Next step on mining

Written By: - Date published: 6:45 am, May 11th, 2010 - 27 comments
Categories: capitalism, Conservation, Economy, Mining, tax - Tags:

It looks like National is about to cave in to public opinion and abandon its ridiculous plans to mine on New Zealand’s most precious land. Good. The economics never made any sense, let alone the environmental case. I note they’re still keen to mine on conservation land, just not land projected by Schedule 4 – it’s more attractive to mining companies because they don’t have to pay leases like on private land.

Abandoning mining on Schedule 4 land does leave the Nats economic ‘plan’ for this country looking even more like a rushed assignment handed in by a first year, though. Bit sad, eh? When it’s either an awful idea or no idea.

Well, here’s something the Nats can do – sort out the minerals royalty and leases on mining concessions.

Last year, the mining industry dug up $6.5 billion worth of minerals that belong by law to you and me and all New Zealand. They made about $1.4 billion in after-tax profits.

For giving them the right to come and take our minerals and sell them for $1.4 billion of profits, we got $6.2 million.

Not good enough.

We’re meant to be getting a 1% cut of the mineral sales, which is already too low. In reality, we’re getting 0.1%. They’re ripping us off for tens of millions of dollars a year. Apparently, they do it by selling the minerals they dig up to shell companies or their parent companies at below-market prices, which artificially depresses their sales for royalty purposes.

Another thing. While any sane landowner would charge big lease for a mining company digging up minerals on their land, we get nothing when mining companies mine the conservation estate.

So, what needs to happen here?

The royalties rort needs to be cleaned up. Rather than charge 1% of sales, we should charge a set amount – $100 per ounce of gold, for example, which is about 6% of current prices – and reset it to match prices as necessary.

We need to start charging leases on mining on public land, when that land is not of environmental value. It’s outrageous that the wealth of public land is allowed to be privatised without even a lease being paid. Is it any wonder that National is so keen to gets its mining allies in on this bonanza? It’s a typical capitalise con – privatise the wealth, socialise the costs.

Private landowners charge leases, so should the government.

If National can stop the mining companies ripping off this country, that will really be something.

I won’t hold my breath.

27 comments on “Next step on mining”

  1. tc 1

    LOL…..the nat’s make a big company pay more in taxes ! good one.

  2. Draco T Bastard 2

    I’m not going to hold my breath either – National is, after all, in favour of giving our resources away to their rich mates. Hopefully, the next government will do something about it.

  3. Bored 3

    Privatise public land for a toll only Cycleway (for the high tax bracket fat cat), built on the cheap by recidivist chain gangs from Crushers private money making prison schemes . All will be well, our economy will flourish (he said in total hope)………………………

    Capcha: visions hehehehehe

  4. Bored 4

    Serious time Marty, I am not sure that it is a safe strategy allowing mining for a fair lease / tax or whatever price. It holds the miners out while prices are wrong if you go this way with anything that should be totally conserved or hands of you put it at risk.

    What happens when you do this is that the rapacious miner / water miner / grass miner etc compromise and argue it is “safe” to take only 10%, then later they take another 10% as the precedent has already been set. In the end they take the lot. No compromise is the only safe approach to these b*******s.

  5. Abandoning mining on Schedule 4 land does leave the Nats economic ‘plan’ for this country looking even more like a rushed assignment handed in by a first year, though

    But we still have the John Key memorial bike track don’t we?

  6. Brett 6

    “For giving them the right to come and take our minerals and sell them for $1.4 billion of profits, we got $6.2 million.”

    Was this agreement done under Labour?

  7. Joshua 7

    I assume the $6.2 million is the royalty-only figure right? For a accurate economic analysis of the mining industry then you need to add in corporate taxes, wages, PAYE, GST, and flow-on effects to the local and national economy.

    Using your fiqure of a $1.4 billion after-tax profit, at 33% this equates to approximately $700 million in corporate taxes paid. The fact that they only make $1.4 billion in profit from $6.5 million worth of minerals means that there is still $4.1 billion dollars that is spent by the industry somehow – I would guess that most of this money is spent in New Zealand. Or are they somehow taking that offshore as well?

    You are right that we should investigate the royalty regime – and 1% is too low, perhaps the 5% commonly used for Petroleum reserves should be used as well.

    • Bright Red 7.1

      But Joshua, any business pays those other taxes.

      It’s our gold. we only get a 0.1% cut when someone else comes along, digs it up, and sells it? You’re right, it needs to be more. But if they’re just going to circumvent the royalty regime, some other charge needs to be made

      • Joshua 7.1.1

        They do – but no one would be paying taxes on those profits if the mining did not occur – i.e, take away the mining, take away the revenue, take away the jobs, GST, and corporate taxes. A mining industry cannot pay taxes if there is no mining!

        The point I was trying to make is that Marty is being intellectually dishonest in his analysis in ignoring the other incomes to the government from the industry.

        • Lanthanide

          I have to agree with Joshua, Marty really just has been incredibly anti-government with all of his recent posts, seemingly to reflexively disagree with anything the government does even if when looked at objectively it isn’t a bad idea. He also uses emotive language to cloud the issue.

