A REVIEW of the Western Australian mining sector suggests less than 20 local companies will be liable to pay the 30 per cent tax on coal and iron ore profits by 2014, the point at which the federal government expects its tax take to yield $10.5 billion.
A REVIEW of the Western Australian mining sector suggests less than 20 local companies will be liable to pay the 30 per cent tax on coal and iron ore profits by 2014, the point at which the federal government expects its tax take to yield $10.5 billion.
The mineral resource rent tax exempts producers of all minerals other than coal and iron ore from paying the tax, which kicks in only when profits exceed $50 million and returns pass 12 per cent.
Minerals will also be taxed at the ‘mine gate’, less costs to that point. A 25 per cent extraction allowance also applies to the taxable profit.
Existing operations will be valued at market value rather than book value, further raising the bar before the tax becomes payable, while new investment will be deductible in the year in which it is expended.
Based on existing and near-term development plans, less than 20 companies operating in WA are likely to be paying the tax by 2014.
BHP Billiton, Rio Tinto, Fortescue Metals and Hancock Prospecting will be the biggest payers by 2014, while existing mid-tier iron ore miners Mt Gibson Iron, Cliffs Natural Resources, Atlas Iron, Grange Resources, Territory Iron and possibly Mineral Resources and BC Iron may also be liable by 2014.
Citic Pacific’s $5.2 billion Sino Iron magnetite project, Gindalbie Metals’ $2 billion Karara magnetite venture and Sinosteel Midwest’s Koolanooka project are also due to start production this year, meaning they may attract MRRT by 2014.
Asia Iron’s $2 billion Extension Hill magnetite project, slated for commissioning in 2012, may also be liable by 2014.
However, other major projects such as the Murchison Metals-backed Jack Hills iron ore project, Aquila’s $5.7 billion West Pilbara iron ore project, or Brockman Resources’ $1.3 billion Marillana iron ore venture are only due to start operating in 2014, meaning any tax liability is unlikely for several years.
However, Aquila is likely to face a tax bill for its coal mining activities in Queensland, as will Wesfarmers on production from its eastern states coal mines.
Junior miners have loudly protested their exclusion from the discussions that led to the government’s compromise deal with mining giants BHP Billiton, Rio Tinto and Xstrata.
In particular, they maintain the deal will continue to hinder investment in WA’s burgeoning junior iron ore sector, while the scrapping of a previously proposed 30 per cent rebate for exploration spending is also a major blow.
Criticising the tax deal last week, Atlas Iron boss David Flanagan said reduced net profits left less capital to reinvest in the business and made it harder to attract outside finance.
Fortescue Metals Group founder Andrew Forrest said the tax also struck at the aspirational heart of the sector.
“Every exploration company out there believes it’s got a chance at being the next Fortescue,” he said.
“We shouldn’t discourage that at all.”
Resources Minister Martin Ferguson has urged the juniors to put their case to the new implementation panel he will co-chair with ex BHP chairman Don Argus. Mr Ferguson has also hinted at further possible concessions for magnetite, which must first undergo costly processing to attain a saleable product.
