Australian miners 'shocked' by coal royalty hike

Australia's mining industry on Tuesday warned of job losses, mine closures and projects put on hold after the Queensland state government announced a hike in the royalty rates paid on coal. In handing down its annual budget, the resource-rich eastern state said royalties would jump from 10 percent to 12.5 percent for every tonne of coal sold for between Aus$100 and Aus$150 from the beginning of October. Coal sold for more than this would attract a 15 percent levy and the hikes are forecast to generate an extra Aus$1.6 billion (US$1.66 billion) over the next four years. Rio Tinto said it was "shocked" at the increase, saying it flew in the face of the efforts being made by mining companies to improve competitiveness by reducing costs in an industry already struggling with falling prices. "We are shocked, surprised and very disappointed by the size of the royalty increase that has been imposed by the Queensland government," said Rio Coal Australia managing director Bill Champion. "This increase will further endanger jobs and investment in the coal industry, at both existing mines and new projects." Rio employs more than 2,400 people at its three open-cut and one underground coal mines in the state. Fellow mining giant BHP Billiton was equally stunned, saying there was no consultation from the conservative state government about the specific higher royalty rates. "BHP Billiton is disappointed that an increase in coal royalties was announced by the Queensland government today, especially an increase of this magnitude," it said in a statement. "Queensland already had one of the world's highest comparable coal royalty regimes. "We have made it clear to the Queensland government that any additional royalty impost will directly impact the profitability of our existing operations, and will affect future business decisions regarding growth capital allocation." Mining companies across Australia have moved in recent weeks to cut costs and defer or shelve new investment plans as commodity prices fall. On Monday, BHP announced it will cease production at its coking coal joint venture with Japan's Mitsubishi Corp. in Queensland from October 10 and review other assets. The development came as Xstrata Coal announced it would slash jobs as part of an ongoing review of its operations in Australia, given lower coal prices, high costs and the Australian dollar's strength against the greenback. Queensland-based mining tycoon Clive Palmer, who runs Waratah Coal, said any increase in royalty rates would "kill" the state's economy. "Increased mining royalties on top of widespread sackings is hardly a recipe for growth in this state," he said in a statement. "It is a recipe for disaster putting us on an uneven footing with the rest of the world." The Queensland Resources Council, which represents mining companies in the state, including BHP, Rio and Xstrata, said the move could be the final straw for some high-cost coal mines. "It will mean job losses. It risks further mine closures and there are many coal projects on the drawing board that will now never get off that drawing board," chief executive Michael Roche told reporters.