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MINING (ROYALTY No. 2) AMENDMENT BILL

The Hon. K.O. FOLEY (Deputy Premier) obtained leave and introduced a bill for an act to amend the Mining Act 1971. Read a first time.

The Hon. K.O. FOLEY: I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

mining (royalty No. 2) amendment bill 2005mining (royalty No. 2) amendment bill 2005 This Bill amends the Mining Act 1971 to pro­vide a new ap­proach in relation to the assess­ment and payment of mineral royalties under the Act.

The Bill establishes a fairer and more equitable assess­ment of royalty by valuing miner­als at the mine gate, using a market value-based approach. At the same time, the setting of a royal­ty base rate of 3.5 per cent, up from the current range of be­tween 1.5 per cent and 2.5 per cent, will increase in the finan­cial return to the community for the exploitation of the State's non-renewable mineral assets.

The shifting of the assessment of royalty from the current methodology of Ministerial as­sess­ment to that of the ex-mine gate value of the minerals (which consists of the genuine market value of the minerals less prescribed costs in­curred in delivery of the minerals to the point of sale) brings the assessment of royalty in the State in line with that of other States. It also provides for a more accu­rate assessment of royalty.

A key strategy of this Bill is to encourage in­vestment in the development of new mines, leading to a targeted in­crease in mineral produc­tion in the State to $3 billion by 2020. To do this, the Bill introduces a discounted royalty rate for new mines of 1.5 per cent for the first 5 years. This will encourage the develop­ment of new mines, as the lower royalty rate will improve the via­bility of a mining operation in the early years of development, when opera­tors are under pressure due both to the large set-up costs and a restricted cashflow until production tonnages in­crease. There are a number of potential new mines in South Australia that will benefit and this may assist in their development.

Equally importantly, the development of regional popu­la­tions and economies will be stimu­lated through new min­eral discoveries encouraged by the reduced rate of royalty payable in relation to new mines.

These amendments will assist in achieving strategic targets set for mineral production, pro­cessing and exports by encouraging investment in new mines in remote areas of the State.

For mines that are in existence at the time this Bill comes into operation, a transition period for phasing in the chan­ges to the royalty assess­ment regime is provided. The currently methodol­ogy for assessing royalty is preserved by the inclu­sion in the Bill of a table setting ex-mine gate values for certain minerals. These ex-mine gate values reflect the values currently used to assess royalty in rela­tion to those minerals, and will expire on 31 December 2008. Similarly, an agreement between the Minister and a person liable to pay royalty will continue (subject to any necessary or prescribed modification reflecting the amend­ments made by the Bill) until the agreement expires, or is brought to an end in accord­ance with its terms or by agree­ment. Thereafter, the new method­ology will apply.

The Bill increases penalties for non-compliance with the royalty assessment and payment provisions, and also for non-compliance with the provisions relating to returns. These amend­ments will significantly increase the timeli­ness and efficiency with which royalty is paid and returns provided by industry, and will ensure that the finalisation of the State's mineral production statistics can be produced within a reasonable timeframe.

The Bill also makes amendments of a minor "house­keep­ing" nature, particularly in the area of retention of records under the Act.

The South Australian Chamber of Mines and Energy along with many mining industry operators and organisa­tions (including the Cement, Concrete and Aggregates Association and the Australian Mining and Petroleum Law Association (SA Branch)) were consulted during the pre­paration of the Bill. A position paper advising of the pro­posed changes to Act was also circulated and responses sought from, and provided by, the mining industry.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Min­ing Act 1971

4—Substitution of section 17

This clause repeals section 17 of the princi­pal act and substitutes the follow­ing claus­es:

17—Royalty

This clause replaces the current royalty provi­sion, al­though the minerals on which royalty is payable is un­changed. The royal­ty in relation to extract­ive minerals is un­changed. Subject to the transitional provi­sions of this measure, royalty on non-extract­ives will be equi­valent to 3.5 per cent of the value of the minerals. The value of the miner­als will be the ex-mine gate value, and the clause sets out matters relevant to determining that amount, includ­ing defining the concept of "contract price" to in­clude con­sideration other than simply the cash price of the minerals. Prescribed costs, to be set out in the regula­tions, are not included in the ex-mine gate value.

