The Mining Tax – A Personal View – Part 2

In my last blog, written before going on leave overseas for a few weeks, I wrote that the RSPT  as proposed would mean that there could be significantly less investment in Australian mining projects.  I also suggested that if this message got through to the public and to the Government, the proposal would inevitably be modified. 

Well while I was away not only was the tax changed, but the Prime Minister too, an extraordinary outcome that still has residual shock waves. 

Interestingly the new MRRT has been greeted with a much more muted response from the industry at large, with the majors, BHP, RIO and Xstrata seemingly satisfied with the changes made to the proposed tax.  Industry peak bodies have also stepped back from their vocal criticisms of the tax.  However we are beginning to see some of the smaller coal and iron ore companies taking out advertising spots against the MRRT, which seems to most affect smaller new venture relying on debt financing to create new mining operations.  With interest not being deductible before the new tax applies, smaller projects will find it much harder to fly.  Fortescue’s Andrew Forrest is making this point very strongly, with their funding model relying on significant debt funding for expansion.

It remains to be to be seen what impact the lower key new advertising campaign has either on the election or further changes to the MRRT.  As always, it is fascinating for those interested in the industry and in national politics. 

Author - Gary Linton, Managing Director - Prospect Consulting