PERTH (miningweekly.com) – The Minerals Council of Australia (MCA) has warned that the Victorian government could be forcing the early closure of some gold mines in the state, if it decides to push ahead with its gold royalty.

The Victorian government is reportedly pushing ahead with plans to apply a 2.75% gold royalty from 2020 onwards.

Gold is currently the only mineral exempt from royalties in the state.

The MCA’s Victorian executive director, James Sorahan, said on Wednesday that the government’s "reckless decision" to push ahead with the gold royalty would hurt regional communities and threaten jobs in a growing industry.

“Without changes, the royalty will have an unfair and significant impact on the operating costs of all gold mines in Victoria. There is a serious risk that mines will close early and regional development will be handicapped through less investment,” Sorahan said.

He pointed out that the Victorian minerals industry had proposed modest reforms to remove the unintended impacts by introducing an exploration offset, a progressive royalty rate with a gold price floor, and a staged implementation and structure to ensure revenue raised from gold was spent in the regions.

“Without these changes, royalty receipts will come at a cost to investment in exploration,” he added.

Sorahan noted that the projected A$16-million in revenue per annum from the gold royalty compares to over A$300-million spent in Victoria by gold miners in 2018 on wages, goods and services, taxes and community grant, adding that the closure of just one mine would wipe out the entire benefit of the royalty revenue. 

“The government appears oblivious to the fact that Victoria competes for investment in gold mining with every Australian jurisdiction in a globally competitive industry.

“Victoria’s gold industry has unique characteristics which require a more considered approach to the implementation of a gold royalty. 

“Victorian gold orebodies are typically narrow vein and nuggety with irregularly distributed deposits which are more difficult for mine planning and typically incur higher production costs. Victorian gold mines are also underground which involves higher costs than open cut mining given that gold has higher processing costs than other commodities.”

The gold royalty being considered by the Victorian government is higher than the one imposed in Western Australia, which produces 68% of Australia’s gold.

“The shorter reserve life of Victorian gold mines makes exploration the lifeblood of sustaining gold operations in our state. Gold mining requires ongoing exploration investment to keep replenishing ore reserves and resources to maintain mine life. 

“The government needs to start again by listening to industry on the gold royalty to create incentives to encourage exploration and maximise mine life. Every cent of the gold tax should be reinvested in regional Victorian communities.”