"I don't know how we're going to survive," said Stephen Jeffers, boss of the Ballarat gold mine, as he digested shock news of new gold royalty confirmed in the Victorian government's state budget.
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The mine underneath Ballarat currently employs about 160 direct employees and a further 70-80 contractors full-time, but the announcement of the 2.75 per cent gold royalty has placed an unexpected cloud over the mine.
Mr Jeffers is the general manager of Castlemaine Goldfields, owner and operator of the Ballarat gold mine. Mr Jeffers said he had informed his workforce about the government royalty and workers were upset at the news, with it described as "silly" and "crazy".
"It's honestly a very real and present threat to our viability," said Mr Jeffers.
The royalty will apply from January 1 next year. Victoria is currently the only Australian jurisdiction without a gold royalty.
The underground Ballarat gold mine was opened in 2005 in the heart of the goldfields made famous by the Victorian goldrush of the 1800s.
Gold from the mine was used to make the gold medals used in the Melbourne Commonwealth Games of 2006.
"There was no consultation at all, there were no hints of it anywhere," Mr Jeffers said, revealing the first he heard about the royalty in The Age on Saturday.
"I know how my business runs. We are running square. So I've pulled every possible lever over the past few years to make sure that we stay in business. And running square is the best I can do. So to have this, it's a very big shock."
The mine produces about 40,000 ounces of gold per year, putting it far above the 2500 ounce production at which the new royalty kicks in.
The Minerals Council of Australia also criticised the gold tax, with the group's chief executive Tania Constable saying she was shocked by the state government move.
"We're disappointed and extremely surprised that the Labor government here in Victoria has taken the position that they have. Particularly because they didn't talk to us," she said.
Ms Constable said the Victorian gold industry was a story of regional development.
"It's a story of a marginal industry trying to get off the ground again, and a lot of small players that are just barely profitable, but providing important regional jobs."
The Association of Mining and Exploration Companies (AMEC) labelled the tax "disastrous news" for the Victorian gold industry and called for it to be abandoned.
"This is giant step backward for the gold sector that was only just starting to recover after years of minimal activity and may snuff out fledgling gold exploration projects," said Warren Pearce, chief executive of AMEC.
