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  #81  
Old 17-06-2010, 11:38 AM
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Yeah, I reckon the rate is a little high, I think it will end up settling somewhere just above the royalty rates.

Australia is still a very stable country in many areas, and is still a good option for investors.

I also find it interesting that the mining companies arnt taking a harder look at their operating expenses. There is so much wasted money in the industry, they could save a fortune if they could reduce that part of the pie.
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  #82  
Old 17-06-2010, 11:53 AM
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Default Olympic Dam Expansion - BHP

Here an independent look at one company's expansion plans:

Olympic Dam's vanishing value

www.businessspectator.com.au/bs.nsf/Article/Olympic-Dam-BHP-Kevin-Rudd-RSPT-pd20100616-6G93C?OpenDocument&src=sph

Morgan Stanley’s analysis of the implications of the resource super profits tax for BHP Billiton’s proposed $US20 billion-plus expansion of its Olympic Dam project should be required reading for all the members of the Rudd government cabinet because it shows how the tax would kill off one of the largest resource developments in modern Australian history.

BHP has been studying the feasibility of the expansion, which would create one of the largest open-cut mines in the globe, producing nearly four times the volume of copper and uranium that it does today and employing about 9000 people in the construction phase and 4000 once it became operational.

The Morgan Stanley analysis assumes the mine starts production in 2018 and its production reaches maturity around the middle of the next decade.

Once operational, Olympic Dam would generate up to $US5.5 billion of revenue a year and under the current taxation regime would pay about $US900 million a year in taxes and royalties – an effective tax rate of more than 36 per cent.

Under the same regime, once fully up to speed, it would, Morgan Stanley’s analysts say, produce profits of about $US1.7 billion a year, or a return on invested capital (ROIC) that would climb to around 20 per cent.

That provides an indication of the levels of capital, export revenues, jobs, lead times and returns involved in a project of the magnitude and risk of Olympic Dam – the last great mineral find in this country. (It was discovered in the late 1970s but it took 12 years before first production).

Morgan Stanley’s base valuation of the project under the current settings, using an 8 per cent weighted average cost of capital, is $US690 million. That means it would take 12 years to recover the initial capital invested. During that period the mine would generate taxes and royalties of $US9.7 billion.

So, under the current tax regime, with a solidly positive net present value (NPV), the project probably goes ahead – provided there aren’t higher risk-adjusted returns available elsewhere and BHP’s board is prepared to put such a large lump of capital into a single and quite complex project.

With the RSPT in its present form, the NPV of Olympic Dam is a negative $US761 million! That’s with the expansion completely equity funded – the numbers would be worse if there were any debt funding because the RSPT applies before financing costs.

While the project would produce a ROIC of 14.6 per cent under the RSPT, it is almost inconceivable that BHP would proceed with a project that destroyed shareholder value to that extent and which would ultimately face an effective tax rate above 70 per cent. That’s not what one might regard as a fair sharing of the risk and reward of such a major investment of shareholder funds.

Morgan Stanley modelled the impact of a 40 per cent RSPT with an uplift factor of 10 per cent rather than the government bond rate now proposed. That produced a positive NPV of $US85 million.

While it said it believed the project would be developed under those fiscal conditions, one wonders where Olympic Dam would rank under those settings amidst the universe of potential projects within BHP’s vast development pipeline.

As a base metals project with complex mineralisation it is inherently riskier than, say, iron ore or metallurgical coal, where at least Australian producers have some degree of influence over the market and where prices tend not to be quite so volatile because of the relative concentration of the supply base.

The analysts said their analysis showed that, at a minimum, the RSPT required some key adjustments in order for Olympic Dam to be economic and investment to proceed.

The headline tax rate needed to be reduced – 20 per cent was more appropriate than 40 per cent – and the uplift factor needed to be lifted from 6 per cent to a minimum of 10 per cent and be more reflective of the weighted cost of capital.

With a 20 per cent RSPT and 6 per cent uplift factor Olympic Dam would have a NPV of $US132 million, a payback period of 12 years and an average ROIC of 16.9 per cent. It would pay $US9.2 billion of taxes and royalties in its first 12 years of production – about $US500 million less than under the current regime but which would represent, by the middle of next decade, an effective tax rate of about 44 per cent.

The analysts actually think the super profit threshold should be set at 15 per cent because this was more reflective of the typical hurdle rate required for high-risk investment by miners and fund managers. The Morgan Stanley team also says that, for existing mines, assets should be revalued to market or replacement value (which would do away with the retrospective dimension of the tax).

So, under the existing tax regime, the expansion would generate almost $US10 billion of taxes and royalties for the government. Under the RSPT as currently proposed – nothing.

