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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
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MINING (ROYALTIES) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 4 July 2013.)

Mr HAMILTON-SMITH (Waite) (11:03): I will be leading the debate for the opposition on this bill which, of course, was introduced by the Minister for Mineral Resources and Energy on 4 July 2013. As we heard in the second reading explanation, the bill seeks to change the timing of mineral royalty collections for producers from an expected royalty obligation of greater than $100,000. The measure was first announced in the Mid-Year Budget Review on 21 December but, curiously, it has taken the minister almost nine months to act on the matter. This is an issue of concern to industry stakeholders.

This is, in essence, a cash grab by a cash-strapped government, which has so mismanaged the state economy that state debt has spiralled out of control and we have one of the worst deficits we have seen in the life of this state. We have had Standard & Poor's as recently as last week yet again downgrade the state's credit rating. After three terms of Labor, Labor has delivered ruin. It is quite clear that the state's Strategic Plan has in many ways been an abject failure.

Look at what it has delivered: well over $14 billion worth of state debt, an extraordinarily high deficit and, essentially, an economy that is looking very much like it did in 1993 when Labor was last in office, when it delivered a bankrupt basket case to those on this side of the house to fix. It took us two terms to get rid of that debt and to fix the mess that they created. Here we go again in the great cycle of South Australian politics: Labor governments wreck the state's finances and Liberal governments are then called to the rescue to sort out the mess they have created.

The context of this bill is one where, in a desperate effort to muzzle in as much money as it can, we are now shifting the posts on royalty receipts so as to bring forward royalty receipts in a way that gives this flawed and ineffective state government a cash top-up in a pre-election year to help fund the overpromising and the overspruiking that has been going on for some time.

Let there be no misunderstanding about what the bill is about. The bill is about a grab for cash and the government wants our miners, particularly those involved in specific parts of the mining industry, to pay for it. They have spent the money on the credit card and now they want the mining industry to cough up to cover the accounts.

Of course, when considering this bill one needs to have regard for the context in which it is placed. We had what was probably one of the greatest booms this nation has ever seen over the last 12 to 14 years, heralded mainly by a very competent conservative government under former prime minister Howard and former treasurer Costello. To be fair, a lot of that spirited growth was based on reforms made as far back as the Keating and Hawke governments, where some tough decisions were made to restructure the national and state economy.

We had growth from 2002 onwards—in fact, it started well before then—that just beggared belief. It had nothing to do with the policies of this state government; it had everything to do with global economic conditions, a booming China and India consuming our resources and our mineral resources. Royalty incomes and receipts blossomed around the country here, particularly in Queensland and New South Wales. There was a massive turn-up in economic activity and this state government literally had money falling across the counter at them—bucketloads, wheelbarrow-loads full of cash—and of course they were going around from 2002 right through to about 2008 telling everyone what fantastic financial managers they were.

I remember the former premier (the former member for Ramsay) and the former treasurer (the former member for Port Adelaide) spruiking about how they were doing a great job running the economy. Two gorillas in a Volkswagen could have run the state economy from 2002 through to 2008. You needed no level of competence to pay your bills when every year you were getting $200 million to $300 million more in receipts than you had planned to get at the beginning of the year.

That, of course, covered over a whole lot of ills. It covered over chaos, confusion and disorganisation within the health sector. It covered over chaos, confusion and inappropriate administration in the education department, as we have been hearing. It covered over just about every ill and mistake a government could make, because you could buy your way out of trouble when you were getting buoyant surpluses year after year after year. We had an incompetent government from 2002 to 2008, running things in a time when the money was rolling in so strongly that their incompetence was literally covered over in a gloss of cash surpluses.

In that period our mining sector grew. Of course, we had what the former premier had described as the mirage in the desert, the Roxby Downs mine, then heralded as his pet project. We had the overspruiking and the overpromising—we were going to be the Dubai of the south, mining was going to lay a road of gold leaf and diamond-encrusted everything, all the way through to future prosperity. Everyone was going to be a multimillionaire. Of course, it was all a load of nonsense. It was all a load of abject rubbish.

This government and, frankly, the current Premier and the current cabinet must take as much responsibility for it as the former premier and the former treasurer. They just overspruiked, overpromised and underdelivered. Roxby Downs and the Olympic Dam expansion came crashing down around their ears when BHP announced to the world that, because of the economic downturn, they would not be proceeding.

Of course, they got caught out. Once the economic good times, for which they were not responsible, ended with the global financial crisis, and we got rid of a competent federal government and put in place in 2007 an incompetent federal government (and hasn't it been a circus?), it has just been bad news. With the surpluses gone, their misadministration and their inability to govern effectively was exposed for all to see.

That is why we are here debating this bill, and that is why there is a need for a grab for cash—because they got caught out. Anyone who has run a business knows that in the good times you have to tighten your costs; you have to prepare for the inevitable down cycle. This government did not do that; they kept spending like drunken sailors. They did not prepare for the inevitable down cycle, and when it came it hit and it hit them hard. Now they want their mismanagement to be covered over by the mining industry through this grab for royalties.

The problems of the mining sector go far further and have been added to by this government. We have had various reports—there is a regular flow of them—that are pointing to problems within the mining sector compared to the very flush times we enjoyed due to buoyant commodity prices and surging demand from China, India and other places earlier in the last decade.

ABS data going back to June, but also since, has confirmed that high taxes and capital costs and low productivity under Labor governments had brought mineral explorations virtually to a halt; in fact, not only to a halt, but it was in freefall. Labor's mineral resources rent tax (MRRT), which was introduced in July 2012, came at a time—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: —when exploration for mineral resources in South Australia had shrunk from $90 million to $38 million—a staggering decline of 58 per cent. Ahead of the—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: Mr Speaker, he is—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: I will just wait until he has finished.

The Hon. A. Koutsantonis: Will you?

Mr HAMILTON-SMITH: Can you call him to order, sir?

The Hon. A. Koutsantonis: Come on, princess; come on.

The SPEAKER: The member for West Torrens is called to order.

Mr HAMILTON-SMITH: Mr Speaker—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: The minister has had a chance to give his second reading; now he is over there name-calling like a little boy—

The Hon. A. Koutsantonis: Princess.

Mr HAMILTON-SMITH: —like a little boy in grade 3—

The Hon. A. Koutsantonis: Princess.

Mr HAMILTON-SMITH: —like the little boy he was before he came to the parliament and like the little boy he remains today. Now, if he wants to interject—

The Hon. A. Koutsantonis: Princess is going red.

Mr HAMILTON-SMITH: He has just called himself a princess—

The Hon. A. Koutsantonis: You're going red, princess.

Mr HAMILTON-SMITH: Now, if he wants to call himself a princess and carry on, calling names, being a little boy, exposing to all his colleagues what a juvenile delinquent he is—he puts himself forward as the leader, he is all but going around telling people that after the election he will be the candidate to replace Jay Weatherill; he has already got the knife out, he is ready to slide it into Jay Weatherill's kidneys, and he cannot keep quiet while I am speaking—

The Hon. A. KOUTSANTONIS: Point of order.

The SPEAKER: A point of order from the principal offender.

The Hon. A. KOUTSANTONIS: Perhaps paramedics are needed, sir; he has gone red.

Mr HAMILTON-SMITH: Oh, excuse me, Mr Speaker—

The SPEAKER: Well, no; the member for Waite will be seated. That was a bogus point of order, and accordingly, I warn the minister for the first time. That means he has only one further life for the remainder of the day, including question time. The member for Waite.

Mr HAMILTON-SMITH: Thank you, Mr Speaker. I will try not to respond, but I have noted in this place—

The SPEAKER: Perhaps you could exert yourself a little more.

Mr HAMILTON-SMITH: I will try restraint, but what the minister needs to learn is that it is better to be thought of as a juvenile delinquent than to open your mouth and remove all doubt. I hope that he remains silent during the remainder of this so that we can get on with the substance of the issue—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: —but if he wants to interject, there will be responses because they are very good at dishing it out—it is easy to do in government because you have the call, usually—but I can tell you that when the opportunity presents itself for response—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: He does not like it.

The Hon. A. KOUTSANTONIS: Point of order, sir.

The SPEAKER: Point of order. If this point of order is not a valid point of order, the minister will be warned for the second time—

The Hon. A. KOUTSANTONIS: Yes, sir; thank you, sir.

The SPEAKER: —and it would be something of an Olympic record for a minister to be removed before question time.

The Hon. A. KOUTSANTONIS: It would be, sir, and I know your keenness for order in the house. I just remind the member for Waite about the relevance of the bill. Perhaps he could get back to the bill.

Ms Bedford: Good point.

The SPEAKER: What a happy point, yes. The member for Waite—the bill.

Mr HAMILTON-SMITH: Thank you, sir. We listened attentively—

The SPEAKER: To your text.

Mr HAMILTON-SMITH: Certainly, sir. We listened attentively while the minister gave his second reading, so I hope he will do the same from here on. The introduction of MRRT came at a time when iron ore exploration saw $27 million invested in SA in June 2012. Within nine months, this had slumped to $9 million, a 67 per cent decline. In July 2012, $43 million was spent in SA on copper exploration but, following the cancellation of the Olympic Dam expansion, this slumped 67 per cent, to $14 million in the March quarter.

