Soon after coming to power last year NT Chief Minister Michael Gunner announced a review of NT taxes and charges amid reports that Glencore's massive MacArthur River zinc mine has paid almost no royalties since it opened in 1995, using deductions for capital investment to offset potential payments.
While benefitting from a 20-year agreement to receive a A$5 million-a-year subsidy from the government towards its electricity costs, MacArthur River is understood to have made a single royalty payment of $13 million, in 2008, after a historic peak in the zinc price.
The new hybrid royalty scheme will come into force on July 1, 2019, and will require miners to pay the greater of the existing 20% profits-based scheme or a value-based royalty on their gross mineral production revenue at a rate of 1% for year 1, 2% for 2019-2020 and 2.5% from the third year on.
The Association of Mining and Exploration Companies described the 2.5% royalty increase as "massive" that would lead to "economic disaster" for the NT.
"This decision immediately threatens the viability of $6 billion of new mining projects, that would have delivered 4,000 new jobs and hundreds of millions in new royalty revenue for the government," AMEC CEO Warren Pearce said this morning.
The Gunner government this week took a controversial decision to open about half the state to fracking, which could lead to a big increase in oil and gas investment, but he argued it was closing the door to mining investment.
"The Northern Territory is already struggling to attract investment and is widely recognised as a high cost jurisdiction, which is one of the major reasons for the decline in mineral exploration and mining activity in the Northern Territory over the last decade," Pearce said.
"This decision will make it one of the most expensive places in the world to develop a mining project."
The Fraser Institute's Annual Survey of Mining Companies placed the NT at 27 in list of 91 jurisdictions last year, behind WA (5), Queensland (12) and South Australia (14).
The NT has emerging developments for battery metals such as lithium and vanadium, advanced phosphate, copper concentrate and rare earths project, and is seeing a resurgence of investment in the Tanami Desert for gold, and other metals in the frontier Arunta province.
The Minerals Council of Australia, has also voiced concerns about the proposed hybrid system of both ad valorem and profits-based elements, saying it would be the only mining jurisdiction globally to have such a mechanism, saying it was "still a very long way from a realistic policy proposal".
The MCA, which estimates there is "nearly $5 billion" of investment at stake, said miners could pay $350 million in royalties this year under the existing scheme, contributing around 14% of gross state product.
Mining is the second largest contributor to NT self-generated funds after payroll tax.
AMEC, which has honed its skills in fighting off royalty rises in Western Australia's gold sector twice in the past few years, estimates that if the $6 billion in mining development it could generate $70 million per annum in additional royalties.
It has offered to work with the Gunner government to develop a modified proposal.
Treasurer Nicole Mansion has framed the budget as being one of repair after the loss of some $3.4 billion in revenue over the past two years, saying the Top End was facing "unprecedented fiscal challenges", with some tax hikes across the board.
She is targeting savings of at least $800 million a year in various cuts, and said measures such as the royalty were required to avoid imposition of drastic tax hikes, new taxes such as a land tax, and selling off Territory assets.
The NT is the only jurisdiction in Australia to use a profit-based royalty system, under which payments to governments fluctuate.
