Mineral Royalties

Mineral royalties are collected under either the Mining Act 1978 (WA) or Agreement Acts which are negotiated for individual projects. 
In some cases the Agreement Act contains specific royalty clauses, while in other cases it simply refers to the Mining Act 1978 (WA) royalty sections.

However, under the Mining Act 1978 (WA), royalties are payable on all minerals.  A mineral is defined as a naturally occurring substance including evaporites, limestone, rock, gravel, sand and clay.

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.

Back to top

The holder of a mining tenement is required to submit monthly production reports and quarterly royalty returns to the Department.

Quarterly Production Report

Within thirty (30) days after the expiry of the first quarter during which any mineral is produced or obtained from a mining tenement the holder of the mining tenement, shall, unless the Director General of Mines in a particular case otherwise approves, furnish the Director General of Mines with a quarterly production report and continue to furnish the Director General of Mines with a quarterly production reports within thirty (30) days after the expiry of each subsequent quarter (whether or not any mineral is produced or obtained from that mining tenement or land in that quarter).

Royalty Return

The holder of a mining tenement is required to submit a royalty return with each royalty payment thirty (30) days after each quarter. The return must be in an approved form, showing where relevant:

• The quantity of the mineral
• Details of any sale, transfer, shipment or disposal of the mineral
• The royalty value of the mineral
• The gross invoice value of the mineral, when it was paid, and any allowable deductions for the mineral
• The rate of royalty used

It is now possible to prepare and lodge royalty returns online via Royalties Online.

Records

The holder of a mining tenement must keep all records that are necessary to give a true and complete indication of:

• The quantity of the mineral
• Any sale, transfer, shipment or disposal of the mineral, including time, destination, value and quantity of each sale, transfer, shipment or other disposal

All records must be kept for a period of seven (7) years.

Back to top

The Department is responsible to the Western Australian Minister for State Development for administering mineral royalties under various Acts of Parliament relating to the mineral industry.

In Western Australia mineral royalties are payable either under the Mining Regulations 1981 (WA) or various State Agreement Acts . Below are the royalty rates payable on minerals produced within Western Australia.

Mining Act 1978 (WA)

When a mineral is obtained from a mining tenement, or from land the subject of an application for a mining tenement, royalties shall be paid by the holder of, or applicant for, the mining tenement.

State Agreement Acts

Mineral royalties are also payable under State Agreement Acts administered by the Department of Industry and Resources on behalf of the Government.  State Agreements are essentially contracts between the Government of Western Australia and proponents of major resources projects. They "package" the rights and obligations of both parties and establish a framework between the State and project proponents.

State Agreements have been ratified by an Act of the Western Australian State Parliament.

Back to top

In Western Australia there are three systems of mineral royalty collection used:

• Specific rate - flat rate per tonne
• Ad Valorem - percentage of value
• Profit-based - percentage of profit

Specific rate

Generally, specific rate royalties are used for low value construction materials.
A specific rate or quantity-based royalty is calculated on tonnes produced.

In 2004 the Government completed a review of royalty rates for those minerals on which a royalty was payable at the rate of either 30 cents or 50 cents per tonne.  This review, in consultation with industry representatives, applied the Australian Bureau of Statistics (ABS) Non-Metallic Mineral Products Price Index which accounted for commodity price movements from July 1985 to December 2003. 

On 20 August 2004, amendments to Regulation 96(2) and the associated table of the Mining Regulations were published in the Government Gazette.  On 4 November 2004, all affected mineral producers were advised of the changes to royalty rates.

The rates on production before 1 July 2005 are:

• 30 cents per tonne (construction use); and
• 50 cents per tonne (used for its metallurgical content)

The following changes came into effect on 1 July 2005.

An ad valorem or value-based royalty is calculated as a proportion of the ‘royalty value’ of the mineral. The royalty value is defined as:

"in relation to a mineral other than gold, means the gross invoice value of the mineral less any allowable deductions for the mineral"
Both the "gross invoice value" and "allowable deductions" are defined in the Mining Regulations 1981(WA) as follows:

Gross invoice value - in relation to a mineral, means the amount, in Australian currency, obtained by multiplying the quantity of the mineral, in the form in which it is first sold, for which payment is to be made (as set in invoices relating to the sale) by the price for the mineral in that form (as set out in those invoices).

Allowable deductions - in relation to a mineral, means -

• The amount, in Australian currency, of any costs in transporting the mineral, in the form in which it is first sold, incurred after the shipment date by the person liable to pay the royalty for the mineral and
• If the mineral is not exported from Australia, the price, in Australian currency, paid or to be paid by the person liable to pay the royalty for the mineral, for packaging materials used in transporting the mineral, in the form in which it is first sold

"Shipment date" is defined as follows: - in relation to a mineral, means

• If the mineral is exported from Australia, the day on which the aircraft or ship transporting the mineral first leaves port in this State or
• If the mineral is not exported from Australia, the day on which the mineral is first loaded on a vehicle for transport to the purchaser

Conversion to Australian Currency:

Where, for the purpose of determining the gross invoice value of, or allowable deductions for, a mineral, it is necessary to convert an amount or a price to Australian currency, the conversion is to be calculated using the Reserve Bank of Australia rates for the quarter in which the shipment date for the mineral occurred.

The rate of royalty which applies under Regulation 86 of the Mining Regulations 1981(WA) is based on the following principles:

• Bulk material (subject to limited treatment) - 7.5 per cent of the royalty value
• Concentrate material - 5.0 per cent of the royalty value
• Metal - 2.5 per cent of the royalty value

This system takes into account price fluctuations and grade of material. The different rates are intended to adjust for the change in the value as mined ore is processed and value is added.

Profit-based - percentage of profit

Using a profit based system, royalties are calculated as a percentage of the net profit of the mine.

This system is project-based and profit is calculated by obtaining all project revenues and deducting allowable project costs.

A combined ad valorem/profit system applies to the Argyle Diamond and Ellendale Diamond Project.

This system is designed to provide a profit royalty of 22.5 per cent over the life of the project while ensuring a minimum ad valorem royalty payment of 7.5 per cent in any year.

Back to top

Royalty payments can now be made online by direct debit or credit card (up to $10,000) using Royalties Online. This system also allows the preparation and lodgement of royalty calculation returns to be completed online.

Alternatively, payment may be made by cheque payable to "Industry & Resources" and mailed to 100 Plain Street, EAST PERTH 6004.  Royalty calculation returns must accompany the payment.

Royalty payments may also be paid via electronic funds transfer to the Department of Industry and Resources (DoIR) account with the Commonwealth Bank (251 St Georges Terrace, Perth).

• The DoIR account number is 066-040 12000048
• Please ensure that your financial institution states whom payment is made on behalf of and that it is a royalty payment

At the same time, please forward a remittance advice regarding the royalty amount being paid by fax +61 8 9222 3838 or e-mail to Chris Parker.

Back to top