Mineral resources are owned by the community and a royalty is a purchase price for the resource. The community expects a fair return for the loss of its non-renewable mineral resources.
A key aspect to Western Australia’s low sovereign risk status is its royalty system which provides industry with a straightforward, transparent, stable and predictable arrangement.
A fair, consistent and appropriate value of mineral resources must apply when calculating royalties, regardless of where or how a commodity is sold. If the State Government finds that new industry practices are testing its commitment to the community receiving a fair return for the State’s globally traded resources, it will adjust the laws to ensure that the integrity of our royalty system is not compromised and the community continues to receive a fair return.
Mineral royalties are collected under the Mining Act 1978, the Mining Regulations 1981 or the various State Agreement Acts that have been negotiated for major resources projects.
Western Australia has a three-tiered royalty system that was introduced in 1981. It applies one of three royalty rates depending on the form in which the mineral is sold (ore, concentrate or final form), and the extent to which it is processed. Specific rate royalties, calculated at a rate per tonne of production, generally apply under the Mining Regulations 1981 to low value construction and industrial minerals.
Legislation - Mining Act 1978
Under the Mining Act 1978, royalties are payable on all minerals. However, the definition of ‘mineral’ excludes the following where they occur on private land:
- limestone, rock or gravel shale, other than oil shale
- sand, other than mineral sands, silica sand or garnet sand
- clay, other than Kaolin, bentonite, attapulgite, or montmorillonite.
State Agreement Acts
State Agreements are essentially contracts between the Government of Western Australia and proponents of major resources projects, and are ratified by an Act of Parliament. These Agreements specify the rights, obligations, terms and conditions for the development of a project, and establish a framework for ongoing relations and cooperation between the State and project proponents.
In some cases, the State Agreement Act contains specific royalty clauses while in other cases it simply refers to the royalty provisions in the Mining Act.
Download the full list of State Agreement Acts, used in Western Australia since 1952.
In Western Australia, mineral royalty rates are prescribed under either the Mining Regulations 1981 or the various State Agreement Acts.
In Western Australia, there are two systems used to collect mineral royalties:
- Specific rate – calculated as a flat rate per tonne produced – generally apply under legislation to construction and industrial minerals.
- Ad valorem – calculated as a proportion of the ‘royalty value’ of the mineral. The royalty value is broadly calculated as the quantity of the mineral in the form in which it is first sold, multiplied by the price in that form, minus any allowable deductions. In some cases an alternative to ‘royalty value’ applies e.g. nickel.
Generally, specific rate royalties are used for low value construction and industrial minerals. A specific rate, or quantity-based, royalty is calculated on the number of tonnes produced.
The rates on production between 1 July 2015 and 30 June 2020 are:
- 73 cents per tonne
- 117 cents per tonne
These rates will be reviewed in 2020.
The ad valorem or value-based rate of royalty, which applies under the Mining Regulations 1981, is based on the following principles:
- bulk material (subject to limited treatment) – 7.5 per cent of the royalty value
- concentrate material (subject to substantial enrichment through a concentration plant) – 5.0 per cent of the royalty value
- metal – 2.5 per cent of the royalty value.
In some cases e.g. nickel, an alternative value applies.
This system takes into account:
- price fluctuations
- material grades
The ‘royalty value’ components used to calculate the ‘royalty value’ are defined under Regulation 85 of the Mining Regulations.
Financial assistance programs
In 2014 the State Government announced that temporary assistance would be made available to junior haematite iron ore miners, on a case by case basis. Applications for assistance under this program have now closed.
The assistance is in the form of a 50 per cent rebate on royalty payments over twelve months and is subject to the iron ore price remaining below an average of $90 per tonne over the relevant quarter. All rebates must be repaid to the State Government by September 2017.
Further information about the Iron ore financial assistance scheme can be found in the Iron Ore Financial Assistance Guidelines.
Information on how the State Government considers unsolicited requests for assistance may be found below.
Mining Act 1978
Fines may be imposed if royalty return and production report non-compliance occurs.
Forfeiture action or a financial penalty in lieu of forfeiture will be initiated if royalty payment non-compliance occurs. The penalty comprises a flat penalty plus a 20% percentage of the late royalty amount, applied on a daily basis i.e. 0.054%. The penalty must not exceed $75,000 if the lessee is an individual or $150,000 if the lessee is a body corporate.
State Agreement Acts
- If a breach of the royalty provisions in an Agreement Act occurs, action is taken under the provisions of the relevant Agreement Act.
For further information on penalties, please see the Mining Act 1978.
The department accepts royalty payments by Electronic Funds Transfer (EFT).
All EFT royalty payments must be made within the prescribed time as stated in the respective legislation to relevant departmental account.
Bank: Commonwealth Bank of Australia
It is a requirement for your Payer Reference Code to be included on your EFT transaction so that the Department can allocate your payment against the correct payer/project(s).
Due to changes to its Royalties Management System, DMIRS Regional Offices can no longer accept royalty payments. The only acceptable form of payment method is by cheque or EFT as outlined above.
Late payment penalties
Mining Act 1978
- Fines may be imposed if royalty return and production report non-compliance occurs.
- Forfeiture action or a financial penalty in lieu of forfeiture will be initiated if royalty payment non-compliance occurs. The penalty comprises a flat penalty plus a 20% percentage of the late royalty amount, applied on a daily basis i.e. 0.054%. The penalty must not exceed $75,000 if the lessee is an individual or $150,000 if the lessee is a body corporate.
State Agreement Acts
If a breach of the royalty provisions in an Agreement Act occurs, action is taken under the provisions of the relevant Agreement Act.
For information on the Divisions/Branch Quality Assurance.