2ND UPDATE: Australian Government Announcement On Mining Tax Likely Friday - Source
The Australian Government has made progress in talks with the
nation's three biggest miners on a compromise on a controversial
new mining tax and is likely to make an announcement Friday, a
person familiar with the situation said.
A deal would bring to an end a lengthy and bitter battle between
the government and the major players in the industry over the
proposed 40% Resource Super Profits Tax and would be a big win for
new Prime Minister Julia Gillard, paving the way for her to take
advantage of a recent lift in voter polls and call an election
The miners have waged a public campaign against the tax,
spending millions on a series of anti-government advertisements,
stoking public unease about the potential impact on jobs and
investment in the mining industry. That unease was a factor in the
recent dumping by the ruling Labor party of Kevin Rudd as prime
Tony Abbott, leader of the main opposition Liberal-National
coalition, has vowed to scrap the tax if he wins the election. If
miners agree to a compromise, that could pressure Abbott to back
the deal to end uncertainty for the sector.
However some miners including Fortescue Metals Group Ltd.
(FMG.AU) say they have been excluded from a process dominated by
the biggest miners, who may not be representing their best
BHP Billiton Ltd. (BHP.AU) Chief Executive Marius Kloppers, Rio
Tinto Ltd. (RIO.AU) Managing Director Australia David Peever and
Xstrata Plc (XTA.LN) Coal Chief Executive Peter Freyberg met with
Australia's Treasurer Wayne Swan and Resources Minister Martin
Ferguson in Canberra for a second day Thursday to hammer out a
compromise on the tax, according to the person familiar with the
situation. A government spokeswoman confirmed talks had taken
place, adding "the government is committed to a speedy outcome with
regard to the" tax, but would give no other details.
The Age newspaper, without citing sources, reported on its
website that the government had agreed to lift the rate at which
the tax kicked in, to exclude nickel operations from the new regime
and had offered generous concessions on the treatment of
depreciation of assets.
Under the government's original proposal, the tax would kick in
when a project's rate of return reached the level of the long-term
bond yield, but The Age said this had now been raised to the
long-term bond yield plus 7%, taking it to about 12%.
The newspaper also said the government had agreed to let miners
inject existing assets into the tax regime at market value,
allowing them to claim large deductions for depreciation.
Morgan Stanley analyst Craig Campbell said such a concession
would be a big win for miners with older assets that had already
been depreciated, like BHP and Rio Tinto's giant iron ore
operations in the Pilbara region of Western Australia state.
It would also benefit miners like Fortescue Metals with newer
mines whose market value had surged ahead of book value, as prices
for commodities like iron ore and metallurgical coal had
The Age report said it was not clear if the government had
agreed to alter the 40% rate of the tax, but that it was believed
it had also given ground on this front.
A person familiar with the government's plans told Dow Jones
Newswires that Gillard would return to Canberra Thursday evening
for meetings on the tax.
BHP declined to comment, while Rio was not available for
Some Miners Unhappy With Negotiation Process
While analysts said resolution on the tax would remove the
uncertainty that had been hovering over the market, some miners are
Fortescue, which had played a role in attempts to broker a deal
under Rudd, said it had not been involved in any talks this
"FMG would be opposed to the discussions presently being held in
Canberra with select representatives of multi-national mining
companies leading to a formal government position or policy," a
spokesman for the company said.
Gindalbie Metals Ltd. (GBG.AU) Chief Executive Garret Dixon said
the government should engage the entire industry. "If there are
selective deals (being made) I'll be looking for us to have our
turn," he said.
The country's peak mining lobby group, the Minerals Council of
Australia, which counts larger and small miners among its members
and has been a vocal critic of the original tax, did not return
Shares in the big miners were supported in intraday trade
Thursday. BHP ended down 1.4% at A$37.11, having been at A$36.76
immediately before the Age report, while Rio ended 2.3% lower at
A$65.10 after trading at A$64.20 just prior to the report.
Nickel miners staged a turnaround on hopes they would be
excluded from the revised tax regime. Minara Resources Ltd.
(MRE.AU) ended up 4.6% while Western Areas NL (WSA.AU) rose 1.3%
and Mincor (MCR.AU) climbed 5.8%.
-By Alex Wilson, Dow Jones Newswires: 613-9292-2094;
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