Not boom, not bust: Newmont Waihi Gold external affairs co-ordinator Kit Wilson gives an industry perspective.
`It's a gold mine' is a phrase often used as a way of describing any activity that makes lots of money.
People look at the amount of gold we mine each year and the increase in the gold price reported on the news and assume that most of this is profit.
Let's look at the figures.
Our revenue increased over the past four years. The price of gold has increased by 60 per cent since 2008. Some of that increase is because of the devaluation of the US dollar. During the same period our operational costs per ounce have risen by 80 per cent. We have invested in significant mine development and plant upgrades.
Although the gold price has gone from NZ$1250 to NZ$1990 during that period, and our revenue is up, our profit is down.
In addition to all the other taxes that a company pays – income tax, PAYE on behalf of employees, local rates and GST – Newmont Waihi Gold also pays royalties on its underground mines, which is where most of the gold comes from.
Income tax is payable on income earned, but royalties are payable even if you don't make a profit, as they are calculated on pretax revenue. If, for example, we had revenue of $200 million, royalties at 1 per cent would be $2m. If our costs were $180m that leaves $20m profit. and 30 per cent company tax would be $6m. The royalty is equivalent to another 10 per cent tax of $2m.
You can see this if you look at our accounts – in 2009 and 2010 the amount we paid in royalty was about an additional quarter of the amount that we paid in income tax.
The single greatest economic impact from our operations comes however, not from the taxes and royalties that we pay, but from the people we employ and the money we spend on building and maintaining our operations in Waihi.
From 2006-2010 we spent $694m on operations and invested another $239m in equipment and facilities – a total of $933m; 32 per cent of that was spent in and around Waihi and 82 per cent of it was spent in New Zealand. The money we spend overseas is used to purchase equipment we cannot source in New Zealand, like large dump trucks.
We employ close to 400 people in Waihi, and previous economic impact assessments have shown that for every person employed directly by the mine, another person is employed as a result of work that we generate or because of the money that our employees spend.
More than 95 per cent of our staff are New Zealanders and many are locals. You don't always need a degree in geology to work at a gold mine. We employ drivers, mechanics, technicians and electricians.
Gold mining was "boom and bust" in the early days, but not now. We have been operating continuously in Waihi since 1987 and intend to stay here for the long term.
Statistics New Zealand states that the mining sector has a "relatively high survival rate" in terms of business survival, higher than healthcare, social services, agriculture, fisheries, education or telecommunications. They also note that only 29 per cent of businesses that were started in 2001 were still operating in 2011.
We've continued to operate during periods of low as well as high gold prices. The community continues to benefit from our operations even if our profit was down last year. In 2011 we provided $2m of financial assistance by way of partnerships, sponsorships, environmental programmes and donations in Waihi and the wider region. We have committed an additional $150,000 to educational organisations in Waihi, and further funding for community investment in areas close to our mines. We are developing a partnership with government to match their subsidy for home insulation in parts of Waihi. This is good for the environment, good for community health, and good for local wallets. So, yes, we are a "gold mine". We provide jobs and opportunities for locals and have done for 25 years.
- Bay Chronicle