Rio Tinto Ltd and BHP Billiton Ltd, the mining giants in Australia, have agreed to pay higher royalties to the West Australian government. WA Premier Colin Barnett announced that he has signed a new agreement with the companies.

The higher royalties would cost the two companies by $A340 million per year. By signing this agreement, BHP and Rio Tinto also got the green light for their proposed joint venture in the Pilbara.

According to the agreement, now onwards BHP and Rio Tinto will have to pay royalties on their West Australian iron ore production at a rate of 5.615% of iron ore fines sales revenue, instead of 3.75% previously. The rate of royalty for lump will be set at 7.5% now onwards.

Colin Barnett, WA Premier, said today that the new royalty rate would generate an additional $A340 million for the government during the year 2011. The government also expects to generate about $A1.06 billion during the next four years from the increased royalty rates.

Barnett said that earlier these companies were granted concessions on royalty rates in order to encourage them to invest in the infrastructure needed to develop the iron ore resources in the state. In return, the Western Australia government approved the$116 billion iron ore joint venture between BHP and Rio Tinto in the Pilbara region.