The mining tax
 

So she sorts out the tax and all is well with the world. Wrong.

Here is a country that relies on a single industry and out of the blue the goverment announces its going to bite the hand that feeds it. It might have climbed down a lot, but those looking at investing in mining here are going to have a longer memory and the shock of what the goverment tried to do will not be forgoten. That and the fact we all know that taxes dont decrease in size or magnitude. They have a nasty habbit of going the other way. In fact now the voters in QLD and WA have been bribed sufficiently to get her through the next election, it will be interesting to see if we see increases in the tax as soon as the election is over.

The soverign risk of Australia is now a significant issue.

Re: The mining tax
 

Don't forget the hand that feeds the mining industry - AUSTRALIA'S natural resources. The reason why resources are in fact a special case and Australia deserves a reasonable return.

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Wouldn't it have been better to increase the royalties mining companies pay to the states? Would have looked better than a money grab to get the Fed. Gov. out of the financial mess they got themselves into.

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The less they pay the more someone else pays. The key is structuring the tax to encourage investment and the tap into super profits. Someone else in the economy will be taxed more if the miners are taxed less.

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WA is already doing that.

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That was the easy and sensible option, but this is politics, I think the Liberals may have suggested that, therefore Labor had to do something different. No party can ever do what the other side suggests....

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I totally agree...

Re: The mining tax
 

I totally agree too.

The vast majority of the profits from Australia's resource exports are going to a few well connected locals and mostly to major overseas corporations. Its nothing less than a pillage of this countries natural wealth by a select few, and they should pay into the countries balance sheet. If the commodities are deemed too expensive now, Australia will loose nothing in the long term by leaving them unexploited until such times as the world is willing to pay fair value for them.

In the meantime the profits from natural resource taxes could be properly employed by building out the countries infrastructure and developing a true productive base here. Like manufacturing and high technology, not just being the sandpit for the true productive nations. The only problem I have with the MSPT is that its being paid into super, rather than developing the country for the decades to come.

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Reasonable return and an encouragement to invest. The latter is more important but won't happen without return.

The name of the tax is a super profits tax. If structured correctly it would tax on profits above a reasonable return.

Now who do you want to lose out instead?

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This maybe a very simplistic viewpoint but these natural resources aren't going anywhere. Therefore when the rest of the World has been pillaged then I'm sure every single mining company would be willing to pay whatever it costs to get their hands on the Australian reserves.

I'm just disappointed that Joe Public can't put together some tv & radio ads criticising the Government for allowing councils to increase their rates above the agreed threshold.

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Yep, my thoughts exactly. The public is being asked to feel sorry for foreign firms being taxed on massive profits from hauling Australia's assets overseas, and many are swallowing it.

The operative word here is Profits, give me a choice of no income or being taxed on my income and I'll choose the latter, so will the mining companies.

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Be careful here--don't forget China[I think the largest buyer of Australian resources?}is developing huge new resources in Brazil and Africa.Anyone on a visit to the latter will be amazed at the level of penetration of the African economies by China.They are even taking over areas of agriculture in places such as Zambia.It is really latter day colonialism;but with a very much under the counter political influence:unsure:

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China and Japan are the major destinations. China is also buying Australian farms for food security.

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They do pay tax though and royalties to the states. Why should they be singled out to pay "super" tax. If we are going to have a super tax it should be across the board and include banks, real estate developers, individuals.

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Because the goalposts have moved. Say 10 years ago the government(s) were taking a figure of about 1/3 of resource profits as royalties...and everyone was apparently happy with that situation. Now that figure is more like 1/7. The government is seeking to move that figure back towards where it was years ago when everyone was seemingly happy. I could see the advantage of the tax - aren't royalties paid regardless of profit?

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Wow. Please tell me you guys will all refuse to vote in the next election as there is some amazingly badly informed people out there on what is the biggest issue facing Australia today.

