council of Australia Victoria branch executive director James Sorahan said the tax is reckless, poorly considered and will hurt regional communities and threaten jobs in a growing industry.
“Without changes, the royalty will have an unfair and significant impact on the operating costs of all gold mines in Victoria,” Mr Sorahan said.
“There is a serious risk that mines will close early and regional development will be handicapped through less investment.”
The MCA Victoria has proposed reforms to remove the unintended impacts by introducing; an exploration offset to encourage exploration to create profitable royalty-paying mines; a progressive royalty rate structure with a gold price floor to account for inevitable lean years of low or no profitability; staged implementation to reduce retrospectivity and; a structure to ensure revenue raised from the royalty is spent in the regions.
“Without these changes, royalty receipts will come at a cost to investment in exploration,” Mr Sorahan said.
The projected $16 million in revenue per annum from the gold royalty compares to over $300 million spent in Victoria by gold miners in 2018 on wages, goods and services, taxes and community grants.
Mr Sorahan said that the closure of just one mine would wipe out the entire benefit of the royalty revenue.
“The government appears oblivious to the fact that Victoria competes for investment in gold mining with every Australian jurisdiction in a globally competitive industry,” he said.
“Victoria’s gold industry has unique characteristics which require a more considered approach to the implementation of a gold royalty.”
Specifically, Mr Sorahan pointed to Victorian gold orebodies being typically narrow vein and nuggety with irregularly distributed deposits which are more difficult for mine planning and typically incur higher production costs.
Victorian gold mines are also underground which involves higher costs than open cut mining given that gold has higher processing costs than other commodities.
“Despite this, the Victorian Government wants to impose a higher gold royalty than WA – which produces 68pc of Australia’s gold,” Mr Sorahan said.
“The shorter reserve life of Victorian gold mines makes exploration the lifeblood of sustaining gold operations in our state.
“Gold mining requires ongoing exploration investment to keep replenishing ore reserves and resources to maintain mine life. “
MCA Victoria has urged the State Government to start again by listening to industry on the gold royalty to create incentives to encourage exploration and maximise mine life.
“Every cent of the gold tax should be reinvested in regional Victorian communities,” Mr Sorahan said.
Mineral resources strategy
The royalty seems at odds with the State’s Minerals Resources Strategy 2018-2023, which is focussed on helping grow investment and jobs in Victoria’s minerals sector and its initiatives to boost investment in minerals exploration.
The Stavely Minerals Exploration Initiative is once such program which aims to encourage investment, with more ground in northern Victoria, with similar geology to the Fosterville gold deposit, expected to be released for minerals exploration in late 2019 via a competitive international tender.
While the Department aims to attract international companies to the State through these exploration initiatives, it’s taken an integrated approach including conducting geoscience programs to identify areas that have the most potential for mineral discoveries, understanding the local land uses, environmental, water, land access and other factors that are most important to the region’s local communities.
The Victorian mining industry is being bolstered by a recent spike in the gold price, and even with the introduction of a gold royalty, exploration licences in the state are in high demand. “A new 2.75pc gold tax would add to uncertain project approval and regulatory regimes and regulatory duplication and inconsistencies.”
They include identifying and making available areas suitable for minerals exploration in a way that encourages the best exploration programs and explorers who are committed to working more closely with land holders and local communities before, and at all stages of their exploration programs.
The initiative also aims to engage with local communities, land holders, councils, water authorities and others in the region, to understand what’s important to them, and involved an extensive geoscience program named the Stavely Project which found that the Stavely Arc has the geological potential for new copper, gold and possibly other metals discoveries.
Then there is the TARGET Minerals Exploration Initiative, a $15 million strategy designed by the State Government to encourage investment in exploration for copper, other base metals and gold in Victoria (and create more jobs and new investments in regional Victoria).
The initiative includes government grants for companies to conduct co-funded minerals exploration programs for eligible minerals.
The grants cover up to half the cost of eligible exploration activities, which include geophysical surveys, drilling and sampling analysis and since 2016, 15 projects have been awarded more than $3.4m in TARGET grants.
In October 2018, a further five projects in the Stavely Arc in western Victoria were selected to share in $2.3m in TARGET grants (subject to being granted a minerals exploration licence), as part of the Stavely ground release tender.
However, securing a grant is a competitive process, with the State revamping assessment guidelines to raise
the bar on who can access state owned minerals.
The new guidelines will make sure a company’s track record, and the records of its directors and executives, are examined when considering licensing decisions.
The goal is to provide greater assurance for farmers and communities that public safety, infrastructure and the environment will be protected when minerals explorers and miners work on both private and public land.
The changes will also benefit the sector by providing upfront and consistent information about how mining licence applications are assessed, making it easier for people with a good track record to apply.
These changes have been part of the process for assessing potential licensees for the Stavely Ground Release in western Victoria and will also be front and centre for the Lockington Ground Release in northern Victoria later this year.
Resources Minister Jaclyn Symes said the new guidelines centre around the main theme of the Mineral Resources Strategy – building a minerals sector that creates jobs, particularly in regional Victoria, and giving communities across the state confidence in the sector.
“We’re raising the bar to make sure our mining sector employs the most qualified and reputable people to access our state’s mineral resources with a strong focus on supporting the communities they work in,” Ms Symes said.
“We’re attracting people to our minerals and mining industry with a strong track record of integrity and collaborating with the community, to ensure we can keep supporting local economies and creating Victorian jobs.”