Australian govt wins crucial support for mining tax

Mon Nov 21, 2011

CANBERRA (Reuters) - Australia's government is set to pass laws for its 30 percent mining profits tax later this week after agreeing to lift the starting threshold and promising more scrutiny of coal seam gas projects in a deal to win support from three key independents.

But the changes, which will cost about A$20 million a year in lost government revenue, have upset the Greens, whose support is needed to pass the laws, and done little to allay concerns of small and mid-tier mining companies.

Under the agreement with independent lawmaker Andrew Wilkie, the government will lift the starting profits threshold for the tax from A$50 million to A$75 million, although smaller iron ore miner BC Iron said the changes would give no relief to smaller companies.

"It's like painting that house full of termites" BC Iron Chief Executive Mike Young said. "To put A$75 million into context, at current iron prices, that's our margin on maybe 1.2 million tonnes."

Gillard's government, which holds a one-seat majority with support from one Green and the three independent lawmakers, wants the mining tax passed by the lower House of Representatives by the end of the week.

The government wants the tax on iron ore and coal mine profits, due to start in July 2012, to raise about A$7.7 billion in its first two years, and Treasurer Wayne Swan said the changes meant the biggest miners would pay the most.

"Most of this money will now be paid by the largest miners in this country," Swan told parliament.

A government deal with two other independents, Tony Windsor and Rob Oakeshott, earmarks A$200 million over five years for scientific research into coal seam gas projects, to allow governments to better assess the impact on water and farming.

GREENS WARY

The government wants to slap the proposed tax on big iron ore and coal miners as part of reforms designed to balance its budget and reallocate wealth from the mining industry, now enjoying the biggest boom in a century, to other sectors.

The government and global miners BHP Billiton, Rio Tinto and Xstrata agreed on the mining tax in 2010, but smaller miners such as Australia's Fortescue Metals Group have complained that the tax favors big miners.

But Simon Bennison, chief executive of the Association of Mining and Exploration Companies, said his group will continue to push for the tax to be based on a production threshold instead of a profit threshold.

Bennison said 10 million tonnes per year would be a good starting point.

"Iron ore prices are not going to stay at high levels forever, they have already fallen quite a lot and the profitability levels of companies are all different," he said.

The mining tax will help the government return the budget to surplus and fund a 1 percentage point cut in the company tax rate to 29 percent, portrayed as a boost for non-mining sectors, especially those hit hard by a strong local currency.

But the Greens, who want the tax rate to be lifted to 40 percent and for the tax to also apply to uranium and gold mines, said they now wanted to be sure the government did not cut other areas of the budget to fund Wilkie's amendments.

"We are going to ensure that the public interest be upheld here. We will be talking to the government in the coming day or two," Greens leader Bob Brown told reporters.

The government needs the Greens to pass the mining tax through parliament's Senate upper house, where a vote is due in early 2012.

(sourced Reuters)

US coal giant says taxes make Australian investment less attractive

Fri, August 26, 2011
By Matt Chambers, The Australian

Peabody Energy says the government is making it less attractive to invest in Australia because of proposed taxes.

The US coal giant, jointly bidding $4.7 billion for Macarthur Coal with the world's biggest steel company ArcelorMittal, also says there is a heightened sovereign risk.

Speaking in Sydney yesterday, senior vice-president of investor relations, Vic Svec, said despite Peabody's continued investment in Australia, there was no question that the nation's relative advantage in attracting foreign investment was shrinking under the current government.

"It's really only in the last year you've heard sovereign risk being associated with Australia, and we don't like that," he said.

Peabody is Australia's fifth-biggest coal producer, but it will jump to the third-biggest if it is successful in the joint $15.50-a-share cash bid for Macarthur.

"We want Australia to be more welcoming to capital, as opposed to less welcoming, to ensure we don't take a meat cleaver to the milk cow," Mr Svec said.

He said Australia was "absolutely" becoming less welcoming to capital through the proposed mining and carbon taxes.

Peabody, the world's biggest non-government coal company, sold 246 million tonnes of coal last year - all from the US, apart from 27 million tonnes in Australia.

Despite this, its Australian operations accounted for 60 per cent of the company's earnings because most of the US coal is contracted domestically for much lower prices than are fetched on export markets.

Mr Svec said he had not planned for any formal meetings with Macarthur during his visit, but the company continued to engage with its target and hoped that an agreement could be reached.

"Their mantra of taking no action seems to be going on for a pretty long time," he said.

When Macarthur released its full-year profit on Wednesday, the company said it remained in conversations with other potential suitors but that nothing had eventuated and that shareholders should take no action on the Peabody bid.

A recommendation from the Macarthur board is expected before the end of the month.

Mr Svec said Macarthur's inability to hit production targets in four of the past five years was indicative of either poor forecasting, poor operations, or both.

Peabody had begun to receive some acceptances for its offer, Mr Svec said.

But it is only a trickle at this stage and has not strengthened the Peabody/Arcelor stake in Macarthur more than one percentage point beyond the 16 per cent it was at when the bid was lobbed a month ago.

Bluescope Steel chief Paul O'Malley slams carbon tax plan

February 22, 2011 12:00AM
By Geoff Easdown, From: Herald Sun

BLUESCOPE Steel chief Paul O'Malley has panned the Federal Government's plan for a carbon tax, branding it unfair, discriminatory and "not good" for the industry.

He argued the Government would restrain Australian manufacturers if imported products were allowed to land free of any carbon-related impost.

Mr O'Malley aired his views at a press conference after the steelmaker revealed a $55 million first-half loss due to higher costs and lower domestic demand for fabricated product. He conceded Bluescope had been through tough times.

The disappointing first half followed a $28 million loss in the previous corresponding period.

Bluescope Steel shares were hammered yesterday, falling more than 6 per cent when the market opened.

The accounts showed that during the six months to December 31, Bluescope took a $77 million writedown of goodwill on its distribution business and a $68 million write-back on its Coated China assets.

Mr O'Malley said there were signs of stronger industrial activity in the developed world this year.

"However, steel supply, excluding China, remains in an oversupply position," Mr O'Malley said.

"We need to see GDP in the developed world improve and drive increased steel demand, to narrow the supply-demand gap."

Referring to the proposed carbon tax, he said Australian manufacturers would face competitive restraints.

"From a policy perspective, there is a bust between the rhetoric and reality," he said, pointing out that European manufacturers avoided a carbon tax by shifting production.

Mr O'Malley revealed that the company was looking to mine its own raw materials because it was now consuming more than 8 million tonnes of iron ore and 4 million tonnes of coal annually.

An interim dividend of 2c a share, fully franked, will be paid on April 4 to shareholders registered by March 4. Bluescope shares closed almost 3 per cent, or 7c down, at $2.30.
(sourced:Herald Sun)