In Resources

Western Australia Premier Colin Barnett

New State Agreements Announced

Victor P Taffa

After 12 months of discussions the State Government has reached an historic new agreement with BHP Billiton and Rio Tinto about iron ore royalties for fines and the development of the Pilbara iron ore industry.

From July 1, BHP Billiton and Rio Tinto’s royalty rates will change from 3.75 % to 5.625 % to bring them into line with other iron ore producers and the companies will be able to integrate their Pilbara operations.

This will apply to all production by the companies and will generate an additional $340 Million in State royalties for the 2010-11 financial year.

Under the Heads of Agreement signed today the companies will also make a joint one-off payment to the State of $350 Million.


Premier Colin Barnett said modernising the State agreements reflected the maturity of the Iron Ore Industry in Western Australia.

“This is a win-win deal which gives the companies greater flexibility to integrate their operations and ensures a better return to the community.” Premier Barnett said.

“Western Australia’s Iron Ore Industry has come a long way since the first State agreements were signed with Rio Tinto and BHP Billiton in the early 1960s.”

“The old agreements recognised the pioneering role the companies would play in the region and offered a discounted royalty rate to acknowledge that fine ore was not a valued product in the market at that time.”

“Since then the companies have made significant investment in dual purpose infrastructure in the region, including developing towns, roads, rail and ports.”

“Today, fine ore has become the main ironmaking feedstock, the Pilbara is known as a world-class iron ore producing area and the industry in Western Australia is well-established with 10 producers and at least 80 companies actively exploring for iron ore.”

“The success of the 1960 agreements in developing the Pilbara means the rationale for discounted royalties is no longer relevant and the time has come to update them.”

The Premier said legislation to formalise the royalty rate changes would be introduced this week.

The companies would make the additional one-off payment of $350 Million to consolidated revenue when further legislation to finalise the changes received royal assent.

“I’m very pleased to confirm the $350 Million one-off payment will be placed in a special account for the new Children’s Hospital, which is due to begin construction in 2012 and due to be completed by 2015.” Premier Barnett said.

The new royalty rates are forecast to generate an additional $340 Million in 2010-11 and $1.06 Billion over the next four years.

“Some of the additional revenue generated by the increased royalty rates will also go towards the Children’s Hospital so we can nurture and care for the State’s most precious resources.” Premier Barnett said.

“We expect these contributions will fully fund this important facility.”

The Premier thanked the companies for their willingness to engage in good faith during negotiations with the Government over the past 12 months.

“Today’s successful outcome follows considerable and often tough negotiations and will give the companies the ability to share port and rail infrastructure and blend iron ore which will keep them competitive on international markets.” Premier Barnett said.

“This presents a new chapter in the iron ore industry and will lead to more efficient and productive iron ore operations and spur further investment in the Pilbara.”

All businesses should “Pay their fair share” of taxation but it is hard to fathom on the one hand State Government’s taxing the Mining Industry and on the other hand the Rudd Government “Crying Poor” that the Mining Industry should pay their fair share of 40% as well.

The Southern Thunderer will be happy to pay Taxation when businesses and any Government Department’s consider advertising in The Southern Thunderer.

If as with Hospital takeovers the Mining Tax of 40% is a backdoor means to abolish State Government’s then people who want Constitutional reform should come up with a better system of Government.

Should State Government’s be abolished and replaced with expanded Regional Government’s then these Regional Government’s would require Constitutional Authority.

Furthermore if State Government’s were abolished Capital Cities such as Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart or Darwin could not be called ‘Capital Cities’ but instead downgraded to the status of ‘Regional Cities.’


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