The West Australia Mineral Royalty Rate Analysis (Review) commenced yesterday with a deadline of 31 October 2013 for submissions.

The Review is the first formal Government review of the royalty rate since the early 1980s and is designed to achieve an improved revenue return to the Western Australian community.

Terms of reference

According to the 2012-2013 State budget, the current revenue target (of a tenth of the total mine head value of a mineral resource) is not achieved by a 10 percent rate of royalty.

The Review aims to:

  1. examine the ongoing efficacy and appropriateness of the policy that revenue returned from royalties is broadly equivalent to 10 percent of the total mine-head value of the mineral;
  2. if a benchmark based on 10 percent of mine-head value is retained, examine the extent to which the current royalty rates structure produces revenue that differs from the benchmark, and identify appropriate adjustments that would take revenues closer to the benchmark;
  3. if an alternative benchmark is proposed, examine royalty rate structures that would achieve the new benchmark; and
  4. address any anomalies identified in the current royalty structure.

Importantly, the Review will not:

  • consider petroleum royalties;
  • consider major changes to royalty arrangements;
  • propose changes to the ad valorem basis of State royalties;
  • consider changes that could have detrimental effects on the State’s revenue base; or
  • include consideration of magnetite.

Submission and review process

The Government is currently accepting submissions from industry representatives and interested stakeholders based on the terms of reference and stakeholder consultation paper (available online at http://www.dsd.wa.gov.au/royaltyrates). Submissions will be accepted by email or post until 31 October 2013.

After considering the submissions, the Department of State Development and the Department of Mines and Petroleum will prepare an issues paper and consult further with relevant parties, before preparing a report for Government by December 2014.

Although the Review is aimed at ‘tweaking’ the current royalty system to achieve increased revenue return, rather than achieving a complete overhaul, it is a valuable opportunity for mining tenement holders to have their business concerns recognised.