The fact is that this Labor government has delivered the highest capital costs for mining projects in the world and low productivity. The results are now in; just look at the ABS statistics. In February, the state government's Department for Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) chief executive, Geoff Knight, said the mineral resources rent tax had 'increased our sovereign risk' and destroyed investor confidence. When asked whether or not he agreed with Mr Knight's comments, the minister responded, 'No I don't...I do not agree with my chief executive, I think he was mistaken to say that...Geoff Knight is wrong.' That was on the ABC on 19 February.

In May, DMITRE's deputy chief executive, Paul Heithersay, criticised the MRRT, indicating it had resulted in SA's declining rank in the internationally recognised Fraser Institute's mining investment index. I do remember the former premier coming into the house regularly and touting the Fraser Institute's findings. Whatever the Fraser Institute said, the former premier would note, had to be correct. Well, of course, now that the Fraser Institute is saying things the government does not want to hear, they have changed their tune.

Today's independent analysis is regularly showing that those senior staff are correct, not the minister. Labor senior departmental executives know that Labor's policies are killing off investment and quashing jobs growth. It is time for the Labor government to listen. But what do they do? They bring in this bill. They bring in this bill to grab yet more cash out of the mining industry, which is already struggling. Not only that, this measure comes after a budget where the minister, instead of reinvesting in mining, ripped money out of the mining sector.

Let me just run over it, because I was shocked when I read the budget. Labor spent $88.2 million in the previous year but then cut that to $81.3 million in 2013-14, a reduction of $6.9 million. When the minister is spending that amount on mining and then he cuts it down to a much smaller amount the following year, you have disinvested from the mining sector. You have stripped money away. In a classic case of smoke and mirrors, the part-time Treasurer, the current Premier, tried to claim that his 'budget provides further funding so that we can fully realise the benefits of the mining boom', despite these new initiatives being overwhelmed by much larger cuts.

Minister Koutsantonis's overspruiking of the new Mining and Petroleum Services Centre of Excellence is designed—

The SPEAKER: Member for Waite—

Mr HAMILTON-SMITH: Yes, Mr Speaker; I meant the member for West Torrens.

The SPEAKER: The member for West Torrens or the minister for mining.

Mr HAMILTON-SMITH: Indeed, sir. Excuse me, I lost myself in all the excitement. The member for West Torrens has been overspruiking the petroleum services centre of excellence—a very good initiative—in order to hide these other cuts. What we do is get out there and talk about what we are doing, so that we do not have to talk about what we are not doing—the money we have cut away.

Hardest hit were grants and subsidies down from $12.3 million to $7.5 million. Savings initiatives will remove $2.3 million. I note that geosciences surveys were to be cut by another $1.6 million, and $1.2 million was to be cut from the Plan for Accelerated Exploration (PACE) 2020. This is the big scheme that the minister and his colleagues have been going around touting as their great success story—the PACE scheme—so what do they do? They cut money from it in the last budget: 'We've got something that is really, really successful, so let's just slice it up and throw it in the wastepaper bin.'

That accelerated exploration is actually very welcomed by the industry but of course it was hit with a $1.6 million increase in regulated fees and charges, and funds were to be fiddled between financial years, assets written down and adjustments to annual and long service leave provisions changed for public servants, so the minister really whooped into the mining department and the mining budget. Poor old Mr Heithersay and his people are out there trying to do a good job—and doing a very good job, may I say—and the minister is out there taking their money away.

You can only deliver with the resources you are given. I have to say that everybody in the industry tells me that they are really happy with the service being provided by the department. They are a little less enthusiastic about the service being provided by the Labor government, but the department is fine. It just seems that this Labor government keeps getting in the way by cutting their funding so that they cannot do the things they need to do.

The fact is that there is significantly less being invested in mines and energy this year than last year. The ABS confirmed that mineral exploration investment had collapsed, as I mentioned earlier, and I did hear the finance minister indicating that SA had now missed the mining boom under Labor's watch. The Minister for Finance understands. He said, 'We've missed the mining boom under Labor's watch,' and he is part of that Labor government.

The budget sent the wrong message to the mining industry. Of course it was a message of decline both in activity and government investment and that is simply not good enough, so the government has little to be proud of in mining. It surfed the buoyant wave of prosperity which it had not created but which had been created by international economic circumstances and the Howard government. Now of course it has come off the trough, and what is its response? Instead of reinvesting, it is cutting and cutting and cutting.

The government claims it is introducing this bill to align royalty payments in SA with 'some other Australian jurisdictions'. The minister claimed in his second reading that the bill is needed to align large mineral producers' royalty payment arrangements with those of petroleum and geothermal producers who already pay royalties monthly. What a great guy; what a great initiative. He is actually doing this for the good of the industry, just to align things.

It is a bit like all those other little alignments that Labor likes to engage in, both federal and state. It is called harmonisation or alignment or some other term and then you find out that really there is quite another agenda because, as I have mentioned, the bill will rip money out of the industry. In fact, a one-off $31.6 million will be the temporary windfall for the budget position by bringing forward royalty payments from biannual to monthly payments from large mineral producers. It is really about $31.6 million; it is really about propping up this incompetent state Labor government's budget and financial mismanagement.

At present, miners pay royalty on 31 January and 31 July in biannual bulk payments. Transitioning to this new payment arrangement will require monthly payments to government. While the 31 July 2013 payment will proceed, as required for the retrospective six-month period from 31 January 2013, the bill seeks to bring forward the obligation to pay throughout this financial year to a monthly basis after proclamation. So there are considerable problems with the way the bill has been managed and brought before the house as well as the substance of the bill.

The minister told the house on 4 July that 30 mine operators would be affected, but at a departmental briefing on 19 July the minister's advice to the house was corrected as it was confirmed that only 21 operators would be captured by the measure. I am not sure what the figure is today; perhaps the minister could tell us when he responds. Of the 300 producers in SA, these 21 producers represent approximately 98 per cent of mineral royalty revenue collection. A further 10 companies sit just outside the $100,000 trigger. I want to mention who some of those companies are, because when they read this Hansard they will understand the significance for them.

The government apparently has indentured agreements with BHP Billiton Olympic Dam Corporation Pty Ltd, OneSteel Manufacturing Pty Ltd, and Flinders Power Partnership. Companies that I am aware of that are over $100,000 include: OZ Minerals Prominent Hill Operations Pty Ltd; Dominion Gold Operations Pty Ltd (Challenger); Iluka (Eucla Basin) Pty Ltd; Hillgrove Copper Pty Ltd (Kanmantoo); Termite Resources NL (Cairn Hill); Boral Resources (SA) Ltd; Heathgate Resources Pty Ltd (Beverly); Exco Operations (SA) Ltd (White Dam); the Cheetham/Ocsalt Pty Ltd; Rocla Pty Ltd; Southern Quarries Pty Ltd; Penrice Soda Products Pty Ltd; McLaren Vale Properties Pty Ltd; Gypsum Resources Australia Pty Ltd; Holcim; Southern Iron Pty Ltd (Peculiar Knob, Arrium); and Hanson Construction Materials Pty Ltd.

Of course, there are a number of other companies sitting just outside the $100,000 trigger, who I understand include: Hallett Brick Pty Ltd; Futuretop Developments Pty Ltd; Schmidt, Trevor Robert; Adelaide Brighton Cement Ltd; Clinton Quarries Pty Ltd; Bowjen Nominees Pty Ltd; Trenel Pty Ltd; Gambier Earth Movers Pty Ltd; McDonald Earthmovers Pty Ltd; and Mineral Holding Pty Ltd. Perhaps the minister could clarify to the house in his response just how many companies are going to be caught up in this measure. Is it the 30 mine operators that he told the house on 4 July would be affected? Is it the 21 operators that were advised on 19 July during a briefing to this side of the house, or is it a new figure? And is there a likelihood that some of these people sitting just outside the $100,000 trigger will be caught up and, if so, when?

The bill proposes that the charges be implemented retrospectively from 1 July 2013, even though the bill is only being considered now, in October, and will then go off to the other place and may or may not be passed before the end of the year—I mean, we just do not know. It has been a very sloppy handling of the measure if the government argues that it is a budget measure. The administration and acquittal of payments will remain a biannual process, but companies will need to adjust their procedures to provide for monthly payments. There will also be transitional provisions as companies adjust from one payment practice to another that will involve compliance costs. The affected operators will need to have paid $100,000 or more the preceding financial year or the minister will have discretion to deem a mining operator as relevant to the measures contained in the bill.

Some of these companies produce different amounts from one year to the other and, just because they produced $100,000 last year, they may be caught up in something that they should not be required to pay this year because their revenues have fallen below $100,000. I am not quite sure how the minister proposed to deal with such cases. It seems to be that whatever your performance was last year will determine what happens to you this year.

It is worth noting that three companies are exempt from the provisions, as I mentioned a moment ago, which some in the industry find curious. BHP and Arrium are not affected by the bill as their royalty payments are contained within their respective indenture acts. Flinders Power Partnerships has a separate agreement with the government, which is outside the Mining Act 1971 and therefore will not be affected by the bill, as I mentioned a moment ago.