Ok. Lets have a look a mining 101.
1. The resources do NOT belong to the Oz people. They belong to the mining company who has already paid for them at exploration stage.
2. The profits are not going to a few forign people. Hello, do you have super? Mining invests more $ back in Oz that is taken out.
3. The resources are there for ever. Mmm yes, but mining in Oz is VERY expensive and difficult in many ways. There is a point at which it simply isnt worth it. For example the hills around Middlesborough still have massive iron ore deposits, but they will never be mined as its just too expensive.
4. Australia gets a VERY reasonable return from mining. The companies not only pay the same taxes that every other company pays but also the state royalties, the range of state and federal exploration fees and the taxes paid by employees. I wonder how people here would feel if say the goverment announced anyone who has moved to Oz in the last 10 years and moves here in the future will pay 80% tax.
5. The so called "super" profits. I can only talk for gold mining, but for a mine to be just viable it needs to make about 15%.

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Well said, talk about Australia trying to bite the hand that feeds it.

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Think you might be a tad biased on this one, stormy?

The resources may not belong to the Oz people but, in that case, why does the QLD 2010/11 Transport budget include a "highlight" that "$864.2 million for coal network track works and new and upgraded locomotives and wagons to support coal haulage across Queensland"? Something the Oz people will be funding.

Seems to me those mining companies are quite well looked after.

(Source: http://www.tmr.qld.gov.au/~/media/fi...ghts201011.pdf)

Re: The mining tax
 

It comes down to what is the effective tax rate compared to other businesses. With the royalties and concessions available it is not easy to compare.

BTW the resources are licensed to the mining companies with the right to mine. There should be certainty regarding that however the government should have recourse should the owners not be fulfilling their production and community responsibilites.

Profits get ploughed back into dividends although miners are low dividend payers. Those dividends are paid into our super as well as the pockets of the myriad of shareholders across the globe. By no means is mining an industry that spreads its wealth though hence the desire to tax.

Of the major minors
BHP is listed on the ASX, Rio is dual list on the ASX and LSE and Xstrata is listed on the LSE and Zurich exchange.

The people that seem to make the most from mining are the investment banks who chop and trade the companies.

I worked for a mining supply company and that happened to them. Office was closed.

Resources is a heavily cyclical industry. Australia needs to be ready for the downturns by putting aside enough. The resources industry increases the value of the AUD making other industries struggle. They also sap resources needed by other industries making Australia unattractive for manufacturing.

IMO resources should be taxed effectively to expand the sovereign wealth fund and ensure that a chinese downturn can be coped with.

BTW Australian iron ore is some of the cheapest to extract in the world. No resource is there forever.

Re: The mining tax
 

...they also artificially inflate the value of housing in rural areas close to mines making it impossible for locals to own.

This whole mining council scare tactics campaign really sh!ts me. Clive Palmer has already been shown up for the liar and scaremongerer that he is by admitting that his threats of projects all being canned were grossly exagerrated. Funny that he is also the Liberal & National Party's largest single doner:confused:
Those adverts were a disgrace, trying to take credit for Australia not going into recession and that it was mining that kept Australia out of it, yet it was mining the first sector to start shedding jobs by the bucket load.
Now Australia wants to stock pile its budgetry reserves again for another economical winter and all the fat lazy mice just want us to lounge around and enjoy the sun. If the situation was so bad here then I am sure all these large mining firms would have p!ssed off to Mongolia and Siberia a long time ago. Instead they are sticking around where they are making the most profits and as soon as the Govt wants to do anything about that they start crying poor. PLEASE!

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This is more controversial than politics and religion!:)
Seriously,I really want an unbiased,balanced,truthfull report on the mining sector.
Yes,I know-the mining sector pay and conditions are deplorable-why keep advertising for staff?:ohmy:Don't be conned in the working100+ hours a week for $2,000.00-think about it,do the same in your local state and you will make more dollars-FACT.
Backbone of Australia's economy,I accept that.
But the lies,mistruths,exgerations by both sides makes me :unsure:
Can anyone shed light in a simple straightforward explanation?

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I work for a company that has a department that only does analysis on Australian mining exploration. That is all that dept does. That dept has just recorded the biggest quarter in its 20 year history. Yet we are supposed to believe that these mining companies, for whom this department does all its work are shelving all current projects. I haven't seen any evidence of that, leading me to assume that it was one big bluff from the mining sector to hold onto those grossly inflated profits they make. The only other sector that I think gets away with more daylight robbery in Australia is the Banking industry.
I certainly think that Rudd underestimated the battle he was going to face on this topic and ultimately it cost him his position. I am not a Labour voter and never have been, however I prefer the stance this govt has taken to some of these monopolistic industries and corporations than the "bend over and take it" policy that Howard's lot employed. Telstra got away with the same robbery under Howard and were soon put in their place when Labour came in. I hope Labour stick to their promise that they will take on the Banking sector soon as that, for me is the last bastion of fat cats needing to be put in their place.

