A GOLD royalty would negatively affect Victoria's already "lacklustre" mining competitiveness and make it harder to discover hidden riches under central Victoria.
The royalty could raise costs across Victoria's sector, reduce investment in exploration and risk the feasibility of marginal mines, Fitch Solutions found in an a forecast for Australian gold.
Fosterville's Kirkland Lake Gold mine - currently the largest in Victoria - has enough gold to last five years, the report observed.
"The inability to fund exploration activities essential to extend its mine life would result in a sizeable loss for future Australian gold production," Fitch Solutions noted.
That is the one downside risk to a positive outlook for Australia's mining sector, which Fitch Solutions predicted would grow an average 2.3 per cent to 2028.
The gold price's upward momentum and a shift in expectations around interest rates are among factors that could drive investment in Australian gold mining, the group predicted.
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Their forecast comes as the Victorian Department of Jobs, Precincts and Regions begins consultations on the royalty.
Its newly released regulatory impact statement argues the royalty is unlikely to affect the viability of production in Victoria and that the gold price is surging.
That report found that a small change in profitability under the 2.75 per cent royalty is unlikely to make miners exit Victoria's market.
The report also found the royalty would allow all Victorians to be "adequately compensated" by private companies taking gold.
"The public benefits from the royalty outweigh the costs to industry because the revenue will increase the government's public investment capacity," the report stated.
The modelling has not dimmed calls from the Minerals Council of Australia to reform the "flawed" royalty before it begins on January 1, 2020.
"Without reform, the government recklessly risks closing mines early and there will be less investment in mining impacting regional development," MCA Victoria division executive director James Sorahan said.
He would like to see an "exploration offset" built into the royalty.
"Gold mining requires ongoing exploration investment to keep replenishing ore reserves and resources to maintain mine life," Mr Sorahan said.
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