Miners Warn of Shift Towards Foreign Processing

4 Aug 11

The Federal Government has been warned that the value-adding processing of minerals could be pushed overseas in response to increased taxation of the mining industry.

The warning from magnetite producer Grange Resources at the Diggers & Dealers conference in Kalgoorlie came as miners updated investors on the bottom-line hits they will take from the introduction of the proposed mining tax, and the reduction in the diesel fuel rebate.

Grange managing director Russell Clark said the diesel fuel rebate cut would cost the group's Savage River magnetite operation in Tasmania about $1 million a year, a relatively small hit as it has access to grid power. The carbon tax, he said, was estimated to cost $5 million to $10 million a year.

''We are the only producer of magnetite pellets and it is very easy to push that part of the business offshore, if that's what the government wants to do,'' Mr Clark warned.

Magnetite is a low-grade type of iron ore that is upgraded in an energy-intensive process to become a premium product for use in blast furnaces.

Mr Clark said he sensed that the greater taxation burden on the industry was ideologically driven.

''I just get the sense that it is about the mining industry's ability to pay and spread the wealth,'' he said.

As it is, Grange is planning for the downstream processing of magnetite from its proposed $2.5 billion Southdown project in Western Australia to occur in Malaysia.

Article by Barry Fitzgerald of BusinessDay