I realise this piece sounds like a Labour electioneering campaign so I will try and balance it out by looking at the crap things this govt has done (ie: Internet Filter, Emissions Trading)

Re: The mining tax
 

Thanks Broad:thumbup:
It isn't a black or white issue-or even a grey issue.

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Absolutely. For example Liberal party spokesman, oh sorry hold on, I mean mining magnate Clive Palmer was already caught out lying about supposedly shelved projects.

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It does my head in ... :blink:

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....as for those precious Super Funds that need to be protected due to their reliance on the mining sector. Would those be the same Super Funds that saw a nationwide average fall of more than 10% over the 2009 fiscal year? IE: your Super fund was worth less in 2009 than it was in 2008. The moral of that story? Don't invest in a super fund that puts all its eggs in one basket.

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So Broad Shoulder, you work for a employer. Tell me, what would happen if your employer was told tomorrow that the tax bill was going to 78%. I am guessing they wouldnt be too happy? Maybe your job would no longer exist? And why shouldnt you pay at least that in tax. How much net does your industry pay to the goverment? Less than mining? Oh, so maybe you should actually pay a premium to bring it in line with actual figures? Not a pleasent thought is it.

As for exploration booming, you are having a laugh. I am a exploration geo. Responsible for some big $$$ spends. Most of my friends are exploration geos. Most are already seeing projects being scrubbed, spend reduced and the number of vacancies in the industry has fallen on its ass.

The effect this has had is simple. No mines will close. No mines would have closed even if it had come in as planned. What will happen is simply a withdraw of future investment in areas such as exploration and mine expansion in favour of projects in countries that are viewed more favourably. The hard reality is, is that mining in Australia is VERY expensive (In the future i may set up my own exploration company but would not even dream of exploring here) At the same time the size of deposits is now fairly small on the global scale and difficult. A lot of projects are fairly marginal. So when a company is looking at making half a billion dollar investment to build a mine, knowing that at best they would see profit as such until year 8 of a 10 year mine life, then believe me, tax regime is pretty important.

Ah but wait, i see, so we make huge profits. Wait a minute while the guys around me dry their eyes. Coal and iron ore do at PRESENT. I work at one of the largest gold mines in Australia and we barely cleared 7 figures last year. And that was a good year! Oh, by the way, the company invested nearly 100 times that in new projects. But even coal and iron ore have limits. Mongolia has massive coal and iron ore deposits and until recently they have lain pretty dormant due to soverign risk and the fact they would be expensive and difficult to mine, so we mine WA and QLD instead. But, things like this can tip a fine balance. In fact i know one Perth company that has recently agreed to explore these on behalf of the Chinese goverment.

Then there is the "we will invest it in rural communities" rubbish. They have never invested in rural communities. A lot of the small towns in WA have their medical services care of mining, a lot of the roads, heck my mine even picks up the bill for a museum. And we arent even in the town.

If you didnt realise that it was the mining sector that kept Oz out of recession then please tell the rest of us who it was? Oh, and how are thing looking from the planet you are on? Maybe it was super Dudd? Oh, maybe it was all them school halls and home insulations

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Well we will soon see how badly those mining companies were doing it these last few months when they publish their quarterly reports. Better hope they show something other than bumper profits otherwise you Mine Criers will end up with egg on face.
You may be a geologist in the field but that doesn't make you a business expert in your field, you are paid to be a scientist...very different and therefore I am suspecting that you will believe everything your fat-cat bosses will tell you when they say it would have ruined the industry.

PS. I sit next to and work on a daily basis with a Geo-Physicist and he is employed to give scientific advice, not business analysis. Those that provide the business analysis are often also those that can produce the positive or negative spin to get what they want (I should know as that is what I do for a living unfortunately)

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Taxpayer did it through stimulii. Mining laid me off and I now work for the government.

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That can't be right! Those "gospel" mining ads said that it was mining that saved us!

