Question Time

MINERAL EXPLORATION

The Hon. D.W. RIDGWAY (Leader of the Opposition) (14:23): I seek leave to make a brief explanation before asking the Minister for Mineral Resources Development a question about mineral claims.

Leave granted.

The Hon. D.W. RIDGWAY: The budget papers have shown that over the past four or five years royalties from our mining industry have grown steadily from $82.6 million in 2001-02 to the estimated figure in this year's budget paper of $138.9 million. In December 2006 the government predicted that royalties due to the Olympic Dam expansion will increase from $US46 million to $US106 million after the expansion. Of course, we have had an upgrading of the resource since then, so we can expect it to be significantly better. So, after the expansion we could see South Australia's royalties somewhere in the range of $200 million to $300 million a year.

In the budget papers this year, the opposition highlighted the fact that, in the first three years of the PACE program (and the government continually brags about its great success), $5.6 million was allocated. This year, the budget allocated an additional $8.4 million and a two-year extension to the program, which is effectively a cut of $2 million a year. The minister continues to be quite proud of the fact that South Australia is the third or fourth best jurisdiction in the world in which to prospect and explore for minerals. Bearing that in mind, and consistent with the ongoing arrogance of this government, can the minister confirm that he is considering increasing the range of fees in relation to the mining industry by as much as almost 1,000 per cent?

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (14:26): The government has released a discussion paper in relation to minerals. In some areas, there is no doubt that, given the boom in mining at the moment, there is no proper cost recovery in that some of the fees, which have not increased for many years (and, in some cases, decades), are not appropriate, given that this government has invested significantly in the mining industry.

The Hon. D.W. Ridgway interjecting:

The Hon. P. HOLLOWAY: It is vastly above what other governments have done. Let me just make a comment about the preamble given by the honourable member. He pointed out that there has been a significant upgrade of resources at the Olympic Dam mine and said that that would lead to an increase in royalties. It does not necessarily follow. What follows is that the life of any potential mine at Olympic Dam will be significantly increased; however—

The Hon. D.W. Ridgway interjecting:

The Hon. P. HOLLOWAY: They probably will go on—and I hope they do for centuries. One would hope that they would go on for many years. The upgraded resource will mean greater royalties, but they will not come until 2013 or 2014, when the mining is producing. What this government is doing is investing now for the benefit of future generations and, indeed, future governments. Those royalties will be available for some government in the future.

Quite apart from that, the Leader of the Opposition well knows that mining royalties are subject to the equalisation formulae applied by the commonwealth government in relation to grants to the states. Of course, it means that those royalties are equalised to a very large extent in those resource-rich states, such as Western Australia, which has nearly $2 billion in royalties—not a couple of hundred million dollars but $2 billion in royalties. So, royalties are part of the formula, with the revenue effort, as opposed to the expenditure effort, taken into account by the Grants Commission.

Nevertheless, we certainly welcome a future increase that we will receive in the royalty stream; however, most of that will be in the years ahead. This government is significantly investing now through the increase we have made in the PACE scheme, which is over and above what existed prior to this government's coming to office. We have extended that scheme.

The Hon. D.W. Ridgway interjecting:

The Hon. P. HOLLOWAY: We have not cut it. What we did was introduce a brand new scheme over five years—over and above what the previous government did. So, this was new money on top of what had previously been put into geo-scientific information. We have extended that out. Originally, it was supposed to be a four or five-year program, but we have extended it out by several years to ensure that that investment continues.

The Hon. D.W. Ridgway interjecting:

The Hon. P. HOLLOWAY: Is the Leader of the Opposition saying that we should indefinitely subsidise exploration?

The Hon. D.W. Ridgway: Well, you have been bragging about it for the past four years.

The Hon. P. HOLLOWAY: Yes; we are bragging about it—and we have every right to because, as a result of what we have done, we have gone from exploration of $30 million a year, at the time we came to government, to nearly $260 million a year. I think that is pretty good success. What it means is that we have discovered a whole series of new mines. We will have 21 additional mines; when we came to government we had just four mines in this state.

There was Olympic Dam, Challenger, the OneSteel mines and Leigh Creek. We have had five or six new mines in the past 12 months and there are at least another 21 on the books. So, what we need to have going forward is a focus on getting these mines up, and the issues now facing the mining industry will change. Because of the success we have had through exploration and as a result of our PACE program, we are now recognised as being fourth in the world by the Fraser Institute survey. There is a recognition that we are highly prospective.

So, the investment will come. But what we have to do now is ensure that all those very hard-working staff in Primary Industries and Resources can focus their attention on properly regulating this massive expansion of mines—the 21 new mines, at least, that are coming on-stream in the next few years—and, clearly, if we are to adequately do that, it is appropriate that we should get some investment in relation to it.

So this government, through the paper we have released about changes to the Mining Act, will simplify and reduce a whole lot of red tape in relation to the mining industry, which will reduce the cost and effort that industry bears at the moment. At present, if industry wants to peg a claim under our Mining Act, they have to do it in the age-old way of physically going and knocking a peg in the ground. In these days of modern technology and GPS that is no longer necessary. The new changes we propose in a discussion paper that has been released will introduce the new technology, so that will give significant cost savings to industry.

But, against that, there are historical matters whereby there has not been cost recovery for the activities of the department and we will be looking to ensure that we do get adequate recovery. In other words, we will be making sure that our mining changes are up with world's best practice. We already have a situation where we are the only state that has a reduced mining royalty rate for the first five years of mining; it is 1.5 per cent, and after five years it is 3.5 per cent.

The reason for that, of course, is to encourage the investment in those areas. For example, if you look at Prominent Hill, Oxiana is investing almost a billion dollars in that mine before it will get one ounce of ore at the other end. So the government has introduced a mining royalty rate of 1.5 per cent to reduce that cost at the front end but, of course, we will recover that with the 3.5 per cent after five years. That is a very innovative mining royalty rate that we have that I think other states will eventually follow.

That is the sort of innovation that has put us in the present situation. We are now second only to Western Australia in terms of the level of mineral exploration within this state. The changes that we are proposing through the Mining Act will remove a lot of red tape, which will reduce cost to industry; but, where the costs historically have not been properly recovered for some of the activities of the Public Service, we will recover that. If my department of PIRSA is to manage properly the big expansion in mines, it will need to focus its attention and effort on the areas that are important, and that is why it is important that we have adequate cost recovery where that is required.

But our royalty rates will have this innovative concept of a reduced rate for the first five years, which makes mineral development in this state very attractive. There will be some increase proposed for particular fees, but that rate will still be very competitive with that of any other state. The changes we are making will also significantly reduce costs to industry and the red tape that has to apply under an act that is now 30 years old.