Thursday, June 3, 2010

Resource profits tax threatens birthplace of the gold rush

THE Rudd government's proposed mining tax threatens to halt planned expansions around Coolgardie, the birthplace of West Australian goldmining, according to the manager of the only working mine still in the town.
Peter Williams, chief operating officer at Focus Minerals, says the company has big plans for its Three Mile Hill operations, just outside the town of 1500 people where the first WA gold rush began 118 years ago.

But not if the resource super-profits tax comes in. "There are projects we're looking at that will only be viable because of current high gold prices -- those certainly wouldn't go ahead with the uncertainty of the new tax, or if it was introduced in its current form," Mr Williams said.

"Until we find out what the implications of this are, we won't be starting any new projects."

According to a recent KPMG study, the implications for the gold industry are dire.

In a study commissioned by the Minerals Council of Australia, KPMG modelled the effect of the tax on a typical new project.

The study shows those planned gold projects that have operating costs in the most expensive three-quarters of the industry become economically unviable.

Mr Williams said Focus, which recently spent $20 million upgrading its Coolgardie mill and has plans to spend $12m on a drilling program to help it expand, would be hit hard by the tax. "We certainly wouldn't be expanding the way we are planning to," he said.

Gold was found in Coolgardie in 1892, sparking a gold rush -- the centre became Kalgoorlie, 38km to the west.

Mr Williams said the uncertainty over the tax was already starting to affect exploration in the West Australian goldfields region. "We are finding it easier to get drill rigs than we did a month ago," he said.

"There is a bit of a downturn in exploration -- people are holding their breath and waiting to see what is going to become of this."

Like most small miners, Mr Williams sees little appeal in the RSPT's proposal to refund 40 per cent of failed projects.

"Very few projects actually collapse because it is rare those that are marginal enough to do so are approved," he said.


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