Wirelessly posted (SonyEricssonW890i/R1FA Browser/NetFront/3.4 Profile/MIDP-2.1 Configuration/CLDC-1.1)

Ivanm is not alone - the sector laid of 15% of its staff in the first half of '09 - replicated in the wider economy that would equal 19% unemployment - that would be one heck of a recession! Its true that the exports continued to support the gdp numbers - pity they couldnt support jobs as well.

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Talk about too much information!

2 months since iPhone loss now. :(

W890i...how embarrasing! :o

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:lol::lol:

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ok. If you promise to pay my fine ;)

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Actually am involved on a buisness side as well including planning. I am afraid your labour spin doesnt cut the mustard. It is so simple that if a 3 year old couldnt see the problems i would have him to the docs for tests.

If you take a industry, any industry and tell them their taxes are going through the roof what do you expect to happen?

Ok, lets give an example of the company i work for. We have a very large project that is in the pipeline at present. Like a lot of Oz projects it is extremely risky with fairly small profit margins. If this tax had come in as planned that profit was exinguished and a negative NPV result.

Now, please get your head around risk annaylsis. This isnt just the liklihood of war and things, but includes elements such as a goverment passing legislation that may have a effect positive or negative on a project. It also incorporates a huge amount of other data such as costs, cost increases, labour, labour skill base, energy, water and the list goes on. Ultimatly we look for a number that we can use to help guide investment decisions between competing projects. Now, once a tax is here, their is a risk, that has to be considered, that it will be increased in real terms and its scope increased. That is the redidual risk that we are left with presently.

Most major miners have a series of projects in the pipeline that are competing for funds to reach development - we have 5. All have pluses and negatives. What this tax has done, even now, is substantialy alter the risk weighting that Australia has to be viewed in. For some, that will make little difference, but for many it will be a big factor. We have announced how we see it, and we have been one of the least vocal, but it is likely even now to have a negative impact on the viability of significant investment into Australia. Unfortunatly, it isnt just the mining houses that have this view. I was recently with the rep from a major investment organisation who invests in mining, particularly in Australia. They also have ameded the risk ratio negativly. This makes it harder for companies to raise the capitol needed to develop projects - that is harsh at a time when capitol is still tight, particularly on the $100million plus projects.

Australia has, i believe, forgoten where it stands in the industry and that it is competing on a global basis. It seems to have developed a attitude that it is THE premier destination. Sorry to burst the bubble here, but most commodities are far from that view.

Ah, so you think we make huge profits still. Look, have search for any of the gold or non ferous metal miners and they pretty much all put out all their data on the web and have a look at what we earn. This isnt difficult math. Take the mine i am sat in at present. It was in feasability stage in 1990. The gold price was about $350 an ounce. Now the price at the moment is over $1200. So we should be laughing? Wrong. If gold had tracked inflation then it should be over $2000. In addition, mining costs, particularly in Australia, which has become one of the most beaurucratic places on the planet have increased significantly more than inflation. So please broad shoulders, explain to me how we make "super" profit?

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Some contradiction here?

Extraction costs and taxes are only part of the scenario.
Purity of product has a very large say.

For example why does China import vast amounts of coal and bauxite when they have plenty in their back yard?

Because the quality of their local product is poor and at minimum needs sweetening with the high quality imports.

In the case of coal I guess the thermal efficiency of Aus coal is superior and hence cost effective to import rather than mine their own.

In the case of bauxite I think their own has high levels of silica meaning large chemical costs in processing.

Maybe similar is true of iron ore.

They don't import these things without good reason.

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No worries for you then.
The tax only applies to those who do.

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According to the RBA inflation was 62.7% in the 19 years following 1990. I make your gold price inflation 243% (I assume thats in USD terms) - only 4 times as high.

Perhaps part of the reason there is additional inflation in the mining sector is because of super profits! You suggest that many OZ ventures are risky, well those risks must pay off a lot of the time - how else are we supposed to believe the other argument aboutmining swelling the government's coffers and propping up the rest of the economy if returns are as marginal as you suggest. :confused:

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Exactly right! You can't help but pick up on all of these contradictions. One minute crying poor and unviable, the next claiming they saved Australia during the GFC. Quite like Clive Palmer's position...backtrack, backtrack, backtrack.

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Not if Labor weren't a bunch of spendthrifts. If they spent it wisely I doubt there would be so much outrage but they piss it against the wall like all labor/socialist governments the world over.