Coal Industry Calls on Government for Support

BRISBANE, Australia - May 29, 2013 - PRLog -- Japanese trading giant Mitsubishi joined with steelmakers Nippon Steel and Korea’s Posco as signatories to an open letter expressing concern over the NSW Land Court’s recent Mount Thorley Warkworth decision. Mitsubishi holds 35% and Nippon Steel just under 10% of the Warkworth coal mine while Posco holds 20% of the Mount Thorley operation.

Majority shareholder Rio Tinto has appealed to the NSW Supreme Court against the Land and Environment’s decision to overturn the 2012 Development Consent for an extension to the integrated coal mining operation in the Hunter Valley.

The extension would allow the mine to operate beyond the expiration of the existing Consent in 2021 through until 2033 at the present production rate of 12mtpa.

The Mitsubishi letter warns the NSW government the decision regarding the Warkworth Extension Project “brings the risk and uncertainty in the state to unacceptable levels, is a major disincentive for foreign investment and will impede the state’s economic development”.

“In our view, this has become a matter of state significance and is being watched closely by resource companies around the world,” the letter states.

“It has cast great uncertainty over the ability to gain the necessary approvals for the continuation of existing mines and for new projects.”

In a show of support for the industry the NSW planning minister has filed a cross appeal against the Land Court decision that support Rio’s appeal, to be heard by the Supreme Court beginning July 30, 2013.

Meanwhile the Australian Coal Association (ACA) has warned the Federal government that Australia risks losing its competitive position as a major coal-exporting nation by failing to recognize and act on the challenges facing the industry.

A new research report commissioned by the ACA, Budget Priorities 2013, points out the Australian economy now faces reduced global commodity prices, a persistently high dollar and rising unemployment.

“The Australian coal industry is experiencing the most difficult operating conditions in ten years, with the suspension of major projects, the closure of mines and some 9,000 jobs shed over the past 12 to 15 months,” the report states.

“Current economic conditions reinforce the need for predictable policy settings that encourage additional international investment in Australian coal projects and do not constrain the industry (and hence the economy) with increasing tax or duplicative regulatory burdens.”

The paper says the coal industry is among the highest taxed in Australia, at over 40% when company tax and royalties are combined. Instability in taxation arrangements risks making Australia an undesirable destination for coal mining investment.

In submitting the report to the government, ACA chief Dr Nikki Williams said it was “imperative the government used the Budget process to rebuild its structural position through significant restraint in expenditure, both recurrent and one-off.”

“It would be of grave concern to the Australian coal industry if the government sought to improve its own balance sheet through new, inefficient taxes on business,” she said.

“Industrial transformation in Asia provides global export opportunities for Australia.

“However, despite this positive outlook, government policies need to recognise that the coal boom is over and that the coal industry faces an acutely challenging environment, which is impacting its future competitiveness and ability to attract investment.

“The seriousness of the current international coal market environment and its implications for the Australian economy must be recognised.

“Attacking bipartisan and long-standing tax arrangements – including the immediate deductibility of exploration and waste rock removal expenses, the Fuel Tax Credit Scheme and thin capitalisation rules – would serve only to undermine future private investment and growth and, therefore, future streams of tax revenue.”

ACA’s CEO explained the industry recognises that energy commodity markets are cyclical.

“But the headwinds of cost blow outs (including labour, capital and operating costs), as well as electricity price increases, are proving much more problematic,” she said.

“In addition, difficulties in raising capital, the high value of the Australian dollar, ‘above inflation’ cost rises in both thermal and metallurgical coal operations, extended delays in development approvals and taxation policies are combining to act as a break on future investment opportunities,” she said.

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