Mining in Australia: overview
A Q&A guide to mining regulation in Australia.
The Q&A gives an overview of the domestic mining sector, its regulatory structure and ownership, the environment and health and safety. It covers foreign ownership and tax issues and proposals for reform.
This Q&A is part of the global guide to energy and natural resources. For a full list of content visit www.practicallaw.com/energy-guide.
Australia is a globally significant mining nation. It has a wealth of mineral resources, including vast deposits of lead, nickel, silver, uranium, zinc, bauxite, copper, gold, iron ore and coal, and offers legislative and regulatory conditions conducive for investment. At present, Australia has one of the largest mineral resource sectors by value of production in the world.
The mining industry is one of Australia's most important export sectors and makes a significant economic and social contribution to the nation's economy. Mining activity currently constitutes more than 6% of Australia's economy. Exports of minerals for 2012/13 were valued at approximately A$146 billion.
Australia is a federation of six states and two territories. The mining industry is regulated at the state and territory level. Each state or territory has a Mining Act and Mining Regulations (or equivalent) that regulates the ownership of minerals and operation of mining activities in the region. State legislation also deals with the environment, occupational health and safety, and mine operation. This legislation is subject to the powers of the federal government in relation to international trade and commerce (relevant to the export of minerals), taxation, defence (relevant to uranium exploration and production), corporations, competition and native title rights.
The decision-making authority under the relevant state or territory legislation is vested in a Minister who is advised by a government department. The mineral resource licensing regimes are administered by these departments.
In Australia, in the vast majority of cases, the Crown owns all minerals in the land. As a common law jurisdiction, Australia is subject to the common law principle that presumes a landowner owns all minerals on or beneath the surface of that land. However, this principle has been virtually abolished by the states and territories and all new grants of freehold titles have provided that all minerals are reserved to the Crown. A very small percentage of minerals in Australia are owned by landowners of land alienated from the Crown before the enactment of the relevant state legislation reserving minerals to the Crown.
Even if the mineral is owned by the landowner, the landowner may not explore for that mineral or extract it without an appropriate mining tenement (see below).
Any mineral that is lawfully mined becomes the property of the person by or on behalf of whom it is mined at the time the material from which it is recovered is severed from the land from which it is mined. Until lawfully mined, minerals remain the property of the Crown (subject to the comment above regarding private ownership).
A miner may obtain rights to conduct mining activities on unreserved Crown land or on private land if the landowner's permission has been granted. In some circumstances, that permission is not required or can be obtained by following a regulatory process.
The specific mining rights that miners may acquire differ slightly in each state or territory, but the rights are based on the three basic stages of development of a mine:
Further detailed exploration.
Assessment and production.
Rights to explore or extract are conferred by the grant of a mining tenement.
The terms "mining tenement" and "tenement" refer to all types of mineral titles (both explorative and extractive). There are three basic types of mining tenements:
The first two are investigatory tenements while the third is a production tenement. Ancillary licences may be granted to enable the building of associated infrastructure.
Holders of tenements can also have ancillary rights that relate to those mining activities, such as public road access, access to water and the ability to set up crushing, sizing and grading facilities on the land surface.
Prospecting and exploration licences allow the holder to enter on land for the purposes of exploration, subject to obtaining any consent required from the landholder. An exploration tenement also gives the holder priority to the grant of a mining lease. Exploration tenements are usually granted for a limited term (four to five years) and there is often a requirement to surrender part of the tenement on its renewal or during the term. Prospecting licences are usually granted for more limited periods of time, generally up to a year.
A mining lease is the form of tenure required to carry out commercial scale mining operations. Mining leases allow for the extraction of ore in commercial quantities and are usually granted for a longer period than exploration tenements (approximately 20 years), with the ability or right to renew at the end of the initial term (generally for the same term as initially granted). Some mining leases are shorter if the mine life is anticipated to be shorter.
An application for any type of tenement requires the payment of fees to the relevant state or territory body. Rent is payable for all types of tenements. In addition, exploration tenements have annual minimum expenditure obligations and mining leases impose a requirement to pay royalties to the state or territory. Land rates may also be payable to local councils in respect of the area covered by the tenement.
Mining tenements are subject to conditions imposed by legislation and the terms of the grant. These conditions may require the holder to comply with environmental standards, undertake environmental rehabilitation or provide security to the state.
