Mining Week 48/’11: Change in Brazil & Tax in Australia
November 27, 2011
Top Stories of the Week:
- Australia’s Mineral Resource Rent Tax approved by lower house
- The new 30% tax on profits above A$75mln for coal and iron ore projects has been approved by the lower house and is now only to be approved by the senate. The tax has been debated for approx. 2 years. Initially proposed by Kevin Rudd, the former premier, the regime has been tuned down and now includes arrangements to stimulate and protect investments.
- Sources: Wall Street Journal; Financial Times; Australian Treasury MRRT explanation
- Vale appoints new CFO: Tito Martins
- Tito Martins, Vale’s head of base metals, has been appointed as the new CFO of the company. Several executive management positions changed in the first major move of the new CEO to strengthen control. Mr. Martins was involved in the acquisition of Inco, which turned into Vale’s base metals division which was led by Mr. Ferreira.
- The change of top management of Vale was started by appointing Murilo Ferreira CEO in the place of Roger Agnelli after the presidential elections in Brazil. One of the reasons of conflict between government and Vale was the building of a fleet of iron ore carriers in Asia rather than domestically. This fleet was in the news this week as Chinese ports are refusing to host them, trying to protect the interest of incumbent shipping lines.
- Sources: Vale’s press release; Financial Times
- Rio Tinto bids for uranium explorer
- Rio Tinto convinced the board of Hathor Exploration, a Canadian uranium explorer, with a C$654mln bid. The bid is approx. 5% higher than rival Cameco’s bid. Hathor owns rights to various uranium deposits in the Athabasca basin.
- Sources: Financial Times; Rio Tinto press release; Hathor Exploration board recommendation
Trends & Implications:
- The changes at Vale should prepare the company for further changes to the business environment for the major iron ore producers. The introduction of the MRRT mainly hits Rio Tinto and BHP Billiton, but all three majors are figuring out how to react to increasing uncertainty about demand. Asian steel producers are pushing for adaptations to the recently changed pricing mechanisms, moving the pricing system to shorter term contracts. At the same time various Asian players are starting to buy iron ore assets in the price range of hundreds of millions to several billions of dollars; threatening the dominance of incumbents.
- Rio Tinto is trying to buy into uranium at a moment where industry shares are depressed because of the nuclear disaster in Japan last year. The bid for Hathor signals Rio’s management still believes in the potential of the industry. The company says it accounts for 16% of the world’s uranium production from mines in Australia and Namibia.
©2011 | Wilfred Visser | thebusinessofmining.com