There would be no tax on super profits because there would be no profits, or investment. That would be an odd outcome if the tax were, as Kevin Rudd keeps claiming, truly an historic "reform".


I'd suggest that some have no idea of the implication of this tax excepting "more money from the rich". As such, it was seen as an easy option by Krudd n Swann. The problem is, in the end, that the decrease in investment in Australia will effect everyone. The tax , which in effect, allows for the Government to reimburse projects losses at 40% in exchange for taking a bigger tax grab on profitable companies is a nationalisation of the mining industry by stealth. The Government being a "silent" partner.

Government's business is not being a part of the mining business!
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  #83  
Old 20-06-2010, 08:22 AM
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THE mining industry's new advertising blitzkrieg against the Government's super profits tax has been referred to regulators over fears it could talk down the value of the nation's retirement funds.

http://www.news.com.au/money/superan...-1225881660425
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  #84  
Old 20-06-2010, 11:29 AM
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Quote:
Originally Posted by Kato View Post
I don't think they should be taxed more at all.

I do think they should be forced to use local suppliers and contractors and not just ship everything offshore for fabrication. This would provide great employment, create long term training needs and generate more taxes than any 'super profit tax'.
See this is a solution. Pouring more money into the governments pocket doesnt mean we will benefit at all. The dole bludgers will proberly get a $50 a fortnight increase or we'll all get another $900 that came from our pockets anyway. And a portion of the people didnt even get their $900 because they work harder then others.

To the people who complain about miners being paid too much and therefore pushing up the SOL of the economy, fail to recognise the sacrafices that are made away from girlfriends, family, friends and the strain it puts on everyone to make ends meet whilst away. Take the mining away, do you really think Australia would of been so easily pushed through the GFC? Not a chance.

What Kato has suggested is a real time solution to a problem. It would provide alot of reinbursment to the economy through jobs, materials so on so forth. Maybe another 10-15% increase in tax plus having to use local manufacturers, engineers etc instead of a blatant 40% tax that the public have no say in what it does.
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  #85  
Old 20-06-2010, 12:25 PM
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Quote:
Originally Posted by Elrico View Post
To the people who complain about miners being paid too much and therefore pushing up the SOL of the economy, fail to recognise the sacrafices that are made away from girlfriends, family, friends and the strain it puts on everyone to make ends meet whilst away.
AWWW, look whos getting all soppy cause they haven't got a root in 4 weeks...
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  #86  
Old 20-06-2010, 01:33 PM
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Originally Posted by Hurtenstein View Post
AWWW, look whos getting all soppy cause they haven't got a root in 4 weeks...
Wouldnt you? hah
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  #87  
Old 24-06-2010, 08:29 PM
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I dunno if this is a repost... or relevant anymore but a very interesting read none the less



MINING TAX EXPLAINED

Maybe a lesson in economy for us all…

RUDDS SUPER MINING TAX EXPLAINED VIA THE "BEER ECONOMY" FOR THE AVERAGE JOE....
Have a read...
Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100.
If they paid their bill the way we pay our taxes, it would go something like
this;
The first four men (the poorest) would pay nothing.
The fifth would pay $1
The sixth would pay $3
The seventh would pay $7
The eighth would pay $12
The ninth would pay $18
The tenth man (the richest) would pay $59
So, that's what they decided to do..
The ten men drank in the bar every day and seemed quite happy with
the arrangement, until one day, the owner threw them a curve ball.
"Since you are all such good customers," he said, "I'm going to
reduce the cost of your daily beer by $20". Drinks for the ten men
would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes.
So the first four men were unaffected.
They would still drink for free. But what about the other six men - the
paying customers?
How could they divide the $20 windfall so that everyone would get his fair
share?
They realised that $20 divided by six is $3.33.
But if they subtracted that from everybody's share, then the fifth man and
the
sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each
man's bill by a higher percentage the poorer he was, to follow the
principle of the tax system they had been using, and he proceeded to
work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four
continued to drink for free. But, once outside the bar, the men began
to compare their savings.
"I only got a dollar out of the $20 saving," declared the sixth man.
He pointed to the tenth man,” but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar
too. It's unfair that he got ten times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back,
when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't get
anything at all. This new tax system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine
sat down and had their beers without him. But when it came time to
pay the bill, they discovered something important. They didn't have
enough money between all of them for even half of the bill!
And that, boys and girls, journalists and government ministers, is
how our tax system works.
The people who already pay the highest taxes will naturally get the
most benefit from a tax reduction..
Tax them too much, attack them for being wealthy, and they just may
not show up anymore.
In fact, they might start drinking overseas, where the atmosphere is
somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
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