Mining taxes impede Indian firms foray into Australia

Monday, 19 Dec 2011

Even as it proposes a Free Trade Agreement with the Indian government, Australia is keen to lay out a red carpet for Indian companies looking to mine coal or iron ore in Australia. However, new taxes on mining could also mean that Indian companies will have to buy assets in Australia as well.

GVK recently paid a little over USD 1 billion for 3 coal mines in Australia and it is not alone. Indian power and infra companies are making a beeline for Australia. But two new taxes, carbon and mining tax could act as a spoiler. The Australian government however is at pains to explain that the incidence of these two taxes will be minimal.

Mr Bill Shorten minister for financial services of Australia said "It’s better to tax profits rather than an umbrella royalty. Australia can definitely offer large natural resources to Indian companies looking for mining opportunities."

He said that "We have long term pension funds which are really keen to be part of the Indian growth story and infrastructure is an attractive investment area.”

Meanwhile, the Australian government is also looking to invest in India. Australian pension funds, some with assets over USD 15 billion are keen to pump in long term funds in the infrastructure sector.

Even as Australia and India increase their engagement, the Australian government is ultimately looking at a FTA with India to boost economic co-operation between the two countries.

(Sourced from profit.ndtv.com)

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)

Australian iron ore mine magnate leads fight against tax

Thu Nov 3, 2011

* Small Australian miners plea for mine tax changes
* Small miners say global miners will pay nothing
* Treasurer says big miners pay the most

CANBERRA, Nov 3 (Reuters) - A delegation of small- and mid-sized Australian mining company executives on Thursday called on Prime Minister Julia Gillard to abandon a proposed mining profits tax, saying the biggest firms would pay nothing and leave smaller ones to shoulder the burden.

The claim was immediately rejected by Treasurer Wayne Swan before the Australian Parliament.

Gillard earlier this year vowed to introduce a 30 percent tax on profits from iron ore and coal mining after holding closed-door negotiations with the nation's three biggest mining houses, BHP Billiton , Rio Tinto and Xstrata .

At the time, Gillard estimated the three companies would account for upwards of 90 percent of the estimated A$11 billion in revenue in the first three years.

Fortescue Metals Group founder Andrew Forrest, one of Australia's richest individuals, who made his fortune in iron ore mining, led the delegation, which also warned the tax threatened Australia's economic competitiveness and would stifle exploration.

"The government hasn't thought this through," Forrest told reporters.

Swan rejected the delegation's claim that big mining companies would not pay the new tax, and said companies reaping big profits from the mining boom would be legally required to pay their fair share.

"This tax does not discriminate against small miners. It will be paid predominantly by large miners," Swan told parliament, adding the comments by Forrest were "complete rubbish."

The government on Wednesday introduced legislation for the tax to apply to iron ore and coal miners making A$50 million or more in annual profits. It is scheduled to start July 1, 2012, though it is still uncertain if the government has the support it needs from three independent lawmakers to pass the bills.

Forrest, BC Iron managing director Mike Young, and Atlas Iron chief Dave Flanagan lobbied independent parliament members on Thursday to push their case for the government to rethink supporting the tax.

The executives released projections from accounting firm DBO claiming the tax would see small- and mid-tier miners pay an effective rate of 46 percent, while BHP Billiton and Rio Tinto would pay no tax due to the large deductions they would be afforded.

Forrest said the bigger mining houses would pay no tax under the plans for up to 25 years.

Young also criticised the A$50 million profit threshold for the tax as too low because it would apply to miners after they produce only about 800,000 tonnes of iron ore, a relatively small tonnage.

"We are going to be well above this threshold," Young told reporters.

BC Iron mined about 600,000 tonnes of iron ore last year, and is aiming for around 3 million tonnes this year.

By comparison, Rio Tinto mined more than 200 million tonnes of ore, BHP Billiton 15 million tonnes and Fortescue around 40 million tonnes.

(sourced Reuters)

Australia introduces a new bill that would put 30 pct tax on miners

Thursday, 03 Nov 2011

AP reported that Australia's government has introduced legislation to impose a 30% tax on the burgeoning profits of iron ore and coal mining companies that are feeding Chinese demand.

