Australia’s national interest is best served by excluding magnetite from the Minerals Resource Rent Tax (MRRT), or Mining Tax.
Magnetite ore is of little value in its unprocessed state. Unlike hematite iron ore (or Direct Shipping Ore, DSO), magnetite ore has a lower iron content and requires more complex processing so that it can be converted into concentrate or pellets before being exported to steel mills overseas.
Under the proposed MRRT, the magnetite sector is likely to generate little or no tax revenue because the Federal Government plans to value the ore at the point closest to its removal from the ground. In the words of our Federal Government leaders:
The new resource tax arrangement will apply to the value of the resource, rather than the value added by the miner.
Applying the MRRT to magnetite is likely to generate little or no revenue for the Commonwealth, while impacting negatively on the development of a new important industry for Australia.
It is only fair and consistent, therefore, that magnetite is excluded from the MRRT along with other commodities and mineral concentrate producers already granted an exemption on the basis of negligible tax liability.
These commodities were not expected to pay significant amounts of resource rent tax, and excluding them will allow many companies to remain in their existing taxation regimes.
- Penalising an emerging value-adding regional-based industry
- Slowing down finance for massive capital expenditure projects that deliver economic stimulus
- A disincentive to an industry with lower emissions in steelmaking than traditional hematite ore
- Significant compliance costs for a negligible tax liability
- Threatening to undermine investor confidence at a time when producers are making decisions critical to the industry’s development
A distinction between magnetite and hematite iron ore is already in use in Western Australian royalty legislation and could be readily applied in excluding magnetite ore from the MRRT.
MagNet has also pointed out to decision-makers that it would be inequitable to include magnetite concentrate in the MRRT, while excluding all other mineral concentrate from the tax.
For more details, refer to the attached documents prepared by MagNet for stakeholders and decision-makers.
Nov 2010 Submission to Senate Select Committee on Mining Tax
Dec 2010 Supplementary submission to Senate Select Committee on Mining Tax
Nov 2010 Submission to Policy Transition Group on the Mining Tax
Jul 2011 Submission to Treasury on the Mining Tax
Oct 2011 Submission to Treasury on MRRT Bill 2011 Second Exposure Draft
Dec 2011 MagNet submission to Senate Committee on Economics on MRRT