Northern Territory Considers Replacing ‘Uncompetitive’ Mining Royalties Scheme

Northern Territory border into South Australia, on Oct. 19, 2015. (Mark Kolbe/Getty Images for The World Solar Challange)

The Northern Territory (NT) is looking to replace its current mining royalty scheme with one that is more competitive following a report that found it to be a deterrent to investment.

Currently, the territory is looking at changing its profits-based scheme to one that is based on the underlying value of the extracted assets. The proposed new scheme, called an ad valorem-based royalty scheme, has been described as “simple,” and delivers “investment certainty.”

Nicole Manison, the NT’s Minister for Mining and Industry, said the NT must change its current scheme to remain competitive.

“Mining is one of the key drivers of the Northern Territory economy, and we must stay contemporary and competitive to attract more new mining investment,” Manison said in a June 22 statement.

“Royalties are the biggest source of revenue, and we want the best deal not only on the amount of royalties but also the economic benefits mining generates throughout the Territory, especially in our regional and remote areas.”

Royalties from the mining industry are the biggest source of income for the NT, having contributed more than 41 percent of the territory’s income in 2019-20.

“Right now, we are in a position to set our course for a mining industry that is not only profitable to the Northern Territory economy but also supports the energy transition to renewables,” she said.

Northern Territory’s Multi-Billion Goal

In a December 2022 report (pdf), the NT’s Mineral Development Taskforce identified nine measures that could help the NT realise its goal of being a $40 billion economy by 2030.

The nine measures include the change in royalty schemes, as well as the speedy development of new mines, streamlined and transparent access to land that respects landowners, simplified regulatory processes, and the development of a new rural-based workforce.

The NT government has said that it accepts all the recommendations in principle.

“Securing new producing mines and increased Territory based minerals processing and value add will be critical to economic growth, industry diversification, labour force expansion and productivity,” the report states.

“This transition of mining away from being a primary industry will deliver positive externalities beyond purely economic ones and is the mining industry’s critical and necessary contribution to achieving a $40 billion economy.”

Around 3,500 people in the NT are employed in the mining sector, while the total value of mineral production in the NT was $4.86 billion for 2021–2022.

Royalties Expected to Fall after 2030 Under Current Scheme

According to the task force, royalties are expected to fall “by a significant margin” after 2030, when the territory’s two large mines are expected to close.

“To preserve this revenue base, immediate strategic actions need to be taken to ensure sustained royalty revenues past 2030,” the report states.

Currently, about half of the operating mines in the NT pay the minimum royalty of 1-2.5 percent.

However, more than half of the NT’s operating mines did not pay a royalty until the introduction of a minimum royalty scheme and a profits-based scheme in 2018-19.

Under the proposed ad valorem-based royalty scheme, royalties are calculated on the value of the mineral extracted or sold only. Compared to the profits-based royalty scheme, where royalties are calculated on the net value of the mineral extracted or sold after deducting a range of costs.

“Mineral royalties are a very significant component of the Territory’s own-source revenue, having accounted for approximately 30 percent of total tax and royalty revenue collected over the past six years (an average of $347 million per year),” the NT government said.

The NT government has opened the proposed scheme for public consultation, which will be held until Aug. 4.