Miners continue 'Rent Tax' fight

AS the Federal election campaign nears an end, Australia’s small and medium mining companies are still refusing to “move forward” with PM Julia Gillard and her new Mining Resources Rent Tax.

The new tax “deal” was a major platform advanced by Ms Gillard soon after she deposed Kevin Rudd. She claimed it had ended the deadlock with the mining industry under Rudd.

Initially, it appeared the miners had dodged a bullet, with the original Resources Super Profits Tax barely recognisable. The new tax rate had been slashed from 40 to 30 per cent, and it would apply only to coal and iron ore miners, and fledgling Liquified Natural Gas producers would come under provisions for the petroleum industry.

But many were unhappy at having been left out of any discussion and re-launched their advertising campaign claiming the MRRT would hit the economy, living costs and jobs.

Sydney Mining Council chairman Julian Malnic recently told the 3000 members throughout Australia that the only way to defeat the tax was to support Opposition Leader Tony Abbott, who had promised to dump it, and vote for the Coalition.

Mr Malnic referred to the deal as a “joke about two South Africans and an American who helped throw out the Prime Minister” over the mining tax.

“The two South Africans are Marius Kloppers and Mick Davis, CEOs of BHP Billiton and Xstrata, and the American was Tom Albanese, CEO of Rio Tinto.

“So what happened on that June day when Julia Gillard closed the door on a windowless room in Parliament House to cut a deal with ‘the Australian mining industry’?

“Something vital happened. She closed the door on the executive director of the Minerals Council of Australia, Mitch Hooke. Also shut out was the other industry body, the Association of Mining and Exploration Companies.

“Also shut out was all of us ... across Australia. Julia Gillard must have thought we’re just one big happy union and these were our leaders.

“And yet we heard it on the television that night, agreement had been reached ‘with the Australian mining industry’.

“What a great snow job! These big three companies aren’t even themselves Australian – they are international companies,” Mr Malnic said.

The three CEOs had acted as “self-appointed power brokers”.

“It was purely their idea to cave in on the tax. They didn’t ‘go back to their membership’ to see what we wanted.

“If they had, there is a strong chance we would have unified against it and sent Gillard to an election with the ads still running and the burning tyre of Kevin Rudd’s mining tax still around her neck.

“Instead they chose to let her off and play king/queen maker to the Gillard Government. They stole the industry’s opportunity to defeat the tax, plus they let Labor off the hook. Why for God’s sake?”

Mr Malnic said there was a “stark lesson” to draw from PNG, where after 28 years, a super profits tax raised zero dollars and was finally dumped because of the “contraceptive effects it had on investment”.

He listed several other reasons why the rest of the Australian industry was “so agitated”.

“Long before the release of Wayne Swan’s faked figures about how little tax Australian miners paid, there was quite a wide sense across Australia that mining was carrying the day in the GFC.

“Through company tax, payroll tax, royalties, infrastructure and the many flow-ons, Australians were already getting a sufficiently fair share out of their minerals.

“So much so that Australia’s economy was carried through the GFC if not by direct revenue then at least by the confidence we took from being ‘hard-wired’ to China with minerals.

“Now the Labor Government wants to turn the citizens of Australia into economic ambulance chasers, rushing off to prey on whatever industry has fallen on good times. What happens when coal and iron get a bit soft? They will if prices fall or costs rise.

“The Government will be forced to make some other commodity or industry stand and deliver with another ambush tax to patch the revenue from decreased iron and coal profits. Is copper next? Is gold next? Or are the banks next?

“For Australia’s miners, of the 23 years since the crash of ‘87 we have only had the last few that were any good. We had 13 years of nuclear winter, of capital starvation. Mines are capital intensive and it takes many election cycles to build the confidence and capital to create one. Mugging us when we finally got it together is unfair.

“Even if it ends up raising zero revenue, which some think is possible, the MRRT makes the economic pie smaller. Fooling with the system is fooling with confidence. It will mean less investment, less exploration and less mines. Less mines means less jobs, less income, and less multiplier effect.

“Operating this tax will lead to a huge bureaucratic effort on the Government side and a massive tax minimisation business on the industry side. Many analysts are saying that because of the concern that Australia is now a country where the rules can change overnight, the MRRT debilitates future producers who have to raise their capital on the open market.

“This lifts the barriers to entry for the mid-rank companies like the smaller iron start-ups in the West. They are competitors to the Big Three who ‘did the deal’ so it maybe that’s why they grabbed the moment. Global companies, of course, have global sources of capital.

“The mining industry has been left only one option and that is to chop out the rot by embracing the very clear position of Tony Abbott. And if he comes second in the election, let’s make sure we keep our ‘No MRRT’ burning for next time,” Mr Malnic said.

Investment analyst Ivor Ries echoed some of the miners’ concerns on the ABC’s Inside Business recently.

He said smaller iron ore producers would struggle to obtain start-up finance unless they had a contract with a Chinese mill.

“The cost of finance probably went up five percentage points as a result of the mining tax. So marginal projects are even more marginal than they were and without a contract with a mill, you’re as good as dead.”

Mr Ries is research director for E.L.&C Baillieu.

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