Failure to comply with the relevant laws may result in regulatory action being taken against a tenement holder. Such action can include statutory orders, notices or injunctions being issued or significant fines, if convicted of a criminal offence. It may also result in the forfeiture of the mining tenement.
The grant of a tenement (for example, exploration or mining licence) is not the only permit required for a mining project.
A mining company can also be required to obtain:
Environment and planning approvals.
Native title and cultural heritage approvals.
Consent to access to land from surface land owners.
These approvals can impact significantly on the timing and cost of new projects and the expansion, productivity and profitability of existing projects and should be considered before investing in a project.
The common law of Australia recognises a form of native title to land, which exists in accordance with the laws and customs of indigenous people. These rights do not include rights to minerals. However, the Native Title Act 1994 (Cth) (NTA) gives registered claimants and holders of native title certain procedural rights with respect to the grant of new mining tenements over the relevant native title area. The NTA requires certain procedures to be complied with before a mining tenement can be granted.
Those procedures may include either:
The right to negotiate procedure (usually resulting in an agreement under section 31 of the NTA, often referred to as a "section 31 Agreement").
Entering into an Indigenous Land Use Agreement (ILUA) with the registered native title claimants or holders.
Section 31 Agreements or ILUAs can place further restrictions on activities that may be conducted on the land. In general, however, the procedures do not apply to renewals or extensions of earlier validly granted mining tenements.
Tenements may be acquired from the applicable state department and/or relevant Minister, through an application process on a first-come, first-served basis, or in some states and for some minerals, a tender-based process. Rights to access the surface are regulated both by legislation and by private contract with landowners.
At a federal level, the Environment Protection and Biodiversity Conservation Act 2009 (EPBC Act) imposes requirements for federal environmental assessment and approval of certain actions, which are additional to any assessment and approval requirements imposed by state legislation.
The EPBC Act requires that a person must not take an action that has, will have or is likely to have, a significant impact on a matter of national environmental significance (for example, world heritage values of a World Heritage property or listed threatened species or communities) without approval from the Federal Minister for the Environment. Such actions are referred to as "controlled actions".
In 2013, a new matter of national environmental significance was introduced, which requires a coal seam gas development or large coal mining development to be referred to the Federal Minister for the Environment for assessment and approval if it will have, or is likely to have a significant impact on a water resource. This is often referred to as the "water trigger".
After assessment of the controlled action, the Federal Minister for the Environment decides whether to approve the action, and if so, on what conditions.
In addition, each state and territory has its own environmental regulatory framework for assessment and approval of resources projects. Bilateral agreements made under the EPBC Act allow for the accreditation of state and territory environmental assessment processes where an action would also require federal environmental assessment. It is also possible to accredit state and territory approvals under the EPBC Act and the federal government is currently working closely with states and territories to enter into bilateral agreements for that purpose.
Health and safety
Work health and safety regulation of the mining industry falls within the jurisdiction of each of the states and territories of Australia. Currently, in Victoria, South Australia, Tasmania and the Northern Territory, the general work health and safety legislation in those jurisdictions applies to mining, with varying levels of specific regulations relating to mining activities. In Queensland and Western Australia, where mining comprises a significant part of the states' economies, industry specific safety legislation applies to work at mines to the exclusion of the general safety legislation in those states. In New South Wales a blended legislative framework has been adopted, which incorporates both the general work health and safety legislation alongside mine-specific legislative requirements.
Although there has been some movement towards harmonisation of the mining safety legislation throughout all Australian states and territories, as at July 2014, the National Mine Safety Framework is not yet in force in any of the states or territories.
In some jurisdictions, the relevant legislation creates detailed, statutory roles and imposes specific requirements on those roles, such as for holders and operators of mines, as well as for certain individuals participating in mining operations. Many jurisdictions also impose requirements for detailed, documented safety management systems for mining operations. Regulatory authorities in each jurisdiction have significant powers for ensuring compliance with relevant legislation, and there are significant criminal penalties for breaches of safety legislation, both for individuals and corporations participating in the operations of mines.
The Australian government selectively reviews and evaluates foreign investment proposals. Investment proposals by foreign persons are regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and applicable policy guidelines. The FATA is administered by the Treasurer of Australia, who is assisted by the Foreign Investments Review Board (FIRB).
Certain foreign investment proposals must be approved by the Treasurer before they can be implemented and should be notified to, and approved by, FIRB in advance. These include:
The acquisition of a substantial interest in an Australian company with total assets valued in excess of A$248 million.
