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May 7 - 13, 2010 resources
Flinders 13,000 shareholders
were overjoyed to see their shares
jump from one cent to 13 cents.
Kevin Wills knows he has a
good mine in hand up in the
But the other Kevin, PM Kevin
07, has thrown a spanner in the
works. The new super tax will
apply to all resource mines -- and
while they call it a super tax --
which makes you think it will
only kick in for super profits, it
actually applies to the very first
dollar of profit any resource
Getting a mine happening has
suddenly become a lot harder for
Before you can become a miner
you actually have to mine the
market for money for about 10
years -- to find the stuff, drill it up
and get things moving.
Because Kevin s new Pilbara
mine is looking good, he was
able to raise $53 million from
institutional investors and his
13,000 local shareholders last
year. Sounds like a lot of money
but that s just the start. Getting
a mine going involves serious
documentation and the first step
is a pre-feasibility study.
So Kevin has hired Worley
Parsons, one of the country s big-
gest consulting mining engineers,
to officially appraise the iron
ore and work out the best way of
getting it to market. The study
alone is costing $20 million.
There will be a similar spend
on community consultations and
indigenous negotiations. When
they are done Kevin will need
to find another $80 million for a
"bankable feasibility study".
But Kevin s biggest worry is yet
Because of the global financial
crisis, the big international
banks, the traditional lenders
for big resource projects, are no
longer lending any money.
Even the Australian banks,
with their strong balance sheets
deposit base, won t lend on
resource projects these days.
So Kevin will have to go to the
Like Fortescue, he could go
to his Chinese customers and
negotiate a deal by swapping
equity for cash. Or he could go
straight to the big superannua-
tion funds or investment banks,
or even the retail stock market.
But as early reports indicate,
the Prime Minister s comments
about profits going overseas have
restrained any enthusiasm among
As Kevin Wills sees it, Kevin
Rudd has changed the rules of
the game. Instead of a tax rate of
30 per cent on his profit, Kevin
W s company will now have to
confront a tax rate of close to 60
This is how it works.
There are state royalties of,
say 5 per cent that have to be
paid whether you make a profit
or not. But ignore this for now.
Say Kevin W makes a profit of $1
million, he must pay $400,000 to
the Australian Tax Office. Of the
$600,000 he has left he must pay 30
per cent, or another $180,000, to
the ATO for company tax.
Which makes a tax of 58 per
cent. Suddenly, the investment
loses a lot of its appeal.
Kevin Wills is disappointed by
Kevin Rudd s sudden and belliger-
ent attack on his industry. "The
industry looks less attractive now;
potentially it s quite a worry," he
"I got into the mining business
because I really get a kick out of
building something real.
"I just don t get it. We have a
mining industry that is actually
leading the economy -- by sucking
in all that money from China the
miners allowed the country to get
through the global financial crisis
pretty much undamaged.
"I know it s a clich but it really
looks like they re trying to kill the
goose that laid the golden egg.
"The Government has been
offering us carrots and look at the
result -- new mines, new jobs, new
projects, and new life all over the
"So why would the Prime
Minister want to hop in and
Kevin Wills is determined his
project will eventually succeed.
Premier Mike Rann says the
mining companies should come to
him and put their case, so the new
tax rules can be negotiated.
He can expect a long line at the
A tale of two Kevins
It was the best of times, it was
the worst of times as 400 mining
industry players gathered at
the Adelaide Hilton first thing
Monday morning. Premier Mike
Rann was officially opening
the yearly mining talkfest the
morning after Prime Minister
Kevin Rudd had announced a new
super profits tax on the country s
standout economic success story,
the mining industry.
It was the best of times because
Premier Rann had claimed credit
for boosting the local mining
industry by encouraging the early
drilling of likely prospects with
cash incentives -- resulting in a
long pipeline of new mines which
the Premier took to the recent
election as his biggest achieve-
It was the worst of times
because as the Premier s speech
reiterated his mining achieve-
ments, the mining industry gang
had to sit there like stunned
mullets as they tried to digest
what their Prime Minister had
done to them.
The chairman of the Premier s
mining advisory body, SAMPEG,
Ian Gould, told ABC TV News in
his eight-second grab, that the
way the tax had been dropped on
the industry showed a total lack of
The miners were a lot more
vocal than that in the host of
urgent and passionate conversa-
tional groups that sprung up just
like a lively wake -- to share the
It was not only the way the
political announcement had been
made; it was the way the PM had
delivered the message to the elec-
torate -- not crazy about mining
anyway -- that the miners were
being biffed to pay for everybody s
superannuation. As the miners
pointed out, all employers will be
stumping up the $20 billion a year
to boost the super levy from nine
to 12 per cent.
But that s not the only percep-
tion problem on which the mining
PR guys and corporate affairs
teams will be sweating before
the new Resource Super Profit
Tax (RSPT) comes into effect on
July 1 next year. Every resource
company will be hit by the super
tax -- not just the BHPs and Rios of
this world which, because of good
luck and good management, are
making hay while the sun shines.
Enter the other Kevin.
Dr Kevin Wills is the managing
director of Flinders Mines, which
he floated on the stock market in
2002, raising about $3 million to
look for diamonds on Flinders
Island near Venus Bay on the West
Wills was responsible for
discovering the Challenger Gold
Mine, about 300km north-west of
Ceduna, now owned by Dominion
and one of the new breed of highly
successful mines about which our
Premier is so justly proud.
But diamonds are a pretty hard
business, so in the meantime,
Kevin Wills put together
some iron ore leases up in the
Pilbara, and after drilling into
the soft hematite ore, he struck
paydirt -- about a billion tonnes
of high-grade iron ore that over
the past 20 million years or so has
weathered into the creek beds and
is easily accessible.
When Wills announced the
good news a couple of years ago,
I know it s a clich
but it really looks
like they re trying to kill
the goose that laid the
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