Fallacies in the reasons given for the extra tax on mining in Australia
June 4th, 2012 by Warwick HughesIt is said by Treasury and our GreenLabor Govt in their justification for extra taxes on the mining sector that minerals are non-renewable – and to be sure once you dig out a ton of mineral – nothing grows in its place.
But this GreenLabor view is very simplistic and misleading way to see mineral resources – like a buried treasure chest of coins with the mining company in possession of some secret code which leads them to the chest where they proceed to wreak great profits by selling the property of the people.
In reality metal orebodies tend to be zones with higher grade sections surrounded by haloes of successively lower grade ore.
If the lower grade orebodies are not adjacent they might be further distant along a known mineral belt. So the history of mining shows that in practical terms we are never going to mine minerals out. While a defined orebody will be depleted by mining – history tells us that mineral exploration on average will more than replace this from somewhere – albeit at a slightly lower grade.
The simplistic and harmful Govt view also completely overlooks the facts of huge advances in mining technologies – using copper as an example history tells us that globally we have more copper reserves than we did in 1900. – And of course mined ore grades have declined over a century but technology has enabled us to produce copper at a lower real price.
All rather contrary to the Govt & Club of Rome dogmas that resources will run out at some specified year.
This publication has some excellent graphics – of which I have picked three linked below.
Schodde RC, “The key drivers behind resource growth: an analysis of the copper industry over the last 100 years”, Presentation to the Mineral Economics & Management Society (MEMS) session at the 2010 SME Annual Conference, Phoenix, Arizona March 2010.
p10 of 26 – Copper endowment has grown 25 fold in 100 years
p 14 of 26 – Copper grade mined has fallen for 100 years
p 21 of 26 – Over the last 100 years, the real price and cost of copper has halved
So to sum up – I am saying that there is no rational case for higher taxes on mining compared to any other industry.
Extra taxes on mining will only tend to drive investment offshore.
There is no free lunch – the Govt might grab extra taxes to redistribute to its constituencies – but unless all countries enact identical extra taxes – overall Australia will end up weaker with a proportionally smaller mining industry.
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