          Sure it’s 0.1% in royalties, but Marty just blithely stated the total value was $6.5b and the profits only $1.4b, so clearly the rest of the money is going *somewhere*, and a lot of that would be going to the government in tax. Lets say the royalty rate was 1% – $62m instead of $6.2m on $6.5 is still not much at all. Lets say the royalty rate was 6% – $372m out of $6.5b, that’s a nice whack, but still not earth-shattering figures. Also consider that for every dollar of royalty you’re charging, you’re going to get less back from corporate tax etc. Not to mention that the mining companies might just decide that the royalty rate is too high and scale back, or halt production all together. We don’t want to kill the goose that lays the golden egg.

          • Bright Red

            Lan. The post isn’t proposing shutting down the mining industry.

            The problem is that they are making $1.4 billion – over 20% profits – with our gold.

            Can’t you see that?

        • prism

          Joshua – Taking a rare thing and destroying the area around to get it is a poor way of getting business and tax and employment. The sort of thing that people with no interest in life do. They are not interested in life on this earth – their interest is in getting things with money, which is a set of trading tokens for obtain things.

          Getting money is part of life but how one gets it makes all the difference to that life. Destroying or permanently changing bits of the world must be done extremely carefully, not as a growth industry for short-term gain.

  8. prism 8

    There must have been some good dinners and bottles of wine costing only $30? each paid for by mining and extraction interests in meetings with politicians. The politician enters through the portals of some prestigious restaurant or hotel dressed well, looking as if on important business, to talk about nationally important business. That would be really boosting to that politician, and perhaps the mining side are acquaintances from the same income strata and mores, or from schooldays, a natural alliance. Reason, fair receipts from mining – the pressure to do something in the true national interest will have to be intense to get action in this slippery area.

    Has National given up the idea of mining in the conservation estate? Or has John Key something up his sleeve in pre-empting discussions with Tuhoe about the Urewera. Government seem to be willing to break all reasonable standards of behaviour with these people, as in the police ‘terrorist’ raid. Perhaps they will try and do a deal, have a certain control over the area, but let us have mining rights over this area here, with your requirements met and providing employment to the iwi.

  9. Fisiani 9

    So this post confirms that National will keep its promise to do a stocktake and then only allow surgical mining where it can fit with the environment in accordance with the views of the public. Win . Win situation yet again for National.

    • Bright Red 9.1

      biggest march in generations, cornerstone economic policy about to be dropped.

      Yeah, win win alright Fizzy, but not for your side.

      talk about your painfully poor spin.

      • mickysavage 9.1.1


        You must have typed “surgical mining” about a thousand times on this site.

        Can you explain how there can be surgical mining on Great Barrier where the ore is low grade?

      • Lanthanide 9.1.2

        Technically Fisiani is correct, however in the ring of popular opinion, National has taken a beaten.

  10. clandestino 10

    I agree with Joshua above. There does seem to me disingenuous to say the industry ‘takes’ $6.5b, ‘makes’ $1.4b, rightly point out the royalty is way too low at 1% or $6.2m, but not explain to people what happens to the difference in profit and revenue. I find this is an all too common misunderstanding (notably Lucy Lawless doesn’t seem to get it) and some really think all New Zealand gets out of it is the $6.2m figure. It is too low, I think most can agree on that, but doing it this way is to descend to the level of the right wing tabloid press who don’t even pretend to paint a full picture.

  11. tc 11

    Hey Fisiani that’s great stand up material….”National will keep its promise to do a stocktake and then only allow surgical mining where it can fit with the environment in accordance with the views of the public…”

    Please stop ….the rapier like subtelty of that gag is redefining the boundaries of humour for me ….it’s just sooo funny.

    Let’s surgically mine your back yard as you’re so taken with it…….sycophants are us eh.

  12. The subPrime Minister said:
    When asked whether if the government was considering any increases to current royalties, Mr Key said that no increases would be proposed in the budget

    and he muttered:
    ..that current royalties and jobs created by mining activity were sufficient evidence that mining delivered economic benefits to New Zealand.

    ..Yeah Right.
    Wonder how much Brownlee’s management buddies are earning? – and how much Straterra is getting to peddle PR for Brownlee and co.

    If National can stop the mining companies ripping off this country, that will really be something.

    I won’t hold my breath.

  13. This puts Solid Energy CEO Don Elder on $679,000 for 2005, I believe he is on roughly double that now

  14. No need for more royalties, money is put aside for something else…

    something from the 09 miners strike says that
    Don Elder, CEO of Solid Energy, earned a reportedly obscene $1.27 in 2008

  15. Brett 15

    The Hate rose to its climax. The voice of Marty G had become an actual sheep’s bleat, and for an instant the face changed into that of a sheep. Then the sheep-face melted into the figure of a National supporter who seemed to be advancing, huge and terrible, and seeming to spring out of the surface of the screen, so that some of the people sitting by their computers actually flinched backwards in their seats. But in the same moment, drawing a deep sigh of relief from everybody, the hostile figure melted into the face of Helen Clarke, black-haired, black-moustachio’d, full of power and mysterious calm, and so vast that it almost filled up the screen. Nobody heard what Helen Clarke was saying. It was merely a few words of encouragement, the sort of words that are uttered in the din of battle, not distinguishable individually but restoring confidence in the party faithful by the fact of being spoken.

    • prism 15.1

      Brett I find your post hard to read and understand. For slow thinkers like me how about putting your diatribe in short paragraphs for more effect.
      captcha – ridiculous (Scout’s honour)

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