I am advised that a further company, Heathgate Resources, has special arrangements in place under the Mining Act in respect of royalty payments. Perhaps the minister could clarify that in his response. It has been revealed that at least two other companies have also approached the government for special arrangements in respect of royalty payments. I would like to know whether the minister could confirm that, because there needs to be openness and there needs to be accountability, and if special side deals are being offered to certain companies without visibility by others in the marketplace, that would be wrong. If the government has any other side deals, private arrangements, royalty holidays or exemptions from the Mining Act, perhaps the minister could explain that, so that all in the industry could have a fair view of the playing field.

Consultation with stakeholders by the government over this matter has been poor, I should say. It was one thing just to come out and announce this measure with virtually no consultation in the Mid-Year Budget Review. There may have been some consultation of an informal nature, but I think everyone was caught off guard, because on page 53 of the Mid-Year Budget Review the government said this—and apparently it took the whole industry virtually by surprise:

The government will reform mineral royalty payment arrangements for mineral producers with expected annual royalties of more than $100,000. For those producers, royalty payments will be required to be made monthly in arrears from 1 July 2013. At present, most producers are required to make royalty payments six monthly in January and July each year. This change will align the timing of royalty payments for large mineral producers with existing arrangements for petroleum producers. This change will also bring timing of royalty payments for large mineral producers in South Australia into line with arrangements that apply in Western Australia and to large producers in New South Wales.

There will be no change in royalty payment arrangements for smaller mineral producers with expected annual royalties of $100,000 or less.

The revised arrangements will mean that the government will receive royalty payments on a more timely basis and this is expected to have a one-off revenue benefit of $31.6 million in 2013-14.

That is what just came out as an edict. Let me tell the house what the reaction has been from industry. I could use many examples, but I will do that by just getting into the Hansard and telling the house what the Cement Concrete & Aggregates Australia Association had to say about this in a letter that they wrote to the Premier on 30 January 2013. We had the edict around Christmas that this would happen, and this is the industry's response:

Dear Premier

Since re-establishing our Adelaide Office in December 2011, Cement Concrete & Aggregates Australia (CCAA) has achieved a great deal.

We have worked closely with Minister Conlon on heavy vehicle registration issues, we liaised with the EPA on Waste Derived Fill specifications, we were privileged to have Minister Wortley and Minister Koutsantonis attend our Environment Health and Safety awards night and we continue to receive tremendous service out of DMITRE and DPTI on a range of issues affecting the industry.

CCAA has also praised your government publicly on policy issues such as, the planning changes in the CBD (including lifting and height restrictions), the Housing Construction Grant, abolishing stamp duty on off the plan apartments and most recently planning changes to the inner rim.

All in all, our experiences in dealing with your government have been cordial, professional and overwhelmingly positive.

I make an aside remark that that is a good thing. The document further states:

On behalf of the companies we represent, I would like to acknowledge this work and sincerely hope we can continue to build this relationship in 2013...

However, it is not possible to always agree and unfortunately, my first correspondence to you as Treasurer must express concern on behalf of CCAA members, which have been caught in the Mid Year Budget Review initiative to collect royalties monthly, for mineral producers paying royalties in excess of $100,000.

Our preliminary investigation indicates that just 24 companies—8 of which are members of the CCAA—will be affected by this policy change, which according to Mr Snelling's Media Release dated 20 December 2012 will see an increase in revenue of $31.6 million from 1 July 2013.

This policy change will lead to increased costs in administration, monitoring and reporting and is another impost on an industry which is suffering due to a downturn in the construction industry.

It also comes off the back of 18 per cent increases in fees and charges announced earlier in the year and increased regulatory, compliance and administrative costs connected with the amendments to the Mining Act 1971 (SA) and Mining Regulations 2011.

These fee increases and additional regulatory burdens makes doing business in SA harder and as we have sadly seen recently, puts South Australian jobs at risk.

While this decision was taken by the former Treasurer, CCAA is disappointed it was not consulted about this change in policy prior to it being announced. As such, I would be grateful for a departmental briefing at your earliest convenience and your consideration of delaying or modifying the announced change which, if left unaltered will negatively impact on our industry.

And it is signed by the state director.

The Hon. A. Koutsantonis: Who is that?

Mr HAMILTON-SMITH: Todd Hacking. Read the letter—haven't you read the letter? Have you read the letter? You should have read the letter and you should have responded to it. What this industry association is saying (and I have confirmed it with individual members of the association) is that they were not consulted before this edict when the Mid-Year Budget Review was released. It is not the information that the house was given.

Secondly, they are saying that this comes on the back of increases in charges and fees—they say an 18 per cent increase in charges—and it comes on the back of other imposts that have been put before the industry. That is what stakeholders think of this measure and, of course, they are not alone. Another miner I spoke to said this:

...any potentially perceived negative change to state royalties or other state taxes are certainly of concern to us as it creates uncertainty and reduces competitiveness in attracting the foreign investment required to move our projects into production.

The industry—far from welcoming this measure—sees it as very counterproductive; indeed unfair, unheralded and unreasonable.

The government says that they made the announcement in December, and that subsequent to the announcement the minister wrote to stakeholders outlining the proposals and has spent seven months discussing how to proceed with government. I just put this point: what happened to 'consult and decide'? We have clearly had confirmation here that this decision has been announced and then defended.

The current Premier's promise that he would consult and decide in this particular example is patently wrong. This is just good old 'announce and defend'. So, nothing has changed and we may as well have premier Rann back because it is the same old government out there, doing whatever it feels like doing, bailing itself out of its economic woes by ripping money out of the mining industry and then setting about trying to defend the decision.

Only after this bill was drafted (not that long ago) has the government met with extractive producers to genuinely walk through how the monthly regime will work from an administrative perspective. How can you really work through with the stakeholders how the measure will be introduced until you have drafted the legislation? To say that you can just announce it in the Mid-Year Budget Review and then expect the industry to understand all the nuances of when this will be introduced, how it will be introduced and what it will mean for their business is just patent nonsense. That is the thinking of people who have never run a business in their life; that is the thinking of the Labor Party.

You need a bit of legislation and you need the details of the measure so that then there can be genuine consultation. A better way to do this would have been to consult in the first instance about whether it was the right thing to do at all, then draft some legislation, conduct some thorough and proper consultation with stakeholders about the implementation and transitional arrangements and then announce the measure. Instead, we have got it completely back to front.

The government has acknowledged that it was—perhaps it has done so now—at the time of second reading, still to consult with some stakeholders, including OZ Minerals, Challenger, Beverley and others. That was admitted freely at the briefing so, even then, it still had not consulted with certain key players.

The government claims to have had positive feedback, including that the measure would make cash flow management easier for miners. I do not know where it got that from. I would very much like the minister to tell us in his response just exactly which miners rushed up and gave him a big kiss on the cheek when he announced this measure because they were overjoyed at having to pay extra royalty money sooner. I would really like to know the names of those companies. Who were the ones that gave you such positive feedback and were so delighted that their cash flow would be made easier by having to part with $31.6 million much earlier than they had otherwise budgeted for?

The government also says that administrative arrangements should be manageable and that this will enable miners to 'get tighter with their controls around invoicing and receipting of money'. Isn't that lovely? We want $31.6 million off you and, you know what, you will be better off because you will get tighter and your controls around invoicing and receipting of money will be better.

I mean, really, is this government living in cloud cuckoo land? Is this government so out of touch that it can somehow tell people, 'We are hitting you for $31.6 million of extra royalties, but it is going to be really good for you; don't you worry.' It sounds like the sort of language Idi Amin would use when he said to the poor people of Uganda, 'Do not run from the police. The police are your friends and, besides, you cannot run faster than bullets.' It is that sort of logic. They just do not get it.

I consulted with the industry when this measure was announced and the reaction I got from them was quite at odds with the reaction the government claims it received. I know what they said to me, so perhaps the minister could get up and name the companies that have enthusiastically embraced this measure, as he suggested in his second reading.

Stakeholders have expressed the view that, at a time when the industry is under pressure—and I just read into the Hansard an example—the cash flow burden of having to provide an unbudgeted $31.6 million in the current financial year will put pressure on jobs and investment in mines across the sector. You see—and I say this to all government ministers—companies have to do a budget. It goes out several years, usually, but it certainly goes out thoroughly in the financial year underway.

When you announce, in the middle of a financial year in a Mid-Year Budget Review, that you want $31.6 million out of the industry that they have not budgeted in their cash flows to provide to you, you have got a problem. They have not got the cash flow. They are going to have to go and find it. Who knows what jobs have been lost, who knows what changes have had to be made, but $31.6 million is a lot of money for this industry to cough up in these particular times.

The other point, can I just say, is a point of principle, which has also been raised with me by the industry; that is, simply, moving from biannual to monthly payments is nothing more than a windfall extraction of $31.6 million by government from the sector which, at this point, along with the retrospective nature of the legislation, simply cannot afford it. The retrospective nature of this is something, as a matter of principle, that the industry feels uncomfortable about, even though it was heralded in the Mid-Year Budget Review.

We are introducing some legislation in October, which may not be passed until November, which is going to go back and make changes from July. It would have been much better, in my view, to have postponed this measure by another year, perhaps implemented it a year from now, or a year later than planned, so that companies could then budget for the change.

But we all know why that is not happening—because the government is engaged in a desperate grab for cash because it needs the money now. They have messed up the books of account now. They are in trouble now; they need the $31.6 million now. Who cares about the industry, who cares about their workers, who cares about these small businesses and family businesses? Let's just get the money in.

