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The royalty entitlement arises under Queensland Government law and is in perpetuity on coal mined under private subterranean rights.
The royalty, owned by Gordon Resources (50%) and three other major institutions, is paid at a rate of 7% on the gross sales value of all coal exported less port and some minor charges. On 3rd June 2008 the Queensland Government announced that from 1st July 2008 a two tier coal royalty rate will apply. The 7 % rate will apply to the value of coal produced by a mine sold below $100 per tonne and a higher 10 % rate will apply to the value of coal sold above $100 per tonne.
Circa eighty percent of the output is premium coking coal for the steel making industries, mostly in Japan and the Pacific Rim. The balance of 20% is thermal coal used in power generating plants.
The prices of both coking and steaming coal are denominated in US dollars and the product is shipped from the port of Gladstone in Queensland.
The mines involved are:-
- The Kestrel mine operated by Rio Tinto
The most recent estimate of the reserves of product over which the royalty is applicable is circa 57 million tons.
- The Crinum mine operated by BHP Billiton
The most recent estimate of the reserves of product over which the royalty is applicable is circa 17 million tons.
The strength of the covenants from Rio Tinto and BHP Billiton make the Group's coal royalty interests a world class source of revenue for shareholders.
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