The clause continues the ability of the Minis­ter to waive or reduce the royalty rate in cer­tain circum­stances, and also to enter an agreement with a person liable to pay royalty on minerals (oth­er than extractive minerals) that royalty will be payable accord­ing to the weight or volume of miner­als re­covered or some other basis.

17A—Reduced royalty for new mines

This clause provides that a new mine (de­clared by the Minister by notice in the Gazette) will pay a reduced royal­ty rate of 1.5 per cent for the first 5 years of its operation.

The clause sets out factors the Min­ister may have regard to when determining whether a mine is to be de­clared a new mine.

17B—Assessments by Minister

This clause enables the Minister to make an assess­ment of royalty if he or she is of the opin­ion that a person liable to pay royalty has not made the neces­sary payment when due, or has not paid in accord­ance with the royalty assessment principles under pro­posed section 17 (or with an agreement or determination under proposed sec­tions 17 or 17A), or has not paid royalty in accordance with any other relevant require­ment.

An assessment under this proposed section will be taken to be a new assessment.

The clause sets out procedural mat­ters regard­ing such an assess­ment, including provid­ing a right of appeal to the ERD Court.

17C—Recovery of royalty where appeal lodged

This clause provides that the fact that an appeal has been lodged under section 17B but not yet deter­mined does not in the meantime affect the assess­ment to which the appeal relates, and the amount of any royalty or civil penal­ty amount deter­mined as being payable under the princi­pal Act as a result of the as­sessment may be recovered as if no appeal had been lodged.

17D—When royalty falls due

This clause sets out when royalty falls due, in­cluding a power for the Minister to exempt a person from the operation under proposed subsec­tions (1) or (2).

17E—Penalty for un­paid royalty

This clause sets out a penalty regime in the case where royalty is not paid on time. The penalty amount is $1 000 plus the prescribed amount for each month for which the royalty remains unpaid. The for­mu­la for calculating the prescribed amount is set out in the clause.

17F—Processed miner­als

This clause provides that, in rela­tion to royal­ty, a reference to minerals in­cludes a reference to pro­cessed minerals.

17G—Means of pay­ment

This clause provides that royalty must be paid in accord­ance with any require­ment prescribed or authorised by or under the regulations.

5—Amendment of section 73E—Royalty

This clause makes a consequential amend­ment.

6—Substitution of section 76

This clause substitutes section 76 of the principal Act, increasing the penalties for false returns and non-com­pliance with the proposed section to a maximum fine of $5000. The clause also corrects obsolete references in the current sec­tion, and pro­vides that the regulations may exempt a per­son or class of persons from the re­quire­ment under pro­posed sub­section (1).

7—Amendment of section 77—Records and samples

This clause amends section 77 of the principal Act to enable the Director of Mines, or a person acting under his written authority, to specify a place where records etc required to be pro­duced under that sec­tion are to be pro­duced.

The clause also inserts a new subsection (2a), allow­ing the Director of Mines, or a person act­ing under his written auth­ority, to make copies or take extracts of such records.

8—Insertion of section 77A

This clause inserts new section 77A into the princi­pal Act, requiring records under section 77 to be kept for 7 years, and setting out procedural matters re­lated to such keeping of records.

Schedule 1—Transitional provi­sions

1—Interpretation

This clause sets out definitions used in the Schedule.

2—Continuation of existing ar­range­ments

This clause provides for the continuation of arrange­ments relating to the ex-mine gate value of certain minerals. The minerals, and their re­spective values, are set out in the table provided. This con­tinuation of exist­ing arrange­ments will end, subject to some other agree­ment being en­tered under the principal Act as amended by this meas­ure, on 31 December 2008 with the expir­ation of the clause.

3—Agreements

This clause provides that an agreement under the princi­pal Act relating to royal­ty on any minerals between the Minister and a person liable to pay the royalty in force immediately before the com­mencement of this Act will continue to have effect after the commencement of this Act. The agree­ment may be subject to any modifica­tions that may be neces­sary in the circumstances or that may be pre­scribed by the regula­tions (and on the basis that the agreement will cease to have effect in any event when the agree­ment expires, or is brought to an end in accordance with its terms or other­wise by agree­ment between the parties).

Ms CHAPMAN secured the adjournment of the debate.