Royalty rise puts Telfer at risk: Newcrest chief Sandeep Biswas

Newcrest chief Sandeep Biswas says a plan to increase gold royalties in WA has put the company’s Telfer mine at risk.

Sandeep Biswas in Perth yesterday. Picture: Colin Murty.

Newcrest Mining chief executive Sandeep Biswas says a controversial plan to increase gold royalties in Western Australia has put the company’s Telfer mine at “serious risk” as he rubbished a claim by Premier Mark McGowan that the move would not cost a single job.

As the war of words intensifies over the royalty push, Mr Biswas told The Australian yesterday that the Telfer mine, which employs more than 1500 people, was the most marginal the company operated across four countries.

He said the government’s “ill-considered grab” threatened Telfer’s survival because the east Pilbara mine, which was already dealing with increasing costs and declining grades, would not be able to sustainably absorb the increase of $20 an ounce.

Mr Biswas, in Perth to lobby against the plan, joined other goldmining leaders at a roundtable to outline their concerns and to co-ordinate their campaign against the move, which they claim will cost thousands of jobs.

“The fact that the Premier can come out and say there’ll be no job losses is utter nonsense,” Mr Biswas said. “It’s just not true.”

Labor’s plan would raise almost $400 million for the government over four years by lifting the royalty rate from 2.5 per cent an ounce to 3.75 per cent from Jan­uary 1.

The fate of the budget measure will be decided in the upper house, where Labor relies on the support of either the Liberal Party or crossbenchers.

Treasurer Ben Wyatt hit back at the miners yesterday, questioning why none of them had reported their concerns about a material impact on their operations to the Australian Securities Exchange.

Mr Wyatt said the gold sector was spending millions of dollars on PR consultants and lobbyists in a bid to avoid paying “a fair share” of royalties to the state and contributing to budget repair.

He said the $20-an-ounce rise was “tiny” given the current gold price of about $1650 an ounce.

“I remind them once again that the gold resource they mine is owned by the people of Western Australia,” Mr Wyatt said.

“I say to the gold sector: stop wasting your money spending millions of dollars on lobbyists and help Western Australia get back into a more sustainable fiscal position.

“Your campaign is having no impact (and) the government won’t be swayed.”

But Mr Biswas said the government did not understand the gold sector. “The Labor Party does not understand the dynamics of the industry, the range of mines that we have from profitable to marginal, the impact this has on cut-off grades,” Mr Biswas said.

“The last tonne is always at the margin in order to maximise the resource base.

“Every mine will have a decision to make about what to do about that marginal tonne.

“So the overall ounces come down, which means there is less royalties from ounces, less employment and in some cases you might get mine closures or suspensions.”

Mr Biswas said he believed the royalty increase would wipe out Telfer’s earnings, making ­future expansions uneconomic.

“At Telfer we are facing an investment decision of around $90m for the next cutback,” he said. “So in that situation we are fighting for every dollar, we are investing to get economies of scale and unlock more resources. This is just another burden which could tip the investment decision the other way. There is no doubt it could cost jobs.”

Mr Biswas attacked the government over its failure to consult with the industry before announcing the move in last month’s state budget. He also remained hopeful that the Liberal Party would block the move in the upper house.

Liberal leader Mike Nahan said this week that the opposition may wave through the royalty rise unless the industry urgently ramped up its campaign to win over the “hearts and minds” of the public.

But Mr Biswas agreed that the industry should campaign harder. “I do agree we can do more about making the public more aware of the issue and our contribution beyond royalties,” he said.