Editorial: Wave upon wave of tax hikes

The governments of another four large mining jurisdictions are pressing forward with new plans to hike mining taxes and steer more miners’ profits into government coffers.

• In Brazil, Mines and Energy Minister Edison Lobao told Reuters that his government’s overhaul of the country’s mining code would likely double average royalty rates for minerals to 4%, in-line with proposals that have been discussed in recent months.

President Dilma Rousseff will soon present bills to Congress that boost royalties, change licensing rules and create a new mining regulatory body.

Reuters reports that the bills are likely to contain a flexible system of mining royalties in which the executive branch will be able to change the amount charged without going through Congress, as is currently required.

• In New South Wales, Australia, BHP Billiton and other coal miners are in damage-control mode after the state government announced plans to hike its coal-mining royalties for an extra A$944 million in taxes by the 2014-2015 fiscal year. The state government plans to target companies already hit by the national government’s planned 30% tax on iron ore and coal profits.
• Over in Western Australia, the state government is still in a showdown with mega miners such as BHP and Rio Tinto over plans to boost the royalty rate on iron ore fines from 5.625% to 7.5% by 2014. The government notes that this would mean an increase of around US$3 per tonne, while iron ore was selling for US$170 per tonne.
• In Bolivia, the Deputy Mining Minister Hector Cordova said his government plans to raise mining royalties to take advantage of high global metal prices and bolster the state’s role in the industry.

Media reports state that the reform is expected to raise the 4% average royalty on international prices to a maximum of 7% for gold, 6% for silver and 5% for zinc, tin and lead. The government took in about US$82 in mining royalties in the first half of the year.

Cordova heads a government-industry committee that is wrapping up work on a mining reform bill that will be in accordance with the constitution adopted in 2009. Profits taxes are expected to remain at 37.5%.

• According to accounting firm Ernst and Young’s latest annual report on business risks facing the mining and metals industries, “resource nationalism” tops the list of worries for executives (with “resources nationalism” in today’s corporate-speak meaning just about any tax hike), beating out problems like skill shortage, capital allocation and infrastructure access.

E&Y notes that in the past year and a half, about 25 countries have increased or announced intentions to increase their government take-through taxes or royalties. It points to South Africa’s new royalty regime, Ghana’s plans to double royalties and the Australian government’s proposed minerals resource rent tax as examples.

• It looks like molybdenum mine production worldwide has taken a sharp upturn: in its newly released figures, the International Molybdenum Association (IMOA) reports that global production of molybdenum rose by 14% in the first three months of this year compared with the same period in 2010.

China stands out with a scorching 21% increase in quarterly output to 44.8 million lbs., closely followed by South America with a 19% increase, up to 29.8 million lbs.

The IMOA reports that North American moly production was 45.7 million lbs., up 9%, while production from other parts of the world fell by 1% quarter-over-quarter.

Compared with production figures for the fourth quarter of 2010, the IMOA finds that 2011’s first-quarter output shows a decline of 4% each for North and South America, and a decline by the same amount in other molybdenum-producing regions of the world.

This was offset by China’s output rise of 27% compared to the fourth quarter of 2010, which resulted in an overall 5% global increase in moly mine production from the fourth quarter of 2010 to the first quarter of 2011.

Downstream, the IMOA reports that molybdenum use worldwide rose 16% in the first quarter of 2011, compared with the same period in 2010, or a rise of 9% compared to the fourth quarter of 2010. China, the U.S. and Japan were far and away the biggest consumers.

The IMOA has stepped up its services for members and is now providing quarterly supply and demand statistics.