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AMEC takes aim at Australian gold royalty system

The Association of Mining and Exploration Companies, or AMEC, has warned the gold mining industry that the issue of possible royalty hikes is still very much alive.

"Anyone who thinks that this situation is going away would be deluding themselves," CEO Simon Bennison told delegates Oct. 11 at the Precious Metals Investment Symposium in Sydney, Australia.

"Unfortunately governments and treasuries see royalties as something to be manipulated on a cycle these days."

The Western Australian government completed a review of its royalty system in March 2015 but made no changes to rates. The Queensland government is now also undertaking a review of its royalty model, which levies a 5% charge on gold miners.

"It is an ongoing space where governments like to fiddle in order to prop up failing budgets," Bennison said.

"What concerns me is when we go through these review processes, and there is one pending in Queensland at the moment, politicians will take advantage of it, treasuries will take advantage of it to obviously manipulate rates, and nine times out of 10, if not 90 times out of 100, it’s certainly not to our advantage."

"The 5% gold royalty in my mind in Queensland is an absolute nonsense and shouldn’t be tolerated."

Currently there is an A$890 ceiling on the Queensland gold royalty and once it hits that peak mining companies are subject to the full 5% royalty charge.

"I think there is a serious flaw in the design of their model, not only in the ceiling, but also around the floor value that they put within the model," Bennison said.

"At some point in time, as much as the majority of the industry is against profit-based models, we've seriously got to look at how we can get some consistency in how states charge on the royalty situation."

Bennison also took the opportunity to urge all Australian explorers and miners to stay ahead of activist groups determined to stall projects.

"It seriously concerns me that a number of activist groups, and I wouldn't call them community representative bodies but they are genuinely professional activist groups, are going out now and targeting particular development projects," he said.

"It is a serious problem for us and a massive cost to the industry."

India's Adani Enterprises Ltd. has faced lengthy delays and massive cost overruns due to environmental activists attempting to block the development of the A$21 billion Carmichael coal mine in Queensland.

The government has now stepped in and granted the project "critical" status to fast track the approvals process.

Bennison said delays in approvals had cost Adani roughly A$200 million in the past year.

"These people have got very sophisticated, they're very clever, they use crowdfunding, they're using social media, they are on top of the game far better than the industry and this is a concern for us," he said.

"We've got to get our act together in this space and I think we've got to be far more collaborative and strategic in our approach to it."