The Government proposes to increase royalties it receives
from mining companies, but submissions on whether profits or
revenue should attract the increases may alter the plan.
Any change to royalty rates will only apply to new permits,
so existing mining operations such as Oceana Gold and Newmont
Waihi Gold will be exempt, much to their relief.
However, the proposed regime could potentially dampen
foreign-investment interest in New Zealand mines.
During the past week both Prime Minister John Key and
Minister of Energy and Resources Phil Heatley have reiterated
the importance of the resource sector to underpin economic
This has been a key Government policy for the past two years,
but in order to succeed the sector must attract foreign
The Reviewing the Royalties Regime for Minerals paper
outlines proposals on Government revenue from minerals,
including gold, silver, coal and platinum, phosphates and
iron sands but not oil and gas.
In existing royalties, gold and silver producers pay either
1% of the value of minerals or 2% if revenue is more than
The proposed changes seek either 2% of the mineral value
produced, or 10% of profits, whichever is the highest.
Chief executive of political lobby group Straterra, Chris
Baker, said the industry had been "primed" to expect worse,
but the reality was the proposals were "not so bad, and
remained competitive" internationally.
Oceana Gold chief executive Mick Wilkes has been highly
critical of the initial proposals to increase tax and
royalties given mining costs are spiralling well beyond the
general perception that near-record gold prices must be
offsetting rising costs for producers.
With more details being released, Mr Wilkes said Oceana was
still reviewing the proposals in detail, but his first
impression was the royalties increase was "reasonable" and
the New Zealand sector would be "still internationally
"Yes, it is very good that they are not retrospective [on
existing operators]," he said in a statement yesterday.
However, he believed the Government was missing an
opportunity to be more competitive for foreign investment in
mining by not making the royalties profits-based only.
"Rather, they have chosen to go for the higher or 2% of
revenue and 10% of accounting profits," Mr Wilkes said.
Mr Baker said an increase of tax on profit was better than a
increase of tax on revenue.
He said the coal industry would be harder hit by royalty
proposals, given the international price per tonne had
slumped and this was further compounded by rising production