The legislation introduced to Parliament on November 2nd 2011 is not certain to pass since key independent lawmakers have yet to state their support. The tax would replace the current royalty tax on tonnage levied by states.

Prime Minister Dr Julia Gillard's minority government needs the support of at least four of five uncommitted lawmakers for the tax bill to be implemented in July 2012.

Assistant Treasurer Mr Bill Shorten told Parliament that mining companies' profits have risen 262% in the past decade.

(Sourced from Associated Press)

Xstrata decries unilateral policy changes - CEO

Monday, 08 Aug 2011

Mr Mick Davis CEO of Xstrata said that it's the prerogative of governments to seek a greater share of the profits from mining resources when commodity prices are high, but changes in regulations and taxes should always be prospective, not retrospective.

Delivering the diversified miner's interim results, Mr Davis said that he was concerned that too many governments contemplate significant new legislation or changes to their fiscal regime which target the mining industry, without consulting the sector.

He added that "It is perhaps unsurprising that resource nationalism risks rise when commodity prices are high, ranging from threats of nationalization in its most extreme form, to additional imposts on the industry and increased legislation. It is of course, the prerogative of governments to seek a greater share of the rents from mining the nation's resources and to impose legislation as they see fit. However, an important principle should always be adhered to; changes in resource rent sharing between the owner of the resource and the beneficiator of that resource should be prospective and not retrospective."

Mr Davis said that mining companies take on board significant financial and operational risk when they invest their capital in projects and that it was not fair to rewrite the basis on which those investments were made. He added that "New legislation and taxes must take into account the realities of how mining investment decisions are made, involving billion of dollars for long term operations that may only repay the initial outlay over many years before the mine can begin to generate returns."

Mr Davis was especially scathing on Australia's proposed carbon emissions tax, labeling it a bloody stupid idea. He said that "A unilateral carbon price won't reduce carbon output. It's a blunt instrument designed to raise income."

He said the tax would only succeed to lower Australia’s competitiveness as a mining destination in exchange for no likely reduction in global emissions.

Mr Davis was, however, more moderate in his stance to newly elected Peruvian President Ollanta Humala, who prior to his election was known to favor increasing taxation on miners, and once campaigned to nationalize Peru's mining industry.

Xstrata' Peruvian assets are an important part of its strategy to increase copper volumes by 50% over 2009 levels by the end of 2014, with the Antapaccay extension planned for the group’s Tintaya mine in southern Peru due for commissioning in 2012, at a cost of USD 1.47 billion. Additional to this is the Las Bambas Greenfield project, scheduled to be operational by 2014.

Mr Davis said Humala has underlined the government's intention to maintain Peru's economic growth and stability by re nominating the governor of the Central Bank of Peru, while reappointing experienced cabinet ministers, including the minister of mines and energy.

He said that "Other positive signals from the new administration include a commitment to respect fiscal stability agreements, currently in place for all of Xstrata’s projects."

Mr Davis made no reference to the debate on the nationalization of mines in South Africa, where the group is currently constructing the second phase of the Lion chrome smelter. It is also home to some coal operations. He added that "Our highly diversified portfolio of assets and growth options by geography is an important means of mitigating these risks. With a range of potential growth projects in many different countries, diversified companies can prioritize new investments in the most favorable jurisdictions that offer a stable investment climate for the long-term commitments required to build a mine."

sourced MiningMX

Namibia chamber warns over new tax

Friday, July29,2011 |MiningMX

NAMIBIA'S Chamber of Mines wants the government to reconsider plans to impose a further 17% tax on exploration and mining firms in the southern African producer of diamonds and uranium, saying it would discourage investors.

The Chamber of Mines in a statement said that "It is important... that any legislation that is implemented will not reverse the commercial viability of existing projects, or prevent investment in new exploration and mining projects.”

Namibia said that it would increase mining corporate tax to 44% for miners other than diamond producers.

Rio, Woodside criticise govt's carbon scheme

Mon, Mar 07, 2011 6:56 PM, By Reuters

Two of Australia's biggest resource firms launched an attack on government plans to price pollution, opening up a second political front for Prime Minister Julia Gillard over her plan to impose a fixed price on carbon emissions from July 2012.

