Association of Mining and Exploration Companies chief executive Simon Bennison said ongoing media speculation about the axing of the rebate was alarming and of intense concern to its hundreds of members, who are already facing a A6.21c per litre reduction in the rebate from July 1 as part of the carbon tax package.
“The likelihood of a further reduction in the diesel fuel credit will be a severe blow to many businesses, with diesel fuel representing up to 25% of total costs for base and precious metals,” he said.
He added it could threaten the viability of small companies.
“Mining and exploration companies working in remote areas have little option but to use diesel, and energy generation comes at considerable and impossible costs to some companies,” Bennison said.
“The diesel fuel credit system was put in place because mining, exploration, agriculture, forestry and professional fishing entities do not use public roads for which the fuel tax was intended to pay.
“It is an essential component of these businesses, particularly noting the volume of diesel fuel used off public roads and for processing purposes.”
Bennison said if the rebate was removed, thousands of jobs would be at risk.
“The Australian small and mid-sized mines generally operate on tighter margins and are more sensitive to input cost changes than the large scale mines operated by global majors.
“This is an important factor which should not be overlooked or ignored by the government.
“The government must therefore take care with any new taxes or amendments to existing tax arrangements to ensure there is no collateral damage and unintended consequences for these emerging mining and exploration companies and their employees, contractors and suppliers.”
Bennison said there should be consultation before any change is considered.
“The viability of Australian base and precious metals mines are particularly sensitive to changes in diesel costs and will be hit the hardest by any change,” he said.
“The pressures on these sectors is already being seen with recent mine closures.”
Increasing costs of production would only drive more investment dollars offshore, according to Bennison
“Driving investment offshore will inevitably lead to a smaller mining industry in Australia and jeopardise state government royalties and taxation revenue for local, state and federal governments.”
OZ Minerals CEO Terry Burgess recently said the removal of the rebate was estimated to hit the company’s bottom line by around $A16-20 million per annum.
“That would be, to me, another tax on the company,” he told reporters last week.
“It really is something that’s important to primary industry.”
He said the rebate should compensate for the installation of infrastructure, such as roads, rail and airstrips.
Meanwhile, Fortescue Metals Group chief financial officer Stephen Pearce expects the removal of the rebate to cost the company $140-150 million based on the its current fuel usage of 350 million litres.