As I have mentioned, the aim of the bill is simple: it is a transparent grab for cash, with an election-year bolster to the government's budgetary position. You want this money in your books, in your bank account, before March. It comes at a particularly poor time for the mineral resources industry; capital investment is becoming increasingly constrained, and commodity prices are declining.

I have mentioned the budget cuts the government has made to the mineral resources sector, down from $88.2 million to $81.3 million. This flows on the back of those budget cuts. I have talked about difficult trading conditions; Terramin recently announced that its Angas zinc mine would go into abeyance, and mineral explorer UXO Resources announced that it would be ceasing trading.

On 16 July this year, Oz Minerals, which will be captured by the bill, announced that 61 jobs were to be cut from its Prominent Hill operations. There have been further bad news announcements from Oz Minerals and Prominent Hill in recent times, and I notice that its share price, as late as yesterday, took another whack as a result of a forecast downturn in production.

The government admits that the extractive industry sector, including quarries in the construction sector, are under pressure and, as mentioned previously, a number of companies have indentures of special agreements with government in respect of royalties, in response to cost pressures those enterprises are facing. We cannot be doing side deals with certain people that are not visible while making others pay; it is just not fair on the payers.

I have also mentioned the retrospective nature of the legislation, because the bill puts in place royalty payment arrangements which will take effect from 1 July, even though the bill is unlikely to be proclaimed, as I have mentioned, until late 2013, presuming it passes the parliament. In effect, the measure proposes retrospective arrangements, and I have covered all that. Businesses affected have developed their financial plans based on existing royalty payment arrangements, and this bill has crashed into those financial plans and messed them about.

In summary, I think that the justification for the bill is very weak, very weak indeed, and it is principally driven by this craving to grab $31.6 million in a cash grab in a pre-election year. Not all other Australian jurisdictions have similar arrangements, I am advised, with only Queensland and Western Australia applying monthly royalty payments, to varying extents. I am happy to be qualified on that, but the impression given that every other Australian jurisdiction has these arrangements, I am advised, is not correct; it is wrong. So, we have based this on a flawed premise.

Although the industry might accept the principle of monthly payments, I think that the way in which the government has gone about introducing this measure has been most unfortunate. I think that it would have been better, as I have mentioned, if the transitional arrangements had involved the bill taking force not on 1 July this year but on 1 July next year—in 2014, that is.

The opposition did consider its position in that regard, and we considered whether we would make amendments. However, we have abided by a principle that you are claiming this to be a budget measure; you are claiming this to be a revenue measure. This is what you want to do; you are the government; you need it for your budget to survive, so we have decided not to oppose the implementation timings. It is what you want; you can take responsibility for it with stakeholders, and you can wear the consequences.

The measure will bring mining royalty payments into line with oil and gas arrangements and will provide for more regular cash flow to government on an ongoing basis as miners move from biannual to monthly payments—but, of course, at their expense. The government has spent an extraordinary amount of time sitting on this initiative. I must say that I am surprised, and maybe the minister can explain to the house why it is so, that a measure announced back at Christmas is only now being debated.

I would be curious to know why this could not have been brought in in February or March, why it could not have been decided upon by both houses prior to the budget so that before 1 July all the stakeholders would have known what was coming and could have budgeted accordingly. Is it deliberate or is it just the case that the government could not get its act together in bringing this matter forward sooner? I would very much welcome information from the minister in that regard.

The opposition believes that the parliament has been put in a position by the government given that this is a budget initiative where it must support the measure with the qualifications that I have mentioned. We, therefore, do not propose to amend it. This is something that Labor wants. This is $31.6 million of cash that Labor intends to grab. This is a measure which was introduced with no consultation and which is retrospective and reflects this government's inability to govern competently.

Be that as it may, we are not going to get in the way of exposing that to everyone involved. So you can have your bill; we will not be opposing it. The industry is aware of what has happened, they know they will now have to part with royalty payments they had not budgeted to part with. They know that the process has been mismanaged and they know who to hold accountable about it in March 2014. With that measure, I indicate that the opposition will be supporting the bill without amendment.

Mr GRIFFITHS (Goyder) (11:52): I wish to speak briefly about this and to raise one question for the minister. I have noted from the list provided by the shadow minister, the member for Waite, that the impact will be felt across businesses based in metropolitan and regional areas and outer—

The Hon. A. Koutsantonis: Say that again, sorry?

Mr GRIFFITHS: The businesses are based across all areas, like head offices in Adelaide, activities outside Adelaide and outer areas and that sort of thing. I found it very interesting because it impacts across so many different parts of the state. I have taken particular note that in the $31.6 million that is intended to come through as a short-term bonus because of timing issues—and that is what the budget figures relate to in the 2013-14 year.

There are a couple of interesting accounting terms that I have learnt over the years. One is horizontal fiscal equalisation and one is vertical fiscal imbalance, and the effect that an increased revenue opportunity has upon a Grants Commission transfer that occurs through to the state. With this $31.6 million coming through because of cash flow management, because of the monthly payment requirements and an increased amount that is coming through this year, I can only presume that it has a negative impact upon grant revenues. The minister is shaking his head on this, but the reason relates to the question I asked when the decision was made about the desal plant and to double it from 50 gigalitres to 100 gigalitres.

There was an additional payment made by the feds of a grant of $216 million, I believe, but then the corresponding drop in Grants Commission flow that came through related to the fact that it was only worth only between $7 million and $9 million in a positive sense in additional dollars. The reason I am asking the question relates to things that I have seen occur in the past and things that I have been aware of, and I am wondering if the minister can provide a formal answer to that as part of what we are talking about later on. It is an issue. I understand that in desperate financial times you have come to make this decision.

I have a level of frustration, as the member for Waite does also, about the level of negotiation or non-negotiation that has occurred with the industry and about the impacts it will have on them and the challenges for them in difficult times when they are trying to prove resources and expand their opportunities. For this there is a real issue that I would like to see some details on. I would like some clarification, too, on the number of mines—and I know that the second reading talks about 30, the member for Waite has talked about 21 as being the revised figure—and what that will be.

I stand up before you to talk about mining, not as someone who knows a lot about the industry but as someone who is particularly interested in it now because of proposals in my own electorate which are rather challenging, it would be fair to say. I do so, though, out of respect for the fact that mining has occurred in my own electorate over 155 years.

The Hon. A. Koutsantonis: That's why they went there.

Mr GRIFFITHS: The minister says 'That's why they went there', and I understand that also. The economy of the state was so dependent on those mining activities 150 years ago that with that, and the activities in Burra, it pulled us out of desperate financial times. The challenge now, though, is to try to marry the expectations of a community which has been based upon a very different form of industry—that is agriculture—compared to an economic diversification opportunity. As a member of parliament who tries to be responsible and look at opportunities to grow the economy and to contribute to communities, I am attracted to it for that reason, but I must admit, minister, I have sent one letter to you recently seeking your attendance at a public meeting and I understand that that may not be occurring.

The Hon. A. Koutsantonis: No.

Mr GRIFFITHS: No? But there may be a visit by a DMITRE officer at a 3 November public meeting that is potentially going to be held also. It is a really tricky one for communities to deal with and it relates to the royalties issue because I know that about $200 million comes in from royalties statewide. I would love us to be in the range of the Western Australian experience where the cash opportunity to grow the economy is enormous. There is no doubt about that, but there are some very difficult balancing acts that need to occur between where mining happens and the impact upon communities, because it is easy for one to think that, when it is out of sight and out of mind, it is all okay. It has an impact upon the environment but we feel as though it is managed appropriately and there are very stringent controls in place.

However, when mining opportunities are pursued in inner areas—in agricultural areas which have a long productive history—that is when people, rightly so, exercise their democratic right and stand up and ask questions. As you make a decision about the proposal, there will be some challenging times for me as a local member to try to balance community desires, what I would like to see occur in the future, and what mining needs to do to interact with communities and agriculture to work appropriately. To me, I suppose, it all links to this discussion about the opportunity for royalties revenue and state financial growth.

I have listened intently and read the second reading explanation from the minister, and listened intently to the member for Waite in his summation on this, and it raises a great challenge for the mining companies to manage cash-flow issues relative to the monthly payments when they occur, the increased payment that will be incurred in the 2013-14 financial year, and how we as a state actually manage it as an industry going forward. I do not intend to ever stand up and say 'No' to mining in any particular area. I understand that there are some who would call for that.

I am about processes and about the fact that, in 156 or 157 years of government in South Australia, we have developed a set of processes that allows things to be pursued and considered, and legal opportunities exist for those who are for or against to put those positions, and for them to be reviewed. Then it is up to the minister and the government to make that decision, and that is what I hope to be a part of one day—a group of people who will make important decisions like that.

It is important that we put some balance into the debate that occurs in this chamber and not only consider the financial aspects but also the physical aspects that impact on people. Like the member for Waite, I understand you have made this decision and you are prepared to live with the consequences. There will be the short-term impact, and a time when share prices of currencies seem to go all the time, and prices for returns on the commodities seemingly change all the time. It will represent a challenge to the industry. They have contacted the member for Waite and he has quite eloquently, I think, put their concerns before you, but the decision has been made. It figures in the forward estimates and the current financial year, and what the changes will be in future years, and I will be interested to see what the impact will be.

