Nickel miners could pay less to mine in Western Australia amid royalty relief crisis talks

Nickel miners could pay less to mine in Western Australia amid royalty relief crisis talks
  • PublishedJanuary 26, 2024

A glut in the international market – sparked in part by robust supply from Indonesia, the Philippines and China – has seen nickel plummet 43 per cent over the past year.

These past weeks have seen Andrew Forrest’s Wyloo Metals reveal it would mothball its Goldfields nickel mines while Panoramic Resources will close the Savannah nickel mine in the Kimberley, shedding hundreds of jobs.

Lithium prices have also plunged 80 per cent in the past year sparking fears for the future of these “strategic” metals – seen as critical in the country’s renewable energy transition.

Federal resources minister Madeline King and WA mines minister David Michael met with nickel and lithium industry heavyweights today, pledging state and federal level support.

Industry heavyweights hold crisis talks with Federal Resources Minister Madeleine King amid declining global nickel and lithium prices. ABC News: Rebecca Trigger )

Mr Michael said reforms to WA’s royalty scheme based on price, on a sliding scale, were put forward and he would take them to government.

It means nickel miners could pay less to operate in WA.

“It’s something that I’ve committed at least to investigating with the sector,” he said.

“Royalty reform which will go on for a very long time is something that would affect the government and the mining sector for many years.”

Royalty rates court controversy

Currently WA levies 2.5 per cent on nickel sales, generating $128 million in 2022.

In WA, one of three royalty rates (2.5 per cent, 5 per cent and 7 per cent) are applied depending on the form of the mineral when it is sold and how much it is processed.

Drill chips at Ardea Resources Goongarrie South nickel mine near Kalgoorlie.(AAP: Marion Rae)

Attempts to change the system in 2017 sparked a war with gold miners after the government sought to raise their payments.

Nationals WA policy to increase fees iron ore miners pay to the government also saw the political demise of their leader Brendon Grylls in 2016.

That plan would have taken a 25 cent per tonne production rental fee set for BHP Billiton and Rio Tinto in the 1960s, and increase it to $5 a tonne, raising billions of dollars of extra revenue for the state.

When asked whether he thought iron ore or gold producers would be open to longer-term reform, the mines minister conceded he wasn’t sure.

“It depends what the reform looks like,” Mr Michael said.

“At the moment I’m focused on nickel given they’re the ones with some pending issues due to the oversupply of nickel across the globe.”

Mr Michael also flagged short-term relief could be on the cards in the form of royalty payment deferrals but could not provide details on what would trigger repayments.

“In terms of relief, I’m hoping to get some options at least for government to look at and to look at what impact they would make [for] those mining operations that currently are teetering on the price point,” he said.

Ms King said she would also take a proposed production tax credit – designed to encourage processing of minerals onshore — to treasury to be costed.

The cost of production is high but the state also produces one of the purest grades of the metal which is suitable for battery production.

Andrew Forrest’s Wyloo was represented by Luca Giacovazzi who declined to speak to media after the meeting.

The lithium industry, also due to meet with government today, has plunged 80 per cent in the past year.

Western Australia has a five per cent royalty rate on the value of lithium concentrate and it accounted for four per cent of WA’s total royalty revenue.

Lithium royalties in Western Australia rose from $60 million in 2021 to $457 million in 2022.


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