Antinuclear

Many mining companies worse off in Gillard’s new tax plan

BHP Billiton pays the South Australian government an embarrassing 3.5 per cent royalty for the uranium it extracts in the state’s north. As a result of the Gillard compromise it has escaped paying a resource rent tax of 40 per cent but regained a huge sovereign risk.

Sovereign risk back on the resources table, Sydney Morning Herald, PETER MARTINJuly 7, 2010 Have many mining companies been made worse off by of the changes made by Julia Gillard?……..

BHP Billiton pays the South Australian government an embarrassing 3.5 per cent royalty for the uranium it extracts in the state’s north. As a result of the Gillard compromise it has escaped paying a resource rent tax of 40 per cent but regained a huge sovereign risk. The risk that it’ll one day be paying more for South Australian uranium will now be acutely apparent to its funders. After all, Queensland pushed up its rate for high-value coal to 10 per cent two years ago.
The truth is, miners don’t mind facing sovereign risk as much as they say. It’s part of their business plan. Ben Smith says they seek out low-tax high-sovereign risk locations in order to exploit them ”before life becomes more difficult”.

But they know what’s coming.

Which brings us to what’s likely to happen. Expect piecemeal royalty increases state by state, mineral by mineral, in a fairly uneven and unedifying way.

Or perhaps, something else. Most miners have probably been made worse off as a result of the Gillard changes. About 49 per cent of mining companies make no profit, according to official statistics, and would have faced no resource charge under the tax as it was, and would have had royalties refunded. Others, including many goldminers, make low profits and would be in the same situation.

What if a future government (maybe even a Gillard government) offers them the opportunity to switch to a super profits regime? It would be voluntary but having made the choice there would be no turning back. They would escape state royalties in return for knowing that if their mines did turn good they’d be paying Australia a fair share. Many might take it up. It’s hard to imagine them campaigning against it. And they would be freed from the treadmill of sovereign risk. Sovereign risk back on the resources table

July 6, 2010 - Posted by Christina Macpherson | AUSTRALIA - NATIONAL, business, uranium | antinuclear, Australia, BHP, BHP Billiton, uranium