INVESTORS could shy away from the embattled West Australian gold sector after the state government flagged more than $500 million in additional royalty revenue.
Analysts say uncertainty around the WA state government's royalties regime could harm resources investment in the state, particularly among gold miners who have been affected by steep price falls in recent years.
Royalty revenue estimates contained in Thursday's WA state budget show an additional $560 million has been booked over three years from 2015/16.
Gold miners, who currently pay royalties of about 2.5 per of the spot price, believe they are in the firing line following previous government commentary.
They say the industry will be burdened at a time of lower gold prices and high labour costs.
The WA government is reviewing its royalties regime, but it is yet to reveal any outcomes.
It expects to complete the review process by the end of the year.
"Given that the review is yet to be completed and considered by the government there is a significant degree of uncertainty associated with these royalty estimates," the 2014/15 budget papers say.
CMC Market analyst Michael McCarthy said a lack of detail around which sector would be targeted was creating uncertainty.
"We're now looking at a six or seven month period without understanding where that money's coming from and that's certainly bad news for investment in WA mining," Mr McCarthy said.
"Creating this sort of uncertainty ahead of the completion of the review process is absolutely not a positive and has the potential to destabilise investment in resources companies in WA."
Both large and small WA-based gold companies believe they will be targeted.
Newmont Asia Pacific head Kelvyn Eglinton recently said a royalty hike would force his company to reduce costs by holding off projects and not investing in capital and jobs.
Meanwhile, Doray Minerals managing director Allan Kelly, who is also the spokesman of the Gold Royalties Response Group, said margins for the precious metal's producers had been seriously eroded by rising production costs and an 11 per cent decrease in the gold price in the past year.
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