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Parliamentary Questions


Question Without Notice No. 840 asked in the Legislative Council on 19 September 2018 by Hon Peter Collier

Parliament: 40 Session: 1

CLEVELAND–CLIFFS AND MINERAL RESOURCES — KOOLYANOBBING

840. Hon PETER COLLIER to the minister representing the Treasurer:

I refer to the government's decision to provide royalty relief to Cliffs Asia Pacific Iron Ore Pty Ltd and royalty relief and concessions on port fees to Mineral Resources Ltd.

(1) Was Treasury consulted on the issue before a decision was made?

(2) If yes to (1), did Treasury cost the financial implications of this decision?

(3) What is the expected value of the royalty relief provided to Mineral Resources over the term of the agreement?

(4) What is the expected total value of the package, including royalty relief, operating subsidy to the port, and forgone contract termination payments?

Hon STEPHEN DAWSON replied:

I thank the Leader of the Opposition for some notice of the question.

(1)–(2) Yes.

(3)–(4) The expected cost of royalty relief and operating subsidy to the Southern Ports Authority, including forgone contract termination payments, is as follows.

First, there is up to $5 million for a royalty rebate to Cliffs Asia Pacific Iron Ore Pty Ltd for royalties paid in the June 2018 quarter.

Second, the 2018–19 budget forward estimates assumed no royalty revenue from the Cliffs tenements from 2018–19 onwards. Therefore, relative to the 2018–19 budget, no royalty revenue has been forgone as a result of the royalty relief provided. However, up to $123.75 million in royalty revenue is potentially forgone—assuming the ore would be extracted in the absence of the royalty relief, which would almost certainly not occur under current market conditions—from a full royalty rebate to Mineral Resources Ltd for the balance of iron ore remaining in the Cliffs tenements, up to a maximum of 30 million tonnes. This is a notional cost only.

Third, there is up to $113.1 million for an operating subsidy to the SPA to comply with the relevant ministerial direction tabled on 23 August 2018, including a port pricing discount and forgone termination payments. These costs are partially offset by new port-related revenue and expenditure associated with MRL throughput, such that total public sector net debt is estimated to increase by $76.3 million by 2021–22.