I urge the minister, as part of what he does in his role as minister when considering proposals, to look at the fact that there are so many different sides to any equation. When it comes to mining, there has to be an appropriate level of consideration given to community concerns and a balance has to be found between ensuring that diversification happens and the state's economy grows as a result of that diversification, but the bottom line also includes the impact on real people, which I and other members are constantly contacted about. Therefore, we want to ensure that the debate occurs in this chamber, and that you as the responsible minister (and any person who assumes the role in the future) understands the implications.

Mr PEGLER (Mount Gambier) (11:59): I have some concerns with this bill when I read the minister's second reading contribution. He refers to a one-off benefit of $31.6 million to the state for the 2013-14 financial year and yet in 2011-12 the total royalties were $119 million, of which $79 million was taken up from already existing indenture terms, so that only leaves $40 million that will have to be paid monthly rather than six-monthly in arrears.

Either royalties have gone up a lot in the last two years, or mining has gone up a lot, or there may be some other simple explanation for those figures, but, looking at these figures at the moment, I have trouble working out how we get to this $31.6 million; hopefully, the minister can address that matter in his third reading.

Mr PEDERICK (Hammond) (12:00): I also rise to make a contribution on the Mining (Royalties) Amendment Bill 2013. I certainly support the comments made by our lead speaker, the member for Waite, and the member for Goyder, who is having some interesting interaction with farmers on the Yorke Peninsula regarding the proposed copper mine over there.

I understand that a group of farmers, interacting with Rex Minerals, has developed their access arrangements. I think access arrangements are one of the key sticking points with any mining proposal, especially on what is called the 'inside country'. I have often spoken in this place about my time in the Cooper Basin 30 years ago. Many people say, 'That's somewhere a long way away; anything that happens up there won't affect us. We're not concerned about mining in that area; it's only productive farmland areas that we are concerned about.' Certainly, having been a farmer myself before coming into this place, I am very concerned about our farmland and that we do have enough to feed ourselves and the nation and to export around the world.

The simple fact is that we do not own the wealth that is under us in mineral resources—that is the sovereign right of the state. The biggest thing we need to do as a state, and what the government needs to do, is to make sure that the interaction between property owners and miners can be done in a smooth fashion. I know that the Mining Act has been amended since some of these activities occurred in my electorate in regard to the commencement of the Terramin mine at Strathalbyn. I note that Strathalbyn has not been in my electorate for a while, but I still deal with the Terramin mine as an issue, being part of the consultative committee, but also the mine at Mindarie, which was operated by Australian Zircon.

I think there is still a long way to go as far as getting the appropriate access arrangements and agreements in place, even from the first of the port of call, so that the miners and the landowners have appropriate discussions about the access. Even before I became a member of this place, I was talking to community members, and they were very concerned about the way things were being dealt with. Thankfully, a lot of that has changed over time—a lot of it—but there is still some angst about the access arrangements. Occasionally, it is the attitude of the miners, who think that they can just walk in and do what they like. That cannot happen and should never happen.

As I said, I fully understand that we do not have the sovereign right to the minerals if we have them in our soil, but there needs to be some mutual understanding. The member for Goyder, in his contribution, alluded to how long these people have been on their properties. Some of them have been on this land for well over 100 years, and if someone comes in and says, 'Well, look, essentially we are going to purchase it,' they have to go through the proper purchase framework. I believe a premium should be paid for property if it is essentially being compulsorily acquired, especially if it has to be for the site of an open-cut mine or something like that. There certainly needs to be proper mediation, especially in regard to waivers and any work done within 400 metres of a farmer's residence and so on.

The problem we have seen over time is that not always has the right thing been done. This causes a lot of angst for not just the communities but also for miners down the track, new mines that want to open up, and there will be more on this inside country, the more common farming country we have, as time goes on and as minerals became scarce and people wish to look for these minerals.

Yes, some of these mineral-laden areas are very historic, like the one at Strathalbyn, which has a long history of mining in the past. Certainly Yorke Peninsula was based on mining in the early days. The mineral sands extraction that has been happening in regard to the Mindarie operations was a real mess for a while, when the initial miner, Australian Zircon, got way out too far in front of the mining process: their rehabilitation was not being done in the appropriate manner, and it created a huge mess. This is where you get mining companies that are, I believe, underfunded, and they were not going to keep up with their proper commitments as they should.

I must pay due respect to the former mining minister, Paul Holloway, with whom I had a great relationship in the time he was minister. He came up there, assessed the situation and saw that the problems at Mindarie had to be resolved. I have also mentioned in this place the discussion about foreign investment, whether it be with mining or farmland. Frankly, if the Chinese had not got involved in Mindarie it would still be a mess, I think. They put in about $40 million, and that has really changed the focus there.

Part of the rules of Murray Zircon in reopening the sand mining operation there, the mineral sands, was to complete the rehabilitation. That was proceeded with and the mine was reopened again recently. That goes with a full end-use contract (in fact there is probably a better name for it), but the Chinese investors obviously want to use the sands in their ceramics and other things in China, so they have an end use for this mineral sand. They have to go a long way for it—about 20 metres in places, and that is a lot of scraper hours, so as a stand-alone mine it might be struggling, but there is certainly an end use needed by one of the investors.

It is an ongoing issue. In regard to mining in this state, and certainly on these close, almost suburban, mines and Strathalbyn—certainly with the Terramin facility being within a kilometre of the town—it has created a lot of angst at times, some unfounded but a lot of it well founded. I know the miner generally over time has worked with issues about making the mine work with the community, but now we are at a place where, essentially at the end of September, full mining operations have ceased and 115 people are out of work.

Whatever happens here will be interesting as time goes on, but it has given a huge economic benefit locally. I certainly know of businesses in the Strathalbyn district that have really benefited from this mine operating, and now they will not have that opportunity.

Some businesses have explained to me that they would not have been able to expand or operate at their level of staff if this miner was not buying goods locally and so I must acknowledge that, but we have a long way to go to making sure that mining operates effectively on these close proximity mines in the suburban country or inside country to get it right. As part of that process we have to make it economic for miners to operate and, as the member for Waite rightly indicated, this bill talks about where the government will have a $31.6 million temporary windfall for the budget position by bringing forward royalty payments from biannual to monthly payments from large mineral producers.

As the member for Waite rightly said, this was a government who, when they came in 11 years ago, was receiving hundreds of millions of dollars annually they had not even budgeted for from GST windfall. Yet here we are, because they are scratching the decks to find some cash, we are almost blowing out to close to a $14 billion deficit by 2016. This state is in real strife and our budget is only somewhere a little bit north of $15 billion a year. Here we are where we see again another department—another minister—looking to find a way just to bring some money forward. This money was going to come in anyway, but because this government has done such a poor job of running this state, they have had to bring this forward to get it on the table.

It was interesting that this was discussed in the Mid-Year Budget Review, but it has taken until now for this debate to take place. So, what we will see, and it is written in the transitional provisions in the bill, is the fact that the minister can essentially do what he likes if this bill goes through—and, obviously, it will not get through until we have nearly finished sitting for the session. He will be able to go back to the miners and upset their whole royalty program for this financial year, which started several months ago on 1 July 2013, and they will have to change all of their arrangements. Yet, it would have been simple if the brain bubble to do this had come into place, because there was no consultation initially, and this bill could have been introduced early in the year quite simply, but no, it has taken this long to get it to the debating stage.

As I said, the bill does propose that the changes will be implemented retrospectively and have the effect that operators will need to have paid $100,000 or more the preceding financial year as royalties or the minister will have the discretion to deem a mining operator as relevant to the measures contained in the bill. As I indicated, there was little or no consultation early on when this bill was thought up and it was only after the bill was drafted that the government met with extractive producers to walk through how the monthly regime will work from an administrative perspective. At the time of the briefing in July, the government acknowledged that they were yet to consult with some of the key stakeholders, including OZ Minerals, Challenger, Beverley and others.

I note that apart from Terramin, with 115 workers losing their jobs only in the last few weeks, OZ Minerals put off 60 workers the other day, so it is not all cream cheese out there in the mining field at the moment, as we know. It is tough. There are people getting put off. This state was supposedly going to be living off the mining boom. Apart from all these other miners that are operating in the state, we were going to have the Olympic Dam expansion and that was going to basically save us. Certainly, on this side of the house, we did all we could to make sure that the legislation with regard to Olympic Dam went through in a timely manner but, sadly, that expansion has not happened. Just on reflection, the government suddenly realised that there was a primary industries sector in this state. It only took the collapse of the Olympic Dam proposal for that to happen though.

As I indicated, trading conditions throughout the state are very difficult at the minute. We are seeing mines either closing or cutting jobs. The government has had this initiative on the table for too long: it should have been brought before this house earlier in the year. As has been indicated by previous speakers, and I have indicated, bringing this funding forward is purely a budget measure. It is a one-off and was going to happen, anyway, and this will happen if it goes through this place and the other house.

I am certainly concerned at the way this bill has come about and I am certainly concerned about the impact on a mining community which is already struggling in this state with the loss of jobs and, in some cases, the slowing down of mining operations; so anything like this, which I believe will have an impact on mining investment in this state, is not a good thing. We see it as something that the government has brought in because of the poor way they have handled the budget and it will come at a cost, it will come at a cost not just from a local perspective but also for co-investors like the Chinese and the Murray Zircon project at Mindarie.

