The West Australian government has finalised an agreement with BHP Billiton and Rio Tinto to increase the royalty rate for iron ore “fines”.
The WA government cut a deal with the mining giants in June last year to bring royalties for fines, a grain-like variety of iron ore, into line with those for the lump form of the steel making commodity.
Lump-form iron ore used to be a higher-valued product but the price gap has closed in recent years as the steel sector soaked up almost all available supply.
Fines have become the main iron making feedstock, WA Premier Colin Barnett said in a statement.
The royalty rate for fines will rise from 5.625 per cent of sales revenue currently to 6.5 per cent from July 1 next year.
The rate will increase further to 7.5 per cent from July 1, 2013.
The increase ends a decades-old concession BHP Billiton and Rio Tinto had received for pioneering the Pilbara mining hub.
Mr Barnett said the royalty increase was part of changes to the WA government’s State Agreement Acts with mining companies, including legislation providing greater flexibility to accommodate third party infrastructure in areas covered by the agreements.
BHP Billiton Iron Ore president Ian Ashby said the changes to the state agreements would give the miner greater certainty in planning and executing growth projects, particularly the proposed Outer Harbour development near Port Hedland.
Mr Barnett said the increase would lift the state’s royalty earnings by $1.9 billion over the next three years.