The acquisition of the assets of any Australian business valued in excess of A$248 million.
An acquisition by foreign government controlled entities.
Under the terms of the Australia-United States Free Trade Agreement, there are separate, higher thresholds for acquisitions by US investors.
The grant of a new mining tenement does not generally require FIRB approval, but the acquisition of an existing mining tenement by a foreign person generally does require FIRB approval.
The Treasurer (on the recommendation of FIRB) considers whether or not the proposal is contrary to the national interest (commonly known as the "national interest test"). In cases where national interest issues are relevant, the Australian government's preferred practice is to seek to resolve any such concerns through consultation with the parties involved.
Taxes and royalties on minerals are administered and collected under both state and federal legislation.
The state or territory in which a mining project is located requires the payment of royalties. The obligation to pay royalty will be contained in either the relevant mining legislation and/or an applicable state agreement. Each mining company must lodge a royalty return with the relevant state or territory department setting out, among other things, the quantity of minerals produced, details of sales, the gross value of minerals produced and the amount of any allowable deductions.
In general, each state and territory government imposes a value-based royalty calculated according to the tonnes or other relevant quantity of minerals produced. The royalty rate can vary depending on the grade and level of beneficiation or refinement of the mineral. Projects that are operated under a state agreement may have a different applicable royalty rate to the rate applied under standard mining legislation provisions.
From 1 July 2012, the federal government has imposed a Minerals Resource Rent Tax (MRRT) on certain profits generated from the extraction of coal and iron ore, including coal seam gas extracted as a necessary incidental of coal mining or from a proposed coal mine. MRRT liability for a project is determined by multiplying the MRRT rate of 22.5% (calculated by adjusting the 30% headline rate by a 25% extraction factor) by the amount by which "mining profit" is in excess of "MRRT allowances" for the project. After a change in federal government on 7 September 2013, the Government proposed to repeal the MRRT, effective from 1 July 2014, although the amendment has not yet been passed.
In addition, mining companies are required to pay income tax to the federal government. Income tax in Australia is calculated based on the "taxable income" of a taxpayer. This differs depending on whether the taxpayer mining company is an Australian resident or a non-resident.
More generally, mining companies must pay duties and taxes in the same manner as any other business within Australia, including income tax, local government rates and fees, stamp duty (on transfers of mining production tenements and other interests), goods and services tax, and capital gains tax.
Mining activities in Australia are commonly conducted as part of a joint-venture, which may either be incorporated or unincorporated. The tax implications arising from these structures are very different and therefore selection of an investment structure must be made carefully, having regard to the benefits and risks of each structure.
Aside from the royalties and taxes detailed above, Australian federal and state governments do not derive any specific benefits from the exploration and extraction of mineral resources. However, as mining is one of Australia's most significant industries, the nation's economy benefits substantially from activity in the mining industry. It is estimated that company tax and royalty payments paid by mining companies in Australia totalled more than A$117 billion between 2006/7 and 2012/13.
Goods and services tax (GST) of 10% can apply to the export of mineral resources. However, an export will generally be treated as GST-free if the minerals are exported from Australia within 60 days of the exporter either issuing an invoice or receiving consideration for the sale (whichever occurs first). An importation of mineral resources is subject to GST of 10% payable by the importer (but the importer may be able to claim an input tax credit against the GST paid).
The Mineral Resources Rent Tax (MRRT) was introduced in 1 July 2012 and currently applies to Australian coal and iron ore activities (and related by-products). The current Australian Federal Government is proposing to repeal the MRRT, but (as at the time of writing), an abolition date is yet to be set and repeal legislation is yet to be passed by the Australian Parliament. The MRRT is a tax on mining profit less MRRT allowances. The export of iron or coal from Australia is the tax point for the MRRT.
There is no excise on mineral resources in Australia. Customs duty (that is, import duty) is imposed on certain specific types of mineral resources, while the remaining types of mineral resources are duty free.
There are no plans for significant changes to the legal and regulatory framework for mining in Australia. However, a bill has been introduced into Federal Parliament that proposes to amend the Fair Work Act 2009, the legislation that governs employment in Australia, in a manner that may benefit the mining sector. The Fair Work Amendment Bill 2014 proposes changes to areas of importance to resource employers including greenfield (new project) agreements, union site rights to entry and individual flexibility arrangements in modern awards and enterprise agreements.
