 PERTH (miningweekly.com) – Australia’s new mining tax proposal of a 30% resource rent tax for iron-ore and coal, rather than a 40% super profits tax (SPT) on all resources, would attract investors to expansion and merger and acquisition (M&A) opportunities, advisory firm Deloitte said on Tuesday.
Mining lead tax partner Gordon Thring said that while there was still a lot of detail to be worked out, the new proposal would likely remove the uncertainty for investment decisions and exploration.
“M&A activity should now be more viable, as this move by the government should alleviate some of the concerns about the longer-term impact on investment by overseas interests,” Thring said.
Earlier, US coal-miner Peabody walked away from a deal with Macarthur Coal, after the Australian miner rejected a lower bid. Peabody lowered its offer for Macarthur from A$4,1-billion to A$3,8-billion, blaming the punitive SPT.
The country also stood to lose A$20-billion worth of investment, as mining companies deferred new investments decisions and expansion projects, citing the uncertainty of the SPT.
Diversified miner Xstrata on Tuesday reported, however, that it would restart A$186-million of its previously suspended investment in its coal growth projects in Queensland.
Thring noted that iron-ore and coal miners would need to ascertain the market value of their mining rights, and their effective life, essential to work out the value of the deductions now available under the new minerals resource rent tax (MRRT).
“Of course, junior miners and explorers, and also those with marginal projects, will no longer benefit from any royalty refunds or underwriting of losses, and will need to re-evaluate their modelling for the coming year.”
There are particular groups that will be looking for more clarification, including the onshore oil and gas sector caught under petroleum resources rent tax, which differs significantly to the proposed MRRT, Thring said.
Importantly, he added that mining companies not in the coal, iron-ore and oil and gas sectors would now effectively be left out of the new taxing arrangements.
Deloitte said that the government was expecting that over 85% of mining companies previously caught under the SPT would be excluded from the new regime altogether.
“This will be particularly beneficial for industries such as nickel and alumina where significant processing and refining caused difficulties with the taxing point,” Thring said.
The profits-based MRRT will apply only to iron-ore and coal. A 30% tax would be applied to profits above the long-term government bond rate, plus 7%.
Mining companies will receive a credit against the MRRT for their state and territory royalty payments, and small miners with resource profits below $50-million a year will be exempt from paying MRRT.
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