UPDATE: Small Miners Unhappy With Tax Plans But Fewer Affected
July 02 2010 - 4:59AM
Dow Jones News
Small miners criticised the Australian government's revised tax
plans for the industry Friday, despite a sharp fall in the number
of companies likely to be affected by the plans.
A Dow Jones analysis of company results suggests that, of the
2,500-odd miners operating in Australia, few more than a dozen
locally-listed companies would face taxes under the new regime,
once exemptions for base and precious metals and smaller companies
are taken into account.
But smaller companies criticised the process under which the tax
was developed, with executives for BHP Billiton Ltd. (BHP.AU), Rio
Tinto Ltd. (RIO.AU), and Xstrata Plc (XTA.LN) coming to an
agreement with the Australian government in a series of meetings in
Canberra this week.
"There are 320 companies affected and only three companies have
been in the room negotiating," said Clive Jones, managing director
of Cazaly Resources Ltd. (CAZ.AU).
"It's bloody outrageous, particularly given that the larger
companies have been saying (the industry has) got to keep a united
front," he said.
"We see this as a tax negotiated by the big miners for the big
miners," said Garret Dixon, chief executive of Gindalbie Metals
Ltd. (GBG.AU).
The mining tax proposals, which apply to iron ore and coal
mines, introduce a threshold of A$50 million annual resource
profits before miners become liable for the new tax.
Among Australia's listed iron ore and coal miners, only BHP, Rio
Tinto, 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), New Hope Corp. (NHC.AU), Gloucester Coal Ltd. (GCL.AU),
and Rio Tinto-controlled Coal & Allied Industries Ltd. (CNA.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 also 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.
Even so, the threshold is low enough that many iron ore miners
at the exploration and development stage would expect to breach it
during the life of their projects.
The question of whether the A$50 million level will remain
static or rise in line with inflation or some other measure will be
decided by a policy transition group being led by former BHP
chairman Don Argus and Australia's Resources Minister Martin
Ferguson, the government said.
Dixon called for miners of magnetite--a low-grade iron ore which
needs more extensive processing before it can be marketed--to be
exempted from the regime.
"The big iron ore miners just dig up the product, crush it and
sell it, but we start with something that's less valuable than
gravel and then have to concentrate it to end up with a high-grade
product," said Dixon.
Gindalbie, Grange and OneSteel all mine considerable quantities
of magnetite.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com
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