They will have regard to whether they look at this as a favourable place to mine. That is yet to be seen, if and when this legislation goes through the whole political process. We have had quite a vigorous debate about this on our side of the house and we note that it is part of the budget process. We have moved to not oppose the bill, but it is just a cash grab by a government that is out of control.

Mr TRELOAR (Flinders) (12:17): I, too, rise today to make a contribution to this debate with regard to the Mining (Royalties) Amendment Bill. This bill was introduced by the Minister for Mineral Resources and Energy in July this year and seeks to change the timing of mineral royalty collections for producers with an expected royalty obligation of greater than $100,000. The member for Waite has listed a number of companies that will be affected by this and a number of companies also that sit just below that $100,000 figure and, of course, will not be affected but may well be in the near future should their businesses prosper and flourish.

The bill will provide for a one-off payment—temporary windfall, we are calling it—of $31.6 million for the government. This will be much valued by a government in dire financial difficulty and, no doubt, they will be pleased to inject it into their budget operations. About 30 mine operators will be affected by this bill. They will be required to pay their royalty payments on a monthly basis rather than twice yearly. There are about 300 mine producers in South Australia and 21 of these producers represent approximately 98 per cent of the mineral royalty revenue collection.

I have listened intently to the contribution from the member for Waite, who did diligent and informative research, as always, and made a great contribution, but also the members for Goyder and Hammond who, as am I as the member for Flinders, are dealing with particular issues in our own electorates relating to mine expansion and mining exploration. The minister is well aware of what is going on in regard to exploration. It is a highly prospective part of the state at the moment. Much of the electorate of Flinders lies within the Gawler Craton. There is much activity there and many tenements have been let. Of course, the obligation on the companies who gain the tenement is to carry out exploration work. This comes as a surprise to existing landowners, landholders, businesses and communities, because they have been rather settled in their agricultural pursuits for 100 years or more.

The member for Goyder reflected on the fact that in the very early days it was actually the efforts of mining that secured this state's prosperity, because the colony was very nearly bankrupt until mining was first undertaken. Copper was first discovered at Kapunda then Burra and, finally, in the Copper Triangle, which the member for Goyder now represents. So, mining has been a part of our state's economic activity for a long, long time, although not so much in recent years, particularly within the agricultural areas or 'inside country', as the member for Hammond referred to it.

Over much of our history, mining activity has occurred in faraway places, often well up north where a hill or two has been discovered with something of value and we have simply removed the hill and capitalised on that mineral wealth. Of course, royalties are paid on that and they are an important part of any state's budget revenue. Revenue from royalties is not significant in South Australia. It is expected to grow to about $200 million in this current financial year. It is important, but nowhere near as significant as in some other states.

Interestingly, the states that are doing really well from a budgetary position are those that have large and active mining operations, namely Western Australia and Queensland. We are behind the eight ball a little bit, because a lot of our mineral wealth is very deep, and it is difficult and expensive to get out. This was certainly highlighted by the failure of the Olympic Dam project to get up. However, the mineral wealth does not disappear. As technology, the world financial situation and demand for resources improve, I am sure that at some point that project will go ahead and this state will be able to capitalise on that.

We have a number of mines on Eyre Peninsula that will be affected by this bill. As the member for Waite mentioned, GRA mine gypsum out at Penong and have done for 100 years. They have a resource that will keep them going for some hundreds of years into the future, so they are in business for the long term. It is nice to see a mine site being managed and productive over a long period of time. Iluka mine mineral sands out at Jacinth Ambrosia north-west of Ceduna and have hit upon a particularly wealthy seam of mineral sands. They have discovered an old shoreline and are simply following that along. They, too, look like being able to be active as a mine for many years to come. The other company that is probably going to be affected in my electorate is Cheetham Salt, which will be required to pay their revenue payments on a monthly basis now rather than six monthly. Cheetham Salt are also at Penong and have an incredibly large resource.

These companies have had to readjust their revenue flows and revenue commitments to the government. I cannot say that it would be easy because, as has been suggested already by a number of speakers, the mining industry is not as buoyant as it was a few years ago. There has been a distinct lack of consultation, and that has come through loud and clear. Mining companies now are accepting of this. They accept the inevitability of having to manage their budgets differently, but what is apparent is the lack of consultation that was undertaken by the government in the lead-up to this bill.

I urge the minister to consider how to best use this increase in revenue that the government will find itself with. The point I make is, of course, in regard to DMITRE as the regulator of the Mining Act and their obligations to do that work diligently and well. It has come to my attention, and I am sure the minister's attention as well, that not all explorers undertake and adhere to the Mining Act as they should. I am not suggesting that everybody does the wrong thing intentionally, but from time to time the Mining Act and the obligations under that act, such as the environmental obligations that go with exploration, are overlooked or glossed over. I think DMITRE certainly has a responsibility as a regulator to ensure that the act is enforced as it should be. There is no surer way to get a community or a group of people offside than to see breaches in the regulations.

I think a properly-resourced DMITRE with a proper number of staff to be able to inspect and enforce would be of benefit to the mining industry and communities both, so I would urge the minister that that be a consideration in the way this money is spent. I hope it is not just lost in general revenue, although I suspect that that is probably what will happen. Given that it is a revenue stream that comes directly from the mining industry, I think consideration should be given to properly resourcing DMITRE as the regulator to be able to undertake its responsibilities as it should.

The Hon. L.R. BREUER (Giles) (12:25): I want to speak on this mining bill because I must declare an interest in this. I come from a steel town that is solely dependent on the mine that is operating next to it and I come from a long line of Cornish miners. Mining is really important in regional South Australia, so I am getting a bit tired of all the doom and gloom that I have been hearing this morning about what is happening out there. If it had not been for mining, there would be thousands of people in regional South Australia who would not be working, who might not ever have had a future.

Our communities have had incredible injections of funding both through wages and through companies coming into our areas. I see many Aboriginal people out there getting training and jobs who might never have had any opportunity if it were not for the mining industry. So we in regional South Australia owe a great deal to the mining industry and what is happening out there. It is not all roses, of course, and, yes, it was a huge blow that the Olympic Dam expansion did not go ahead. It has certainly affected my electorate considerably. Also the lower resource prices have affected us in the electorates out there.

So that was a blow, and there are other smaller companies that appear to be going under, but it is still our future. We should not be talking down our state. We should not be talking down the mining industry; we should be as positive as we possibly can about it because it is the future of our state and certainly it is the future of our regions. I have lived there all my life and I know that certainly now in my area we have a much better situation. Prospects are much, much better than they ever were when I was elected 16 years ago. So it depresses me that we are being so negative about some of these issues.

I want to congratulate initially Frank Blevins and his Labor government for having the foresight to implement the programs of exploration that happened so many years ago. That was really the start of what happened here in South Australia. I also want to express appreciation to all those companies that had the guts to arrange the finance to go out there and explore and come up with so many opportunities for us. I also want to thank the public servants who worked out there and gave support and assistance to communities particularly to attract companies into their areas, and also the companies.

I think our current Labor government and particularly this minister who is sitting here in front of me have done an incredible job, and I want to thank them. They have kept the flame alight in South Australia. They have kept the mining industry going. I want to thank the minister and the government for having the guts to keep pushing and supporting the mining industry in the way that they have. This minister is a real go-getter. He makes things happen. He is seen out there in our electorate regularly and he has earned a lot of respect out there, so I want to thank him for that.

Mining is the future of our regions. It is certainly the future of my electorate and so I am very positive about it. While we do have things that are happening that we may not be happy about, it is going ahead. It will go ahead, and we should support it in every way that we can.

The DEPUTY SPEAKER: If the minister speaks, he closes the debate.

Members interjecting:

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Transport and Infrastructure, Minister for Mineral Resources and Energy, Minister for Housing and Urban Development) (12:29): I listen with interest. I will work backwards and leave the best till last. I think the remarks from the four regional members is telling of the impact mining is having on regional communities and the anxiety it is causing some farmers. My message to the farming community, as a metropolitan inner western suburban seat holder, is that I do not necessarily understand the concerns that farmers are going through because I am not a farmer, and I do not pretend to be and I do not pretend to have all the answers, but I am prepared to listen.

In terms of Eyre Peninsula, we established extra funding to make sure that we have an Eyre Peninsula engagement group. DMITRE is very keen to get this right, because the reality is this: despite some of the naysayers, mining is part of our future prosperity. Mining is going to be very, very important, and mining and agriculture have to co-exist. We have to get that formula right. It is going to take leadership; it is going to take leadership from regional members of parliament, and it is going to be tough. It is going to be tough for whoever holds the seat of Giles, for whoever holds the seat of Goyder, and for whoever holds the seat of Flinders. It is going to be very tough to walk that fine line.

Whatever role I am playing in this parliament, I want to be on the side of the members who are making the tough decisions, because it is always difficult to go out and say honest truths or home truths to some people who do not want to hear them. It is very, very difficult, and I do not envy what the member for Goyder is going through in Yorke Peninsula, because it is difficult; it is very difficult. When you are talking about an expansion of mining on the scale that Rex Minerals are talking about, it can make it very difficult for a lot of dryland farmers to understand what that means for them.

