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Investment risk warning over new "Olympic Dam Tax"

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Uncertainty over the Marshall Government’s parked Mining Bill and an “unprecedented” new $2 million slug to companies seeking exploration licences in some of the state’s most desirable sites have prompted industry warnings that investment could be put at risk.

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Last week’s $79 million revenue grab – a bid to help offset some $517 million in lost GST – contained a hit to annual exploration licence fees in areas around the Gawler Craton and Olympic Dam.

The standard fee – the greater of $565 or $13.10 per square kilometre – will increase to $757 or $17.50 per square km for the Gawler Craton zone, and $953 or $22.10 per square km within a 200km radius of Olympic Dam.

The hike is expected to reap around $2 million extra for Government coffers each year.

It comes amid uncertainty about the Government’s stalled Mining Bill, which was thwarted by a revolt of regional backbenchers but was offered a lifeline this month when the Labor Opposition offered to support its passage.

However, Mining Minister Dan van Holst Pellekaan is yet to publicly reveal whether he intends to reintroduce the legislation.

Association of Mining and Exploration Companies policy manager Neil van Drunen said mineral exploration “has been falling in SA” and “anything that makes it more expensive is not good for our industry”.

“We understand the Government has to claw back money, [but] it would be better if they were looking to attract more investment to the state rather than increasing costs,” he told InDaily.

Van Drunen said there was “a degree of concern” that SA was becoming a less attractive place for mining companies to invest.

“I think it’s a responsibility of the Government to provide investment certainty for companies… this sends the wrong message, [especially] when the Government’s legislation hasn’t passed parliament yet,” he said.

“It’s a bit frustrating in a sense because the Government’s encouraged exploration companies to invest into those areas – and now the fees have been increased.”

He said the industry had spent 18 months “in quite close consultation with 1000 stakeholders” and made more than 300 submissions on the Mining Bill, and were still in the dark about where it stood.

SA Chamber of Mines and Energy CEO Rebecca Knol said the sector was “deeply concerned by the targeted approach of exploration tenement fee increases”.

“This approach is unprecedented in Australia and penalises the companies who already heavily invest in high-cost exploration,” she said.

“We are noticing a trend of disincentive and penalisation across our sector, from moratoria and funding cuts, to delayed legislative changes – all while our sector is propping up the economy, contributing enormously to exports and helping to advance technology and innovation.”

Knol likened the fee increase to “introducing a tax to the sector most likely to contribute” to the state’s three per cent economic growth target.

This, she said, was “a further disincentive to investment by the resources sector”.

“Increases in taxes and fees are not a way to grow our sector… we need to see investment in exploration to feed the resources pipeline, new province development to open up untapped resources and investment in infrastructure so we can bring more product to market,” she said.

“Our ranking as a destination of investment attractiveness is sliding year on year – and will be further impacted by these fee changes.”

The Labor Opposition today labelled the fee hike an “Olympic Dam tax”, saying it would hit hardest the two companies driving employment in the minerals sector – BHP Billiton and OzMinerals.

“This brand new mining tax [is] a tax on our prosperity, a tax on jobs… OzMinerals and BHP have seen exploration costs increase by 70 per cent,” spokesman Tom Koutsantonis said.

“At this time in our economic cycle it’s completely unjustified.”

He warned the ramifications would impact the broader economy, saying: “If the mining industry catches a cold in SA, we get pneumonia.”

“From my discussions with BHP and OzMinerals, they’re horrified,” he said.

“A 200km radius around Olympic Dam, it’s unprecedented – it’s basically an Olympic Dam tax.”

But Treasurer Rob Lucas said the advice he’d received from van Holst Pellekaan and his department was that “they don’t believe this will see any reduction of exploration effort in these particular areas”.

“Their advice was these areas are highly prospective, and they don’t believe the additional charge would impact the level of exploration,” he said.

Van Holst Pellekaan told InDaily in a statement the State Government “wants to incentivise the holders of exploration permits to use them and expects to see an increase in exploration activity and expenditure in the near future”.

On the Mining Bill’s future, he said “determining whether Labor and its recent backflip can be trusted will be one of the key factors”.

South Australia is and will remain highly prospective for the resources industry which is good for our entire economy,” he said.

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