The regulatory authorities
Department of Natural Resources and Mines (Queensland)
Address. 61 Mary Street, Brisbane, Queensland, Australia 4000
13 QGOV (13 74 68)
Main responsibilities. The Department of Natural Resources and Mines (DNRM) is an economic development agency that enables the productive and responsible use of Australia's natural resources (water, land, mineral and energy resources) to generate wealth and prosperity for current and future generations of Queenslanders. DNRM has four service areas:
- Mine safety and health.
- Mining and petroleum.
Department of State Development, Business and Innovation (Victoria)
Main responsibilities. The Department of State Development, Business and Innovation plays a key role in driving improvement activities in these sectors, with a focus on the following:
- Developing policy frameworks and delivering programmes to ensure that consumers benefit from competitive, efficient, reliable and safe energy services.
- Attracting and facilitating investment in coal, gas, renewable energy and targeted mineral resources.
- Responsibly managing and securing access to earth resources for current and future use.
- Supporting investment in technological development within the energy and earth resources sectors.
- Providing an efficient regulatory framework that enables development while effectively managing the potential risks to the environment and community.
Resources & Energy Division, New South Wales Trade & Investment
Address. Level 47, MLC Centre, 19 Martin Place, Sydney, New South Wales, Australia 2000
T 1300 736 122 (toll free) or
+61 2 8281 7778
F +61 2 8281 7799
Main responsibilities. The Resources & Energy Division is committed to:
- Delivery of quality geological and geophysical maps and data about New South Wales (NSW).
- Authorising mining exploration and production.
- Keeping the environment safe during exploration and mining activities.
- Regulating health and safety for the mining and petroleum industries.
- Attracting local and offshore investment into the NSW resources sector.
Government of Western Australia, Department of Mines and Petroleum
Main responsibilities. The Department of Mines and Petroleum (DMP) is the state's lead agency in attracting private investment in resources exploration and development through the provision of geoscientific information on minerals and energy resources, and management of equitable and secure titles systems for the mining, petroleum and geothermal industries. It also bears prime responsibility for regulating these extractive industries and dangerous goods in Western Australia, including the collection of royalties, and ensuring that safety, health and environmental standards are consistent with relevant state and commonwealth legislation, regulations and policies.
Department for Manufacturing, Innovation, Trade, Resources and Energy, South Australia
Address. 7th Floor, 101 Grenfell Street, Adelaide, South Australia 5000
T +61 8 8463 3000
F +61 8 8463 6518
Main responsibilities. DMITRE's Mineral Resources Division has a pivotal role in supporting mining exploration and the development of new mines throughout the state. The Mineral Resources Division manages the state's mineral resources by:
- Regulating mining operations.
- Implementing significant exploration initiatives.
- Providing comprehensive, high quality geoscientific data and advice.
- Developing sustainable practices for exploration and mining.
- Facilitating mineral resource projects through approval processes.
- Developing an effective and efficient policy and legislative framework.
- Collecting mineral royalties and fees.
Department of Mines and Energy, Northern Territory
Main responsibilities. The Mines and Energy team supports and advances the industry through the work of several groups, which deal with:
- Investment attraction, through the A$3.95 million Creating Opportunities for Resource Exploration (CORE) programme, an initiative that promotes the prospectivity of the Territory to explorers and investors.
- Supply of new generation geoscientific data that is made available to prospective explorers and investors.
- Support for companies going through the processes of the granting and maintenance of exploration licences and mining titles.
- Assistance and advice in indigenous liaison and land access issues.
- Promoting opportunities in a variety of energy related areas, including oil, gas, petroleum, geothermal and alternative energy.
Mineral Resources Tasmania, Department of Infrastructure, Energy and Resources
Main responsibilities. Under present Government legislation and policy, Mineral Resources Tasmania is responsible for:
- Collection, integration, interpretation, publication and presentation of geoscientific information.
- Collection, integration, interpretation, publication and presentation of information promoting Tasmania's mineral resource potential, and land stability and groundwater issues.
- Issue of legal titles to mining tenements, collation and recording of statistics relating to mining production, collection of fees and rentals, management of royalty regimes, and recording of mining tenements.
- Regulation of mineral and petroleum exploration in Tasmania, including offshore waters administered by the state, and the promotion of vacant areas available for onshore and offshore exploration.
- Environmental appraisal, monitoring and management of mining heritage and land access issues.
- Setting and monitoring of standards for both the performance of exploration activities and the technical reporting of exploration records and case histories.