Yesterday, at the Resources Discussion Lunch held at the Catchment Brewing Co., West End, attendees reflected on the large financial markets correction that had just occurred, but remained optimistic about the global economy. Resources sector veteran Rob Murdoch was an excellent MC who facilitated a highly enlightening and entertaining discussion of critical trends and issues affecting the sector. As you would expect at such a gathering, the issue of royalty rates was raised, and AMEC CEO Warren Pearce presented on a new Queensland Gold Royalty Rates Discussion Paper from Grant Thornton which argues:
…the current royalty rates payable by gold producers in Queensland are harming the competitiveness and future growth prospects of the local gold sector.
The report compares Queensland’s gold royalty rate, at current gold prices, of 5% with rates in NSW, SA and WA in the 2-3.5% range, and argues Queensland’s higher rate makes it less likely Queensland would see exploration for gold than other states.
The discussion paper is very interesting and should encourage further investigation, particularly by the Queensland Treasury. Alas, the discussion paper does not present any economic modelling of the impacts of changes in the gold royalty rate on Queensland Government revenue (possibly an impact of up to $20 million p.a.) or on resources sector investment and jobs. While it’s very unlikely we’d see a gold mining boom similar to the 19th century boom again in Queensland, a more competitive royalty regime may encourage some additional economic activity and jobs that would be welcome in regional Queensland.