Western Australia state asks Iron ore Miners to pay cash in advance


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Iron Ore Market

Western Australian state officials are going to ask BHP and Rio Tinto to pay in advance multi-billion dollar fee. In order to exchange the cancelling ongoing intrude on their Iron ore outputs.

Australian state is firmly convinced it will succeed with the current intentions, but miners are not likely to agree. In fact, if they win significant benefits they can possibly consider the option. The mineral-rich state has had more than $23 billion in debt following the end of a mining boom.

Considering all the options, the BHP and Rio Tinto are ready to pay about $3 billion in exchange for cancelling a A$0.25 a tonne ongoing levy. This iron ore levy in their mines could last for further 50 years.

Ben Wyatt won a state election in March this year. The state treasurer supports left Labor party, and he said the proposal is still in very early stages.

“It’s an option that could only be close to crystallizing if you had a range of things in play, one, obviously the engagement and agreement of the miners.” (Wyatt)


Miner comments

Rio Tinto spokesman said that the company rejected the payout proposal, and that it does not want to reconsider it. While the BHP spokesman refused to comment on this subject.

The miners will meet with government officials this week. But there are some rumors, that the proposal could possibly inspire some unwelcome precedent.

“The last thing Rio and BHP want is to become the state’s go-to ATM every time there’s a financial crisis.”  (Reuters source)

The A$0.25 a tonne levy raised around A$150 million for Western Australia last year, based on the two company’s combined output of about 600 million tonnes of iron ore. The state earns far more from a 7.5 percent royalty based on the value of their sales, which contributes well over $2 billion a year to state coffers. (Reuters)


The conditions

Miners will accept the proposal only if they benefit substantially.

“There would have to be a motivation from the miners’ point of view unless they were feeling philanthropic.” Said Pietro Guj, the university professor.

The current plan follows a proprosal by a rival party in the lead up to the March election.  It said  the levy should be raised to as much $5 a tonne, but this proposal was condemned by the miners.

Only Rio Tinto and BHP pay the rental fee which applies to mature projects. The other projects, including those owned by Fortescue Metals Group and Gina Rinehart’s Hancock Prospecting would be liable to pay it from 2023.



By | 2017-05-29T11:27:46+00:00 May 29th, 2017|Financial, Governments|0 Comments

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