Potash industry welcomes royalty rebate scheme but says more needs to be done to support long-term projects

WA’s fledgling potash industry has been thrown a bone in the form of an extended royalty rebate scheme but the State Government is refusing to back down on the royalty key players say is putting a long-term and “almost inexhaustible” projects at risk. WA Mines Minister Bill Johnston announced the rebate scheme extension on Tuesday, November 22 — the first day of the two-day Australian Potash and Phosphate Conference held at Perth’s Pan Pacific last week. The extension will provide a non-payable 50 per cent rebate on royalties paid for two years to companies that make the first sulphate of potash sales before the end of 2027. It was originally flagged to finish at the end of 2024, which would have meant only one company — Kalium Lakes — would have been able to access the scheme because the rest would not be in production before the offer closed. WA’s potash industry has been calling for the State Government to back down after it revealed in the last Budget a five per cent royalty rate would apply to the fledgling sulphate of potash industry, sparking outrage among the handful of emerging companies. Association of Mining and Exploration Companies chief executive Warren Pearce welcomed the move but said industry was looking to the Federal Government to consider how it could financially support emerging potash projects. “We are pleased to see the program extended so that projects still some time away still have the opportunity to benefit from a reduced royalty,” he said. “By extending the royalty, all of the projects proposed would be in production by December 2027. “But we are looking for a lot more support for our industry... farmers and the agricultural industry really need this project. “We are looking for a lot more support for our industry. Beyond the rebate scheme, it has been made clear that the headline rate of five per cent won’t change.” The industry submitted a detailed consultant’s report to the Government last July which advocated for a royalty of 1.5 per cent, though the highest rate players have indicated they could accept is 2.5 per cent. The report came after several companies were given different advice by the Department of Mines, Industry Regulation and Safety on the likely royalty for potash between 2006 and 2018, which ranged from 73¢ a tonne (the same as for salt) up to five per cent. Mr Johnston said the various SOP project proposed for WA were “long-life operations” spanning 30 to 40 years, which would provide hundreds of jobs and opportunities for communities in regional WA. Mr Johnston said the State Government was committed to the industry and pointed to a reduced tenement rental scheme introduced in 2018, a lower contribution to the Mining Rehabilitation Fund. No royalty rebate will be paid when the price of SOP exceeds $1000 per tonne on average during a quarter. However, with potash prices hovering at about $1400 per tonne during the past six months — on the back of the Russia-Ukraine war — the one company able to access the rebate scheme (Kalium Lakes) would not be eligible. Mr Pearce said the long-term price was expected to hover around $400 per tonne. “These are extremely long-term projects that could run for 50 to 100 years and there is almost an inexhaustible supply – it is just about getting over the initial capital cost,” he said. Despite surging potash prices in recent times because of sanctions against Belarus and Russia, which account for 40 per cent of the world’s supply, investor sentiment towards the nascent WA sector is weak after last year’s collapse of one leading player, Salt Lake Potash, and ongoing commissioning problems for Kalium Lakes. The industry is also finding it increasingly difficult to access debt funding. WAFarmers has thrown its weight behind the young industry, with president John Hassell arguing it would provide a valuable fertiliser for the domestic agricultural industry struggling with the high cost of fertiliser.