Last year the mining sector recouped $1.7 billion in diesel costs. Photo: Erin Jonasson
AUSTRALIA’S mining sector is bracing for a new tax slug from the Gillard government, amid speculation that a key detail of this weekend’s carbon policy could raise the industry’s costs by up to 5 per cent.
Reports this week have suggested the mining sector will lose a lucrative tax rebate on diesel under a compromise carbon policy struck between the government and the Greens.
The rebate reduces diesel prices by 38 a litre for eligible industries; the mining sector last year used it to recoup $1.7 billion in diesel costs.
Analysts at investment bank UBS said yesterday that diesel represented up to 15 per cent of costs at a typical open-cut mine, meaning that some miners might see their cost base rise by 5 per cent should the diesel rebate be axed altogether.
Simon Bennison of the Association of Mining and Exploration Companies said he had been unable to confirm whether the rebate was about to be changed as part of tomorrow’s announcement but he was ”seriously worried”.
Mr Bennison said the rebate was warranted because many mining projects were not connected to the major power grids, and used diesel to generate all their power on site.
He said it was also used by companies for transport often on private, rather than public, roads.
”I hope the government understands the implications of lifting the rebate – a lot of these remote-area projects have to generate their own power,” he said.
Sections of the mining industry already face a higher tax impost from the Gillard government on two other fronts – the proposed mining tax will take a bigger slice of coal and iron ore profits, while the carbon tax will hit many miners, particularly coalminers, which release large amounts of methane.
Junior iron ore exporter BC Iron uses diesel to generate all the power on its Nullagine mine in the Pilbara, and for trucks hauling ore on its 55-kilometre private road.
BC Iron managing director Mike Young said he would oppose any changes in the rebate. ”We get a rebate because we don’t use public roads. [We are] happy not to have a rebate if the government is happy to build our roads,” he said.
While mining companies bristled, ASX-listed companies with exposure to renewable energy were applauding the Gillard government’s plan to create an independent agency to manage the development of clean-energy projects.
Geothermal aspirant KUTh Energy said the agency – to be called the Australian Renewable Energy Agency – would help create clear market signals for clean-energy companies. The announcement helped lift KUTh’s share price 1.6 – 30 per cent – over the past two days to close at 6.7 yesterday.
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