Again, on Eyre Peninsula, generations of families working on the land are being told that there could be an open pit, or there might not be an open pit; there might be a generator or desal plant; there might be a port, there might not be a port; there may be a rail line; or there may be a road. It is very disconcerting, and it is causing a lot of anxiety. It is tough enough being a farmer, and it is tough enough being a farming family, without having this kind of uncertainty. We are doing the very best that we can to try and alleviate that.

As best as I can, as an inner-suburban member of parliament, I am trying to understand the fears, concerns and aspirations of those farmers. I will say this to them: like any business, regardless of what is going on in terms of a mine, if you are planning to build a shed, build it; if you are planning to expand your farm, expand it; if you are planning to sow a crop, sow it. Do not let mining or potential mining stop you from engaging in your business.

The best message the government can give farmers is to go about their business as they normally would. I am not saying, 'Ignore reality,' but I am saying, 'Run your small business; don't try to run theirs.' Do not try to run the mining company's business; do not try to anticipate where they are going to go. When it is time, they will come, they will tell you and they will consult with you, and we will deal with it then, but we have to respect not just the mining company and the mineral resources that are there to benefit all of our communities but also the small businesses being run on the land.

Once that mutual respect is in place, we will get better outcomes. I have been quite tough on a lot of contractors (mainly young and inexperienced contractors), who have gone out, throwing notices of entry at the last minute, seeking signatures in back paddocks on the back of a ute from farmers to gain entry. That is unacceptable behaviour; I know that, they know that, the farmers know that and the opposition knows that. It has got to change, and it will change.

In terms of what this all means, I want—if you will allow me, Mr Deputy Speaker—to talk about conservative governments and the way they are treating royalties and perhaps see a snapshot of what may come if the government is not successful in being re-elected in March. Basically, what the member for Waite has done today is try to use language that insinuates we are increasing royalties; we are not.

But I will give you an example of where governments have increased royalties on the basis of the MRRT, which you so quickly criticised in your response to the bill, even though no mining company in this state pays it. The governments of Queensland and Western Australia increased their royalties in response to the MRRT because they would receive a refund. Now the MRRT is to be abolished by the Abbott government.

In the interest of productivity, and in the interest of lowering royalties, what are Colin Barnett (Liberal Party hero) and Campbell 'Can Do' Newman doing about their royalty increases? Well, they are leaving them right where they are. So much for members opposite being the party of low taxation and interests of business. So much for the party that cares so much about mining companies that it does not want to increase royalties.

I will take our record on mines against members opposite any day of the week. Their great claim to fame is that they took South Australia from four mines to four mines—a record in eight years. That takes rare talent not to grow your mining industry even by one. That is a rare achievement, and only members opposite can claim that title, and you are welcome to it. You are welcome to that title.

I fear what will happen to mining if members opposite are elected, and I will tell you why I fear that. Do not believe me; read the remarks of the member for Waite during the BHP indenture. Read what he said about BHP and the indenture. I wonder what the member for Heysen is thinking, sitting up in her office, listening to the member for Waite talking about encouraging the mining industry when she had to drag him kicking and screaming through their party room to accept the indenture. Remember that? Silence. Why is there silence? Because he is guilty—the guilty party.

The man who did not want the indenture passed, the man who did not want to see Olympic Dam expanded, the man who said it was a bad deal for South Australia, to come in here and lecture us about our commitment to mining—how dare you? Your colleagues were embarrassed by your behaviour. You kept the house sitting up all night trying to find a hole in the indenture and you could not do it.

Given what Colin Barnett and Mr Campbell 'Can Do' Newman are doing with mining, it is a bit rich to be lectured by members opposite and a bit rich to be lectured by this shadow mining minister: the man who did not want Olympic Dam to go ahead. He talks about increased royalties. What royalties have been increased? What royalties have gone up? None.

Mr Hamilton-Smith: I didn't say that.

The Hon. A. KOUTSANTONIS: Yes, you did, and I will get the Hansard to prove it. You did say royalties had gone up: 'increase in royalties, increase in royalties', continually, over and over again. He is a master of language—he is very good at language—but the reality does not speak to what he says. The reality is very different.

Again, you have to check the details. Royalties are not going up. This is not a tax grab. This is money we are owed anyway, and what is wrong fundamentally with receiving your royalties monthly? What is wrong with it? It is okay for Western Australia—no harm there, with that socialist Colin Barnett collecting royalties monthly, trying to stop the mining industry. What about Campbell Newman? Is he a socialist as well? Is he trying to destroy mining? Why does he collect royalties monthly?

So, let me get this straight: when the Liberals do it, it is a good idea, well-planned, well-thought, well-constructed policy and it is only appropriate that they pay royalties monthly. When Liberals increase royalties, it is only appropriate and the right thing to do. The MRRT, of course, is an unfair tax, so let's lift it to try to get the rebates, to try to make the MRRT fail—that is all okay.

When Labor attempts—one, we did not increase royalties, and two, the MRRT does not apply to our major resources here in this state (copper and uranium) and we do not have anyone paying it in this state, and we do not increase royalties—Labor bad. So, we go back to the old adage: if I float I am a witch and need to be executed, and if I drown I am innocent.

Quite frankly, the idea of someone like the member for Waite, who did everything he could to try to use the indenture in some sort of weird leadership grab, to try to delay and try to prove that it was bad for South Australia—to come here and lecture me about my commitment to mining. I know Todd Hacking very well and I do a lot for his industry. Whenever he asks me to go out and visit an extractor's mine, I go. Whenever he has a concern, I listen.

I absolutely understand their fears and concerns about this but, ultimately, the issues that are coming to my door from the mining industry are not about monthly royalties. They are about native title, Aboriginal heritage, environment issues and local community issues. You want to talk about mining? Let's get serious and talk about mining. Let's talk about the challenges mining is going to face in the 21st century. Do not come in here and try to make a cheap political point because, quite frankly Martin, you are better than that.

Ultimately, to grow this industry, it needs to be bipartisan. The one thing you do not want to do is turn this into a political fight, because that is what you have in New South Wales and Queensland and their mining industry is on its knees. Do not try to politicise mining; do not try to create this us and them. What's next? CSG, no fracking. What's next? Shut the farm gate. What's next?

Are we seriously going to try to politicise the mining industry? That is exactly what the Greens want; it is exactly what they want. The only way for South Australia to grow its prosperity is for this parliament to be united to try to grow our mining industry for our future prosperity. Quite frankly, it does not suit you, Martin, to try to attack this industry or me on this issue.

The DEPUTY SPEAKER: Point of order, the member for Mount Gambier.

Mr PEGLER: The minister is referring to the member for Waite as 'Martin' rather than 'the member for Waite'.

The DEPUTY SPEAKER: Yes, I am sure the minister would concur and obviously needs to refer to—

The Hon. A. KOUTSANTONIS: I apologise to the people of Waite for calling their representative by his Christian name. The member for Waite, has attempted, quite frankly—and he did it quite well—to turn this into some sort of disaster for the mining industry, but the reality is that it is not and we all know it is not.

You can tell it is not by the contributions we received from other members of parliament who are concerned about the real issues going on in mining—community engagement, land access, water issues, the environment. It is not about monthly payment of royalties. I think that is the stark difference between the thinkers and the shouters. The member for Waite did in fact try to weave some serious questions into his political speech. He asked: which is the right number? Is it 30—did you say 30 or 31?

Mr HAMILTON-SMITH: 31.

The Hon. A. KOUTSANTONIS: Is it 31 or 21 companies that will be paying this? Of course, petroleum producers in this state have been paying monthly royalties for a long time. That has not seen Santos move. That has not seen Beach Energy close its doors. In fact the chief executive of Senex, Ian Davies, was awarded the Queensland Businessman of the Year by the Brisbane mayor last night and he says publicly that he chooses to invest his money in South Australia rather than Queensland because we are a better and safer jurisdiction to invest in.

Is that really the sign of an industry that is on its knees? Is that really the sign of an industry that is being badly administered? Is that the sign of an industry that has bad leadership and bad regulations? Quite frankly, to criticise the department about their consultation is unfair. Criticise me, but not them. I have to say that I think the people at the head of our department right down to the people doing the community engagement are well respected by community, by industry and by the government and they should be well considered by the opposition. I think most members do hold them in very high regard. I think the consultation has been good.

The member for Waite said we did not consult before we announced it. It is a budget measure. The member for Waite was part of a government for four years. In every single one of those budget decisions that he made when he was a member of that government, not once did he go out to consultation first, but he wants me to do that. So there is one set of rules for the member for Waite and one set of rules for the rest of us.

What he is really saying is that if he is elected in March, he will go out before every budget and consult with industry about every budget measure. That is what he basically said, so I will be holding him to that, if they are successful, because that is what he said here today. He has criticised us for not doing exactly that and I think that is a bit rich. He knows it is a bit rich, but of course, do not let that get in the way of your story because that is a fact.

What will this bill do? It aligns the mineral producers with the state's petroleum producers with regard to the timing of royalty payments. That has to be outright socialism, doesn't it?. How dare we align both our industries' payments at the same time. What is wrong with that? As I said earlier, petroleum producers have been paying it monthly since the 1990s. It generates a one-off cash benefit to the state of $31.6 million. That is not extra royalties. That is not new royalties that we would not have received otherwise. It is a timing issue, but the member for Waite thinks it is a cash grab. He does not think we can bring things forward in a budget forward estimates. He thinks you can only calculate for one financial year.

