The Queensland government is on collision course with miners and the federal government as it prepares to launch its September budget, with QLD deputy premier Jeff Seeney warning that “this is going to be a horror budget.”
Needing to substantially improve revenues to make up a shortfall of as much as $4 billion, QLD Treasurer Tim Nicholls has touted an increase in mining royalties as a solution.
The possible move has already drawn harsh criticism from the Queensland Resources Council (QRC), which says any increased costs to miners would harm the coal industry with CEO Michael Roche telling reporters “for some mines I fear it could be the tipping point.”
“What we have told the Queensland Government clearly and with the best interests of the state in mind is that in many cases, the Queensland coal industry is already globally uncompetitive,” Roche says. “At current prices, most thermal coal mines in this state are either running at a loss or struggling to stay in the black. It is not a position unique to thermal because the contagion is spreading quickly among our premium coking coal operations.”
Roche said most QRC coal members are in the process of undertaking cost reduction measures that will lead to further job losses in the sector.
“The bottom line in 2012 is that many Queensland coal producers are now generating cash losses,” he says.
Mining companies have already said they cannot afford higher royalties with falling commodity prices and rising operational costs. BHP Billiton has warned it may have to cut jobs in Australia as the company faces a deteriorating market, including slowing industrial activity in China.
The federal government has already butted heads with state governments over increases to mining royalties.
With the Mineral Resources Rent Tax, the government says it will cover the costs of state royalty regimes to ensure that miners do not get doubly hit with taxes. However, the federal governments also warned state governments not to raise royalty rates, adding that if states did so, they would put future federal funding at risk.