Australia's new tax hike angers miners and may hit projects
Australia’s mining giants are threatening both the government of Queensland and the federal authorities with dropping all of their new projects in response to the state’s surprise increase in coal mining royalties.
Over the next four years Queensland hopes to raise $1.6 billion through taxes to ease a nearly $11 billion deficit. The industry will see a jump from 10% to 12.5% for every tonne of coal sold between $100 and $150. Coal traded over that price will be taxed 15%.
The announcement came only a day after giant miners such as BHP Billiton (ASX:BHP) and Xstrata Coal (LON:XTA) said they would shed workers, close mines and delay projects due to the difficult economic conditions affecting the coal industry.
Australia's coal miners are now confronting the same troubles as the country's beleaguered iron ore players, with operating costs rising as commodities prices plunge.
The spot price of coal has fallen to near three-year lows and is now trading at about $155 a tonne, which is a drop of more than 50% from prices seen early last year, after the floods that hit Queensland.
BHP's vice-president public affairs, Samantha Stevens, told AAP that Queensland already had one of the world's highest coal tax regimes and that the company wasn’t pleased with the royalty hike.
'We've certainly made it clear to the state government that any additional royalty impost will have a direct impact on the profitability of not only our existing operations but will also on future business decisions regarding capital allocation on future growth projects,' she said.
Xstrata, which revealed yesterday it was axing 600 jobs from its Australian coal operations, said an important share of the Australian thermal and coking coal industry was losing money at current prices.
Similar reactions came from Rio Tinto Coal's managing director, Bill Champion, who told AAP the company was “shocked, surprised and very disappointed by the size of the royalty increase … [which] will further endanger jobs and investment in the coal industry."
This is the second hike in coal royalties in five years in Queensland.