It will only apply and have an impact on large and more sophisticated producers who pay in excess of $100,000 in royalties per annum. It will align the payment focus with the other major mining jurisdictions. Why would we want to do that? Well, if you are an iron ore company who has set up in Western Australia, and we want you to invest in Eyre Peninsula or the Braemar, gee, does it make business sense to have everything aligned with the way things are done in Western Australia in terms of the payment of royalties, regulations, approvals and business taxes and charges so they do not have to design a brand-new, entirely different computer system to run all this? Gee, does that make business sense? Or should we increase red tape for the member for Waite and have them change their systems when they come to South Australia?

Here we are, Australia's first iron ore jurisdiction, overtaken by Western Australia, with mass deposits on Eyre Peninsula and the Braemar of magnetite and haematite. We want to grow those industries, and we are trying to do as much as we can to make our jurisdiction as attractive as possible for those companies already investing in iron ore to come to South Australia. Apparently, that is bad thing; apparently, that is me wrecking the mining industry. It will not increase the administrative burden for producers, despite what members have said, and I think ultimately it is a good bill. Quite frankly, I am a bit surprised by the controversy it has generated. I will explain this. I will read out the explanation I have received by the department about how we generate the $31 million cash benefit.

I am advised that the one-off cash benefit is generated by a change in the timing of payments. Currently, payments are received in January and July. What will now happen is that the payment received in July will be spread into the 2013-14 year and progressively paid monthly as opposed to being captured in the 2014-15 year; so, that is not an increase in royalties. In terms of you saying that I have not consulted with OZ Minerals, I have. I have spoken to Terry Burgess at length about it and I asked him if he had any real concerns. The first time I mentioned it to him he said there were no problems at all. You quoted a lot of people anonymously in your contribution—

Mr Hamilton-Smith: One.

The Hon. A. KOUTSANTONIS: One, was it? Yes, you quoted someone anonymously. Well, I am not the type of person who does retribution.

Mr Hamilton-Smith interjecting:

The Hon. A. KOUTSANTONIS: Fine.

Mr Hamilton-Smith: You'd better get your facts right.

The Hon. A. KOUTSANTONIS: Sure; I am getting my facts straight.

The DEPUTY SPEAKER: Order!

The Hon. A. KOUTSANTONIS: Why the member for Waite could not have come to see me and say, 'Look, I've gone out to consult'—other shadow ministers do this; this is generally how government works—'I've been out to consult and these are some of the issues that have been raised with me. There is this one company in particular that's doing it a bit tough and they're a bit unsure how this is going to impact on them. Can you speak to them?' Not the member for Waite. The member for Waite waits in his sniper's perch, just waiting, waiting for the parliament to resume.

Mr Hamilton-Smith: You're an easy target.

The Hon. A. KOUTSANTONIS: He's got this.

Mr Hamilton-Smith: You're an easy target, Tom.

The Hon. A. KOUTSANTONIS: Talking about easy targets, I heard you on FIVEaa on Monday. It was an impressive performance. I hope your colleagues were listening.

The Hon. P. Caica: He was very good on smart meters.

The Hon. A. KOUTSANTONIS: Oh, yes; he was very good on smart meters—devastating stuff, devastating. He waited until the parliament was sitting to spring this on me. So how am I to respond to that? How does a minister respond to an email the member for Waite has produced talking about what this one mining company, I assume, is worried about? How am I meant to respond to that? Well, I cannot. I cannot because I do not know whether it is an extractive company or whether is it a mining company, whether they are producing it or whether they are about to produce, whether they are based here or whether they are based interstate, what their real issues are or what their turnover is, and whether can we help them?

The other issue is about side deals. The government does not do side deals. I do not do side deals. Indentures are public. Indentures are not secret documents. Where are the side deals coming from? I know you are very concerned about royalty relief. Why would I not grant royalty relief to companies that are doing it tough just before they expand? Why not? We want them to grow, we want them to stay, we want them to invest. Ultimately, we want the jobs here in South Australia, so quite frankly I would much rather a collaborative working relationship with you—

Mr Hamilton-Smith interjecting:

The DEPUTY SPEAKER: Order!

The Hon. A. KOUTSANTONIS: I would much rather a collaborative working relationship with the opposition on this industry rather than its childish attempts to politicise it for cheap political points. I think it does not do you any justice at all. I commend the bill to the house.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

Mr HAMILTON-SMITH: The act will have come into operation by 1 July 2013. Could the minister explain to the committee why this bill was not brought sooner to the parliament so that it could have been enacted prior to 1 July and, given that it has been brought to the house after 1 July, why we could not have made the commencement date 1 July 2014 or, at the very least, 1 January 2014 or at some point after its enactment by the house.

The Hon. A. KOUTSANTONIS: I am advised there is no retrospective adjustment to the bill. Monthly payments will only start once the legislation has passed. If the amendment is passed in November, then by 31 December the first monthly payment will be made in accordance with the schedule that will be forwarded. The royalty payment period for July to November will be made as per normal, as part of the six-month mining return processes currently in place. Why did I not do it earlier? Because I was consulting. I am guilty of speaking to the industry about this bill and I am guilty of not making it retrospective.

Clause passed.

Clauses 2 to 4 passed.

Clause 5.

Mr HAMILTON-SMITH: Under part 17DA(2) and (3), could the minister just explain how many companies now will be caught by this legislation and in particular what happens when a company may have had over $100,000 of turnover last year but expects to have less than $100,000 worth of turnover this year? In other words, they triggered the threshold last year but they have fallen short of it this year. Can they ask for an exemption? How many companies are caught by it?

The Hon. A. KOUTSANTONIS: I am advised there are 21 of these companies affected and, yes, they can seek exemptions if they think their royalties will sink below $100,000. I am also guilty of being reasonable.

Mr GRIFFITHS: This relates to my second reading contribution about the Grants Commission transfer of funds as a result of additional revenues. Can you just outline the situation?

The Hon. A. KOUTSANTONIS: Because they are not extra royalties, they are not new royalties, we have not increased royalties, there is no effect to HFE—none. That is the advice I have received. For example Western Australia, in increasing its royalties, will have an HFE effect one way or the other, but ultimately this is not an increase in royalty. We are not increasing the rate, so it should have no impact on the Grants Commission.

Mr GRIFFITHS: I do respect that there is no increase in the royalty rate, but it is the cash-flow management situation that results from additional revenue for that year and then it balances out in future years, as it would always be—

The Hon. A. Koutsantonis interjecting:

Mr HAMILTON-SMITH: Yes, I understand that. So, there is no change at all because of that because the rate itself is not impacted? Even though additional revenue is more, for a short term only there is no impact at all?

The Hon. A. KOUTSANTONIS: That is the advice I have received.

Clause passed.

Schedule 1.

Mr HAMILTON-SMITH: In regard to schedule 1, Transitional provisions, can the minister explain (and he may have touched on it a moment ago) how this is going to work? We have a bill here that will be enacted at some point between now and Christmas, and then it will be proclaimed. Could you just go over for the committee how it will affect companies caught up in this, the 21 companies on the ground? How will they now have to pay, and how will it be transitioned into being?

The Hon. A. KOUTSANTONIS: The first point is that they do not pay in advance: they pay in arrears. The second point is that if the bill passes in November they will be paying in December; if the bill passes in December, they will be paying in January. If a company makes an application to be exempt because it believes that it will fall below the threshold, it will have to show that to me and we will grant the exemption. They are the quite reasonable and sensible transitional provisions that are in place in the bill to make sure we make this as easy as possible to get in line with the other two major mining jurisdictions in the country.

Schedule passed.

Title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Transport and Infrastructure, Minister for Mineral Resources and Energy, Minister for Housing and Urban Development) (12:56): I move:

That this bill be now read a third time.

Mr HAMILTON-SMITH (Waite) (12:56): Just to address the bill as it has come out of committee, and to clarify a few points in regard to the measure, I think the minister will find that the opposition has not argued at any time that this is an increase in the royalty rate or an increase in royalties. I think he needs to read the Hansard. What we have established is that it is going to be a cash-flow problem for a number of companies, and I think that is an important point.

Can I also clarify some aspects of the debate, as it has come out of committee. For the minister's attention (and I hope he is listening), he made a couple of statements that were factually incorrect; one of them was in regard to the BHP indenture. I just inform the minister that I voted for that measure both in the party room and in the parliament. He needs to check the record. I did argue that the government had drafted a poor indenture and that it could have been improved, and I did that in the party room and in the parliament. So, he is quite factually wrong on a number of things he has said, but of course we are used to that.

I think the ultimate evidence of the failure of the government's negotiation regarding that indenture is that the whole thing fell on its face and did not proceed, which was partly as a result of the government's actions. As the bill comes out of committee, the opposition is determined not to oppose it, so I signal that we will be supporting it in the other place. We accept that it is a budget measure, in a sense, although it was not announced at the Budget but in the Mid-Year Budget Review, which is a curious way to go about things. Be that as it may, we will not be opposing the measure, so we commend it to the other place.

Bill read a third time and passed.


[Sitting suspended from 12:58 to 14:00]


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