Thu, Sep 22, 2016 - Page 10 News List

BHP says iron ore royalties may slow investment in state

Bloomberg

Iron ore exporters in Brazil might benefit under a proposal to raise iron ore royalty charges in Western Australia, a move that could jeopardize investments in the state, according to BHP Billiton Ltd, which is also locked in a dispute with the Australian tax authorities.

Higher royalty, or tax costs, would mean producers face more difficult decisions on approving new mines, opening a path for competitors in Brazil to increase market share, BHP chief financial officer Peter Beaven told reporters in Melbourne yesterday.

The company is also continuing to negotiate with the Australian Tax Office over a higher A$1.02 billion (US$770 million) bill for pricing of sales of commodities, including iron ore, to its Singapore marketing unit, he said.

Raising royalties costs “would most definitely not be good for Australia,” Beaven said.

“Those tonnes would be replaced in the market, but of course they would be replaced from Brazil and other competitors,” he said.

He cited Vale SA’s S11D expansion project, with planned capacity to produce 90 million tonnes per year.

Western Australia’s Nationals party leader Brendon Grylls has set out a proposal to raise state charges on BHP and Rio Tinto Group’s iron ore operations to A$5 per tonne from A$0.25 to boost revenue, and plans to make the change a focus of his state election campaign next year.

The plan from the Nationals, a junior partner in the state’s ruling coalition, has support among about 45 percent of voters, according to a survey last week of 1,700 people published by the West Australian newspaper.

The tax office has issued BHP with an assessment of additional charges liable on sales of commodities from Australia from fiscal 2003 to 2013 to its Singapore marketing unit, the company said in a report yesterday.

The marketing unit resells both BHP and third-party material to customers at higher prices and BHP disputes the ruling, it said.

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