Robert Deutsch

The recent furore regarding the passing of the mining tax is a good reason to refocus attention on some important statistics relating to the mining industry in Australia.

Perhaps of most interest is the breakdown of iron ore and coal production across the states and territories of Australia. In this context one needs recall that the mining tax will specifically apply only to iron ore and coal and to a very limited extent to gas that is incidentally extracted as part of the process of extracting iron ore and coal. Left out of the equation are other minerals, in particular precious metals such as gold and silver and base metals like copper, lead and tin.”

When one examines the statistics a number of interesting features emerge:

  • The overall value of minerals extracted in 2011 is in the order of $158 billion.
  • Of that total approximately $110 billion is from iron ore and copper and $48 billion is from all other metals.
  • In relation to iron ore the equation is very heavily weighted towards Western Australia where of the $66 billion of value extracted nationally $65 billion of it is in Western Australia.
  • Surprisingly of the other four states which have sizeable iron ore deposits, the largest extraction and therefore the strongest effect of the mining tax will occur in Tasmania where something in the order of $340 million of iron ore value was extracted in 2011.
  • Coal is responsible for $44 billion of the total value of minerals extracted in 2011 and perhaps most surprisingly the two largest States in this context are Queensland ($23 billion) and New South Wales ($20 billion). Western Australia has a relatively small coal extraction industry with only $495 million.
  • Focusing on the total for iron ore and coal, it is readily apparent that the State most directly affected by the mining tax by a significant margin will be Western Australia with a total production value across iron ore and coal of $65.8 billion. The second most directly affected will be Queensland ($24 billion) and New South Wales ( $20 billion – coal assets only).
  • Interestingly, Victoria is entirely unaffected by the mining tax with neither iron ore nor coal mining present.

All these statistics carry with them a number of messages that are relevant to the breadth and operation of the recently enacted mining tax.

First and perhaps most importantly since iron ore and coal make up the bulk of the value of all minerals in Australia any argument to extend the mining tax will in revenue terms have only a very marginal consequence. In this regard precious metals represents the largest component but even that in comparison to iron ore and coal is a very small amount ( ie $14 billion).

Secondly, the impact of the mining tax as currently drafted is most likely to have the greatest force in Western Australia and to a lesser extent in Queensland but the importance of the coalmining operations in New South Wales, which are significant, has largely been overlooked in most of the discussion.

Thirdly, the negative implications of the mining tax will largely be unnoticed in Victoria, South Australia and the Northern Territory.

The other interesting aspect of the recently released statistics is that in Australia there are currently somewhere in the order of 61 major developed mines spread throughout the country but with a large concentration in Western Australia, Queensland and New South Wales. Of these 61 major mines 17 are controlled by BHP-Billiton, 19 by Rio Tinto, 10 by Xstrata and 7 other companies (e.g. Newmont and Newcrest) control the others.

This highlights the fact that the amount of the mining tax which will or will not be paid by BHP and Rio Tinto will be critical to determining the overall take from the mining tax.

Professor Robert Deutsch is a professor of taxation at the Australian School of Business.