Electricity prices could rise between 5 and 20 per cent as a result of the Federal Government’s latest resources tax, South Australia’s mining industry body claims.
SA Chamber of Mines and Energy CEO Jason Kuchel said this would be on top of the increases already expected in the wake of rising demand, replacement of infrastructure and the growing focus on green energy.
While mining is not a burning issue for most voters, Mr Kuchel said the Mineral Resources Rent Tax (MRRT) – and the potential energy price rises resulting from the increased tax on coal and gas used to fire power stations – would hit the hip pocket of all SA households.
New market research by Nielsen shows power bills have catapulted ahead of the state of the economy as the main worry for most Australian households.
Mr Kuchel said most miners believed electricity price rises were an inevitable result of implementation of the resources tax.
“Most predictions haven’t even begun to consider the cost of the new tax that will be passed on to consumers,” he said.
Pat Walsh, chairperson of the Essential Services Commission of SA, said he could not make an informed comment on the impact of the resources tax on electricity prices.
However, Federal Minister for Resources Martin Ferguson said the price hike claim was unfounded.
“The price of thermal coal is set on global markets and the MRRT will not have an impact on world thermal coal prices,” he said.
“Commodity prices are only one factor influencing electricity costs which are made up of a range of things, including network charges for transmission and distribution, and retail services.”
Mr Kuchel said while there were a number of mining issues of concern to SA ahead of the federal election, he believed the MRRT would have the widest and most immediate effect on average households.
Two other key concerns for mining companies are investment in infrastructure and the encouragement of exploration through incentives.
“Both major parties are yet to come to terms with how infrastructure can be provided in a way that stimulates economic development,” said Hans Umlauff, chair of the Resources and Energy Sector Infrastructure Council.
He said power, water, roads, rail and ports were fundamental to developing SA’s mining industry.
“You can have a wonderful deposit but unless you can get services to it and get transport for your product out, you cannot develop it.”
An interconnected energy network would allow SA’s abundant renewable resources to be fully explored. It would provide energy at times when renewable is not available or allow the pumping of surplus energy back into the grid.
“Economically, it is almost impossible to make renewable energy work if you have to provide the cost of the renewable plus the back-up generation needed,” Mr Umlauff said.
BHP Billiton’s Olympic Dam project is the biggest mining project in South Australia. While the Liberal and Labor parties support its extension and the continued mining of copper, gold, silver and uranium at the site, the Greens are opposed to uranium mining. The party said its stance does not mean the closure of the project, but rather the abandonment of the mining of uranium.
“When it's pulled out of the ground, uranium is locked up with other minerals, but can be left behind through domestic processing, with only the copper, gold and silver extracted and exported,” Greens Senator Sarah Hanson-Young said.
However, many miners say it is impossible to separate copper, gold, silver and uranium during the mining process, and the Greens’ position is a way to ensure extension of the Olympic Dam mine does not go ahead.
The waters are muddied further by the deals done between the Labor and Greens parties. Many predict this will result in a Labor senator being replaced by a Greens Senator.
“The biggest concern is that the Greens are most likely to have the balance of power in the Senate,” Mr Kuchel said. “This potentially puts Olympic Dam at risk.”
SA mining companies say exploration incentives are badly needed. This was partially addressed by the 30 per cent exploration rebate announced in the first mining tax, but it was dropped in the second version.
Many junior to mid-tier exploration and mining companies do not feel bound by the deal between miners and the Government. The Association of Mining and Exploration Companies, which represents these smaller firms, plans to launch an advertising campaign opposing the MRRT.
Graham Ascough, managing director of Mithril Resources, said there were between 50 and 100 exploration companies in SA crying out for greater incentives.
He supports a share flow-through scheme which would give investors an immediate advantage by allowing them to write off a company’s exploration costs on their personal tax.
“Small investments in incentive go a long way and send the right message to the global exploration community,” he said.
“They need to know we are a mining-friendly state, that we want to be globally competitive and we welcome investors. Exploration booms lead to mining booms.”