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Australia 30% mining-tax deal to affect few firms

Discussion in 'International Forum' started by Steve Dii, Jul 2, 2010.

  1. Steve Dii

    Steve Dii JF-Expert Member

    Jul 2, 2010
    Joined: Jun 25, 2007
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    SYDNEY (MarketWatch) -- The government's revised Minerals Resource Rent Tax released Friday greatly reduces the number of mining companies affected by the new tax compared with that of the original proposal.

    The plan will apply only to iron ore and coal and be applied at a rate of 30%, as opposed to 40% under the original proposal, while the existing offshore petroleum resource rent tax will be extended to onshore companies.

    The exclusion of commodities other than iron ore, coal, and onshore oil and gas means the number of affected companies will be cut to around 320 from 2,500, the government said.

    Some of Australia's biggest listed domestic miners, including Newcrest Mining Ltd. (NCM.AU), Alumina Ltd. (AWC.AU) OZ Minerals Ltd. (OZL.AU), Lihir Gold Ltd. (LGL.AU), and Iluka Resources Ltd. (ILU.AU), would be largely unaffected thanks to their concentration on other commodities.

    The plan also introduces a threshold of A$50 million annual resource profits before miners incur a tax under the iron ore and coal regime.

    Among Australia's listed iron ore and coal miners, only BHP Billiton Ltd. (BHP 62.42, +0.43, +0.69%) , Rio Tinto Ltd. (RTP 44.26, +0.66, +1.51%) , Fortescue Metals Group Ltd. (FMG.AU), Macarthur Coal Ltd. (MCC.AU), Mount Gibson Iron Ltd. (MGX.AU), Centennial Coal Co. Ltd. (CEY.AU), Whitehaven Coal Ltd. (WHC.AU), Grange Resources Ltd. (GRR.AU), and New Hope Corp. (NHC.AU) have breached that level of operating profits since 2005.

    Several offshore miners, such as Xstrata PLC (XTA.LN) and Anglo American PLC (AAL.LN), will likely be included in regime.

    Among other companies listed in Australia, OneSteel Ltd. (OST.AU) also recorded A$161.9 million in operating profits from iron ore mining in 2009, and Wesfarmers Ltd. (WES.AU) made A$915 million in coal mining profits in the same year.

    "It's a long way improved from the original resource super profits tax," said David George, a mining analyst at JPMorgan in Sydney.

    Analysis by JPMorgan prepared before the new tax proposal and based on a 5% uplift rate and 28% corporate tax rate, rather than the 7% uplift and 29% rate under Friday's proposal, posits a target price of A$38.80 for BHP Billiton, A$92.53 for Rio Tinto, A$4.01 for Fortescue, and A$5 for Centennial.

    That compares to share prices at 0140 GMT of A$37.38, A$65.84, A$4.12 and A$4.49.

    George said the target prices would, if anything, probably be increased by the latest changes in the tax proposal.

    Source: MarketWatch - Stock Market Quotes, Business News, Financial News

    The Australian government has reached a deal with mining companies over controversial tax plans.

    Former Prime Minister Kevin Rudd had announced plans for a 40% tax on miners' profits.

    But a compromise agreement negotiated by his successor, Julia Gillard, has now reduced the rate to 30% for coal and iron ore miners.

    But petroleum and gas operations will still pay a pre-existing 40% tax rate, the government said.

    However that will now cover onshore oil and gas projects as well as the offshore operations previously subject to it.

    Smaller iron ore and coal companies, with annual profits below A$50m (£28m; $42m), will not be required to pay the new tax.

    The plans are still expected to raise billions of dollars for the government, however.

    When Mr Rudd announced the tax plans earlier this year, he said he expected to raise A$9bn a year.

    The revised plan would raise A$1.5bn less, the government said, but cuts to company tax rates that were to be paid for by the mining tax will still go ahead.

    The BBC's Nick Bryant in Sydney says the deal brings to an end one of the most angry battles between the government and corporate sector that Australia has seen.

    The row played out on prime time television with confrontational advertisements from both sides, and played a key part in the demise of Mr Rudd, our correspondent says.

    In a country often called the "quarry of the world", many Australians believe their personal prosperity is inextricably linked with the fortunes of the mining giants, he adds.

    Companies including BHP Billiton and Rio Tinto had launched an aggressive lobbying campaign against Mr Rudd's tax plan, warning that it could harm economic growth.

    But industry executives welcomed the fresh deal, calling it "a positive outcome".

    Ms Gillard said the "breakthrough agreement" would "deliver a better return for the Australian people for the resources they own and which can only be dug up once".

    Many political observers suggest that, having stuck a deal, Ms Gillard's Labor Party - which has already seen a surge in the polls following her becoming leader last week - may call an election imminently to capitalise on its popularity.

    Opposition parties have vowed to oppose the tax and scrap it if they win office.

    Source: BBC

    In case you have wondered, Barrick Gold with highly vested interest in Tanzania paying a meagre 3% to the government coffers also operates in Australia and is affected by above announced tax regime.

    Link: Barrick Gold Corporation - Australia-Pacific gold mines in Western Australia, Queensland, New South Wales and Papua New Guinea
  2. Bantugbro

    Bantugbro JF-Expert Member

    Jul 2, 2010
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    These are two different types of Tax..
  3. Nyambala

    Nyambala JF-Expert Member

    Jul 7, 2010
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    Finally jamaa (Big- mining - RIO and BHP) wameshinda. As I said before this has set a very bad precedent kwa vinch vyetu vya dunia ya tatu. Hawa jamaa wamen'goa PM na kama haitoshi wamepata kile walichokuwa wakikitaka!!!!!! Msomeni CEO wa BHP hapa chini!!!

    Today, I am pleased to be able to tell you that after two months of public debate the Australian Government has announced a decision to replace the proposed Resource Super Profits Tax with a Mineral Resource Rent Tax on mined iron ore and coal.

    Throughout this debate we have consistently said that we believe in tax reform that is prospective, competitive, differentiated, and resource-based; and that this will ensure that the Australian mining sector continues to grow investment in the industry.

    I am encouraged that the design of the new tax is closer to these principles
    It is Prospective - businesses can transition into the new tax at market value of the business, not the previously proposed book value, with depreciation over 25 years. This is particularly important for the iron ore and coal operations which have been in existence for many years.

    It is also Competitive - the headline tax rate is 30 per cent, with a 25 per cent allowance for the extraction activity meaning that only the resource profit is taxed.

    It's Differentiated - the tax applies to coal and iron ore resources, all other resources are exempt.

    And finally it is Resource based - taxable profit will be that at the mine gate and not on the downstream processing or infrastructure.

    When Prime Minister Julia Gillard was appointed she asked the industry to engage in new round of dialogue with the Government.

    So we were pleased to participate in constructive discussions this week with the Deputy Prime Minister and the Resources Minister which have resulted in a material improvement from the original tax proposal.
    There is still a great deal of work to be done before this tax is introduced.

    We will continue to work constructively with the Government to make sure that the detailed design of minerals taxation maintains the international competitiveness of the Australian resources industry.
    Under the previously proposed super tax, we had said that our projects were under review. I can say today that with the clarity provided by this new tax arrangement we can proceed with our normal project evaluation processes for all of our development opportunities.

    I will keep you up to date as this work progresses.
    But today I want to take the time to thank each one of you for your ongoing efforts as we continue to work through the tax and its implementations.
    Thank you.

    Source: BHP intanet - Australasia