NEW MINING TAX JUST ‘WINDOW DRESSING’
Written on the 7 July 2010
QUEENSLAND's junior miners have responded positively to the Federal Government’s Mineral Resource Rent Tax reduction to 30 per cent, but the state’s richest miner Clive Palmer says the Federal Government failed to consult widely enough with the sector.
North Queensland Metals Limited (NQM) CEO John McKinstry is disappointed that Prime Minister Julia Gillard only met with the country’s three biggest mining companies, but is surprised base metals were excluded from the tax.
“If that’s the case with base metals and particularly gold for us, then this is positive for the future of the sector,” he says.
“I know this sounds really positive but the tax shouldn’t have to be there, however if it has to be there then this is a reasonable outcome. Under the tax it would have been more profitable to produce less gold, and the last thing you want to do is extract a metal but leave some in the ground.
“There’s a large part of the mining sector that doesn’t get seen - there’s a lot of junior miners out there and I think this will be a plus for them.”
He says the Federal Government needed to move fast on the issue to improve its chances of re-election.
“You have to remember they’re in election mode and have to go for an election quickly, so they needed to sort out the super profits tax as quickly as they could.”
Clive Palmer says the deal still threatened the viability of the Australian resources sector.
“The new prime minister has been very quick to come up with this sweetheart deal but it remains unacceptable,” says Palmer in a statement from Germany.
“New taxes of any scale don’t help create jobs or stimulate overseas investment in Australia’s resource sector and this is still a large tax.
“The prime minister also promised to negotiate with the wider industry but only the big three companies were involved in the process of reaching the new deal and these are companies with headquarters offshore and Australians are not the majority shareholders.”
Palmer says changing the name of the tax to the Minerals Resource Rent Tax (MRRT) was merely window dressing and the tax was still a concern for overseas investors.
“We still have an issue of sovereign risk,” he says.
“This whole debacle has caused irreversible damage to the Australian mining industry which will take many years to regain its former status as investment friendly to international parties.
“The Labor factional warlords may have stabbed Kevin Rudd in the back but his co-conspirators in this tax fiasco namely the Treasurer Wayne Swan and the new Prime Minister Julia Gillard remain at large. Bring on the federal election and give the Australian people the opportunity to have their say on this tax.”
Caledon Resources PLC (CCD) company secretary Bruce Mallett says the tax change from 40 per cent to 30 per cent will make its Wiggins Island coal project more feasible.
“It (previous tax) had a negative effect on the economics of the proposal – it didn’t throw it out the window but it did make it harder to get up,” he says.
“I’d say this is pretty encouraging but I haven’t been through the finer detail yet.”
He says the big issues will come down to the government holding its pledge on reducing state royalties, while addressing the issue of tax in point, which relates to when the tax is applied in the extraction and distribution process.
“They’ve completely changed the name to something more accurate with the Mineral Resource Tax, because I think the super-profits tax was inappropriate and misleading.”
But mining services company Runge Limited is sceptical of ‘picking on’ coal and iron ore, which managing director Tony Kinnane puts down to more belief in their prospects.
“Deciding to pick on coal and iron ore probably means that these companies predict the future for these resources to be much better, while base metals are probably more volatile and a tax system for them would be problematic,” he says.
“The proposal won’t boost our business, but it will return us to the track we were on previously.
“It’s much better but I don’t think it does much for our sovereign risk reputation, to put something like this on and then take it out was not well thought-out at all, but I think it’s a positive step.”