Home' InDaily : August 6th 2010 Contents www.independentweekly.com.au
August 6 - 12, 2010 resources
At first glance the panel the
Gillard Government has
put together to advise on the
detail of the proposed mineral
resource rent tax looks like a very
competent and capable group. The
Government is, however getting
somewhat ahead of itself and it
may be a while, if ever, before the
panel actually has something to
If the Coalition wins the
election, of course, there will be no
MRRT or any version of it and life
and the taxation framework will
resume as normal for miners large
If Labor prevails, it is unlikely
that the MRRT will be imple-
mented in the form agreed in the
intense negotiations between the
government and the big miners
a month ago, when Gillard was
desperate to remove the previous
resource super profits tax and the
damaging advertising campaign
the miners had mounted against it
from the pre-election debates.
It appears almost certain that
the Greens will hold the balance
of power in the Senate after the
election. If the Coalition wins, that
will be irrelevant to the future of
the MRRT because there will be no
legislation to block or amend.
If Labor wins, however, it will
only be able to get the MRRT
legislation through the Senate
with the support of the Greens.
With Bob Brown already saying
he wants a super tax rate of 50 per
cent rather than the effective 22.5
per cent agreed by the government
and the big miners, Labor would
be in an invidious position.
Either it reneges on its deal with
the big miners, Rio Tinto, BHP
Billiton and Xstrata -- which would
be damaging not only to its own
credibility but to perceptions of
Australia as a stable place to invest
(compounding the damage created
by the original RSPT) -- or it would
have to abandon the notion of a tax
on "super profits".
Abandoning the MRRT would,
of course, mean the loss of
the $10.5 billion of revenue it
is supposed to raise and tear a
rather large hole in Labor s fiscal
The big miners knew when
they agreed to the deal that there
was a real risk that it could be
derailed by the Greens if Labor
were returned, but felt they had no
choice but to do the best deal they
could in circumstances that gave
them some leverage rather than
risk a returned Labor government
imposing the original RSPT.
At the time it appeared an
absolute certainty that Labor
would win the election. Had they
known how badly Labor would
campaign, they might have had
second thoughts about pulling
their advertisements and accept-
ing the MRRT.
The Greens dislike mining and
won t be in the least concerned
if a more punitive version of the
MRRT adversely affects invest-
ment in the sector. Thus, if they
control the fate of the MRRT, it
will have more of an impact on the
sector than Labor envisaged.
That s bad news, not just for the
big miners who would contribute
the overwhelming bulk of the
revenue the tax would raise, but
for the junior miners who have
re-started their own campaign
against the tax. If they disliked the
Labor MRRT they would almost
certainly fare worse under a tax
designed on part by the Greens.
The problem for the smaller
miners, and more particularly
those with projects that generate
more than the $50 million of
profits above which the MRRT cuts
in, is that not only have they lost
the incentives for exploration that
were in the RSPT but the MRRT,
like the RSPT, applies before
For companies who have project
financed their developments, that
would make funding projects in
future far more difficult. It is the
reason Andrew Forrest, whose
Fortescue Mining has a lot of
leverage, is railing against the tax.
If an MRRT is introduced, the
panel, chaired by Don Argus, will
have to grapple with the issues
raised by the smaller miners and
devise ways to finesse the applica-
tion of the tax without radically
changing its basic structure. That
won t be easy or uncontroversial.
It will be even more controver-
sial and perhaps impossible, if
Labor is returned and the Greens
are in a position to determine the
fate and form of the MRRT.
Penrice Soda Holdings Limited
announced this week that its
preliminary unaudited accounts for
the year ended 30 June 2010 show an
underlying net profit after tax of $5.3
million, in line with guidance provided
in April 2010 of $5 million to $6 million
compared to $9 million the previous
"As previously announced in April,
chemicals business demand was nega-
tively impacted in the March quarter
when reduced soda ash volumes were
caused by unexpected, extended
destocking by Penrice s principal
glass manufacturing customers," the
company said in a statement to the
"Soda ash sales volumes are recover-
ing to more normal levels. Bicarb
sales volumes, negatively impacted
in the March quarter by unseasonal
wet weather reducing demand from
Penrice s principal stockfeed custom-
ers, are also recovering.
"Penrice is well placed to capitalise
on the market recovery, based on its
Net free cash flow for the year
was negative $7.4 million, which is a
significant improvement on negative
$22 million in 2009.
The result is consistent with recent
guidance of negative $7 million to
negative $9 million.
The positive trend is expected to
continue in 2011.
The company also confirmed
that Penrice s mining operations
will not be covered by the Federal
Government s revised Minerals
Resource Rent Tax scheme.
Following its capital raising in 2009,
Penrice had been in discussion with
its banks regarding future funding
The company said it has secured the
in-principle support of its banking
syndicate for an extension of its bank-
ing facilities for a further year until
March 2013 and expects its revised
banking agreements to be finalised in
the near future.
Penrice Soda s full year audited
results and a market update will be
released on 26 August.
Penrice on track
Miners such as Fortescue's Twiggy Forrest face a sea of uncertainty until the
election is decided.
Penrice boss Guy Roberts says the company profit guidance remains on course.
AWB LIMITED (AWB)
AWB Limited (AWB) and GrainCorp Limited (GrainCorp)
last week announced they have entered into a Merger
Implementation Deed (MID) under which GrainCorp
will merge with AWB under a Scheme of Arrangement
(Scheme) between AWB and its shareholders.
The move creates the largest diversiÞed rural services
business in Australia, with industry-leading positions in
grain storage and handling, rural merchandising, malting,
àour milling, grain export and marketing. The combined
group will have a stronger competitive position to compete
domestically and internationally with international grain
companies operating in Australia.
The merger will create an ASX 100 company with a
combined market capitalisation of approx $2 billion with
combined revenues in excess of $7 billion. It is expected
that the merger will result in beneÞts in excess of
$40 million (annualised) expected to be realised over Þrst
two years. The directors of both companies unanimously
support the proposal.
Sharebrokers and Investment Advisers
Telephone (08) 8217 3900
Warning (General advice only): Past performance is not a reliable
indicator of future performance. The recommendation in this
advertisement is made without reference to its appropriateness to
your investment objectives, financial situation and particular needs.
Before acting on this general advice, you should discuss with your
investment adviser the appropriateness of this recommendation to
your own specific circumstances.
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