Japan denounces sharp rise in Australian state coal royalties


General view of a stockpile of coal at the Blair Athol mine in the remote Bowen coalfield near Moranbah June 1, 2012. REUTERS/James Regan

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MELBOURNE, July 7 (Reuters) – Japanese companies could think twice about investing in Australia’s Queensland, one of the world’s biggest sources of coal, after the state shocked miners with a sharp hike coal royalty rates to capture windfall profits, said the Japanese ambassador to Australia. said.

In unusually strong language, Shingo Yamagami expressed “great concern” over Queensland’s royalty hikes announced in June, a move taken without consulting the mining industry after a 10-year freeze.

“Make no mistake, this is a huge shock for Japanese companies,” Yamagami said in a speech at the University of Queensland on Wednesday.

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The maximum rate was set at 40% for coal over A$300 a tonne, well above royalty rates elsewhere.

“The future of the successful partnership between Japanese companies and Queensland as a competitive investment destination could be in serious jeopardy,” the Ambassador said.

Japanese companies Mitsui & Co Ltd (8031.T), Mitsubishi Corp (8058.T) and Idemitsu Kosan Co Ltd (5019.T) all have large coal investments in Queensland and are considering new minerals investments , hydrogen and renewables, which he said would require mutual trust with the state government.

“Some Japanese companies are already wondering if Queensland will continue to be the safe and predictable place to invest that they have known for decades,” Yamagami said.

A spokesman for the Queensland government said the state was committed to working closely with Japanese partners in existing and new industries, as it has done over decades, a message reinforced during ‘a recent trip to Japan by the Deputy State Premier.

“This relationship has stood the test of previous coal royalty increases in 1995, 2001, 2008 and 2012,” a government spokesman said in emailed comments Thursday.

Analysts said the ambassador’s comments were unusually blunt for a Japanese diplomat, but reflected investors’ need for fiscal stability.

“This was an unusually pointed comment from this stakeholder, but it reflects the serious lack of planning and engagement with the industry prior to the announcement of the tax change,” said Credit Suisse analyst Saul Kavonic.

“There has been a dramatic increase in questions about fiscal stability in Australia from investors around the world following this announcement,” he said.

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Reporting by Sonali Paul; Editing by Christopher Cushing

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