Golden Goose Dodges A Bullet

Posted by Gold FM on 02/11/2012

golden egg

Mining company feathers have been ruffling since the Government announced a proposal to increase royalties and taxes for the industry.

The Minister of Energy and Resources, Phil Heatley, had a few shots fired across his bow when he spoke about the proposed changes at the New Zealand branch annual conference of the Australian Institute of Mining & Metallurgy in Rotorua in August.

Mike Wilkes, the CEO of Oceana Gold, and Glen Grindlay, General Manager of Newmont Operations in Waihi, both gave the Minister a serve with Mr Wilkes saying, the Goverment was in danger of "cooking the goose that laid the golden egg", and Mr Grindlay threatening to stop Newmont's multi-million dollar exploration programme. Delegates at the conference were annoyed that the Government was suggesting the rises, because it wasn't so long ago that they were tooting about the importance of the mining sector to New Zealand's economy.

 The Government obviously heeded the warnings as they announced yesterday that any royalty changes would only affect new entrants to the sector, meaning that Newmont Waihi Gold, Oceana Gold and any other companies already operating are in the clear for the time being. " Existing permits and licences would retain the royalty rate that currently applies," Mr Heatley said yesterday.

The mining industry has been consistently saying that costs have increased more than any gains in gold prices, putting the viability of many mines under the microscope.

It's unclear at this stage whether mining companies will face a tax hike. Revenues Minister Peter Dunne said yesterday, "The mining sector is important but we must ensure that the tax rules do not give the sector an unfair advantage over other investments which may have higher pre-tax rates of return", adding that "it was important mining companies paid an appropriate level of tax".

The Government is calling for public feedback on proposed changes to royalties and the taxation of minerals, and consultation ends on the 7th of December.