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Australia Mining Report Q2 2010
Business Monitor International, March 2010, Pages: 60
The Australia Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Australia's mining industry.
Rumoured tax changes spook mining industry In January 2010, there was a report in the Sydney Morning Herald newspaper which claimed that there could soon be major changes to the taxes currently levied on the mining sector. The newspaper stated that a wide-ranging review of taxation carried out for the government by the secretary to the treasury, Ken Henry, has apparently recommended that the current system of state-based royalty taxes be scrapped and replaced with a uniform national resource rent tax, to be levied at 40%. This tax would not be levied until all the exploration and development costs of a project had been paid and would only be levied in years when the project generated a profit. As yet, the full tax review has not been made available to the public, although Prime Minister Rudd has said that it should be released before the budget in May 2010. Initial reaction to this proposal from the mining sector has been hostile, with the Association of Mining and Exploration Companies stating that ongoing speculation on tax changes is damaging to the mining industry. In addition, the key mining states of Western Australia and Queensland have attacked the proposals, as they remain heavily reliant on the current royalty system as a source of revenue. However, Newcrest CEO Ian Smith, who is also the current chairman of the Minerals Council of Australia, has been quoted in the media that there was no certainty than any of these proposed tax changes will ever make the statute book. Certainly, the publisher feels that it is highly unlikely that Canberra would look to make wholesale changes to the taxation system for mining companies without first engaging the industry in dialogue. China’s acquisitive streak continues
Early 2010 has seen a continuation of moves by China to acquire stakes in Australian mining assets. In January 2010, it was reported that Zijin Mining had been successful in its AUD547mn bid for Indophil Resources. This follows several high-profile purchases of Australian mining assets over the course of 2009, including China Minmetals’ US$1.69bn takeover of OZ Minerals and Yanzhou Coal’s US$3bn takeover of Felix Resources. Indeed, already in 2010, Yanzhou has stated that it is looking for more acquisitions in the year to come. The publisher expects China to maintain strong levels of investment into the Australian mining sector during 2010.
New Data For 2010, the publisher has made significant changes to the way in which we forecast mining data. As well as using local statistics agencies and associations, we now also draw on the expertise of the UN’s Industrial Commodity Statistics Database, the US Geological Survey and the World Bureau of Metal Statistics for our historical export and production data. We then forecast this data using our own proprietary econometric model. Human intervention also plays a necessary and desirable role in our mining forecasting; experience, expertise and knowledge of industry trends and developments ensure that we can spot likely future changes and anomalous data that a purely mechanical model would not.
Country Overview Hosting a gamut of metals and minerals including iron ore, nickel, bauxite, copper, gold, silver, uranium, diamond, opal, zinc and coal, Australia continues to be a world leader in mining. Australia lies within the top five for production of most of the world’s key minerals. The mining industry is a significant contributor to Australian GDP.
Owing to its exceptional geology, Australia is home to some of the biggest names in the global mining industry. Multinationals operating in the Australian mining industry include locals BHP Billiton and Newcrest, Rio Tinto, and Xstrata.
Foreign investment rules are liberal and encourage inward investment. Mergers and acquisitions (M&As) are subject to scrutiny by the Australian Competition and Consumer Commission (ACCC). The country has well-defined regulatory bodies and a well-established legal system that can be described as investorfriendly. In the case of specific mineral exploitation, the authorities now consider uranium mining proposals on a case-by-case basis.
Industry Forecast After a difficult 2009, the publisher is more optimistic on the outlook for Australia’s mining industry over our newly-extended forecast period to 2014. We believe that growth can average just over 6% over the coming five years. We see mining’s contribution to GDP increasing from 6.79% in 2009 to some 8.17% by 2013, although it may then fall back slightly in 2014.
Demand for Australian minerals will remain strong from Asian nations, notably China.
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