With the public wary of the plan and the opposition labelling it "a great big new tax on everything", resource giants Rio Tinto Ltd and Woodside Petroleum Ltd called for strong protection from the new cost.

Climate Change Minister Greg Combet said details of compensation for industry were still being considered, and industry would be consulted on final details, but he said fewer than 1,000 companies would have to pay a carbon price.

"A carbon price is paid by the large organisations in our economy on every tonne of pollution that they emit. There's somewhat less than 1,000 entities that are likely to have a liability to pay a carbon price," Mr Combet told reporters.

The number of companies liable to pay for emissions is similar to the number covered by the government's former carbon trade plan, which was twice defeated in parliament and which offered free permits for up to 95 per cent of emissions for firms exposed to overseas export competition.

Global miner Rio Tinto and Woodside, the country's largest oil and gas producer, are among Australia's biggest carbon polluters, with combined emissions of almost 16 million tonnes.

Rio Tinto said the government must offer more generous compensation than under the former carbon scheme, while Woodside, said it should be exempt completely.

"Woodside believes the company's trade-exposed exports should be exempt from any price on carbon, given the absence of an international agreement on pricing greenhouse gas emissions," it said.

Rio Tinto said compensation proposed in 2009 was no longer reasonable for exporting industries, due to the lack of an international agreement to cut emissions.

"Businesses unable to pass a carbon price through to customers, which is most businesses competing in international markets, would simply have to absorb it," Rio's Australian managing director David Peever said.

"Depending on the magnitude of the carbon price, this may be manageable when market conditions are favourable and margins are healthy. But when the cycle turns down, it will inevitably be disastrous," Mr Peever wrote in the Australian newspaper.

Political pressures

Ms Gillard, whose predecessor Kevin Rudd was dumped by her ruling Labor Party last year after two failed attempts to address climate change, said polluters would pay a yet-to-be-determined fixed price, then move to a market-based system within five years.

The plan has put Ms Gillard's one-seat minority government under intense political pressure, with the majority opposition conservatives promising to reject it and warning consumers it will lead to higher electricity and living costs.

Underscoring the political risks, an Essential Media poll on Monday showed almost one in two Australians – or 48 per cent – opposed the carbon price plan, with overall support for Labor slipping a point to 47 per cent.

Only 35 per cent of voters backed Gillard's scheme, and 59 per cent of respondents believed she had broken an election promise not to immediately pursue a carbon price after last year's dead-heat election.

But in a rebuff to Rio Tinto and Woodside, most people were also opposed to compensation for heavy emitters, with 44 per cent opposed to any buffer for trade exposed industries and a massive 68 per cent opposed to help for power companies.

In contrast, 70 per cent wanted compensation for householders and small business, the poll showed, while 47 per cent of poll respondents wanted action on climate change as soon as possible, compared to 24 per cent who wanted to delay action.

The Australian Greens, who help support Labor in the lower house and have a strong voice in the upper house, said the claims of Rio and other "big polluters" should be rejected by the government.

"We should be looking at the real world and when it comes to compensation, it shouldn't be claims by these big corporations," Party leader Bob Brown told local television.

Mr Brown said compensation claims by emissions-heavy industries should be assessed by an independent arbiter or review process, to ensure corporates did not use their political influence to escape costs and leave taxpayers to make up the shortfall.

Rio has estimated the company's annual carbon tax bill would be about $154 million if the tax was set at $20 a tonne for every tonne of carbon pollution.

Rio's export operations would have faced an additional $3 billion cost over 10 years from a carbon emissions trade scheme proposed in 2009 and which offered almost $50 billion in compensation to industry and mining over the first decade.

Mr Combet said he expected Australia's new scheme would be internationally compatible once it moved on from the fixed price, in three to five years, and said there was considerable international momentum to cut global emissions.

Shares in Rio Tinto closed 1.6 per cent lower at $84.15, against a 1.36 per cent drop in the benchmark index.

Woodside shares sank one per cent to $42.42. (sourced:Businessspectator)