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Posts Tagged ‘Western Australia’
Mining Week 12/’12: Australian tax passed, but BHP warns for demand
March 24, 2012
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Top Stories of the Week:
- Australian Minerals Resource Rent Tax finally approved
- The tax on high profits for Australian iron ore and coal projects which led to a change of premier in the country was finally passed by the parliament last week.
- Officials from the mineral rich states of Western Australia and Queensland argued that the taxation should be a state arrangement rather than a federal law
- Many critics expect the MRRT not to bring in the amount of cash the governments expect because of tax management by the largest players and potentially because of lower profit margins as a result of increasing costs.
- Sources: Economist; Wall Street Journal
- Mixed signals on China’s iron ore demand
- In the same week BHP warned that China’s demand for iron ore is slowing down and the Australian state of Western Australia increased its outlook for exports.
- BHP still is bullish about long term demand in China and does not scale down its investment programs. However, in the short term the company ‘’gives caution” demand might drive down iron ore price to $120/t
- Sources: Wall Street Journal; BHP Billiton presentation; Financial Times
- Power struggle for Rusal amidst debt issues
- A new chairman was appointed to the board of Rusal and his predecessor, mr. Vekselberg, made public that the company was struggling with large debt problems and said it had management problems.
- Rusal announced that it would write down a large part of the value of its Norilsk stake in an attempt to restructure its balance sheet.
- Sources: Financial Times 1; Financial Times 2; Lex Video
Trends & Implications:
- Various of the large Russian miners are trying to diversify both in products and geographic presence. Key problems the companies appear to encounter are a clash of management and corporate governance styles between Russia and western investors and large debt burdens in combination with the need to reinvest most or all of free cash flow to modernize or expand.
- Australia basically kicked off a wave of mining taxation overhauls in countries around the world. Given the very large output of coal and iron ore operations in the country the implementation of the MRRT will be the most impactful for the overall profitability of the industry. As many of the new tax regimes are based on progressive operating margin scales and operating margins of most companies are decreasing because of cost inflation, it is questionable if the new regimes will result in the income countries are hoping for in the short term.
©2012 | Wilfred Visser | thebusinessofmining.com
Categories: Mining Week
Australia, BHP Billiton, business, coal, iron ore, mining, mining business, MRRT, Norilsk, Queensland, Rudd, Rusal, Russia, tax, Vekselberg, Western Australia
Mining Week 52/’11: Chinese investment welcome in Australia
December 31, 2011
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Top Stories of the Week:
- Australia solicits Chinese infrastructure investment
- The government of Western Australia is trying to speed up the development of port and rail facilities of the Mid West region’s Oakajee port by stripping the Mitsubishi/Murchison combination of exclusive development rights and inviting Chinese parties to step in. 8 of the 14 projects in development in the region have Chinese investors.
- Sources: Wall Street Journal; Government statement; Murchison Metals statement
- Yanzhou teams up with Gloucester coal
- Yanzhou’s Australian coal company Yancoal will merge with Gloucester coal, 64.5% owned by Singapore-based Noble group. As a result Yancoal obtains a listing on the Australian stock exchange, a condition put on the 2009 acquisition of Felix Resources
- Sources: Wall Street Journal; Financial Times; Wall Street Journal blog on synergies
- Anglo and Codelco fight for Minas Sur stake
- Anglo American launched a range of claims in Chilean court trying to prevent Codelco from being awarded the right to buy a full 49% of the Minas Sur assets. The scope of the option for Codelco to buy 49% has been unclear since Anglo sold a 24.5% stake to Mitsubishi. In response to Anglo’s claims Codelco restated its intention to acquire 49% of the full project.
- Sources: Financial Times 1; Financial Times 2; Anglo American press release
Trends & Implications:
- As expected Chinese investments have proven to be a key driver of M&A activity in the mining industry in 2011. It is noteworthy that many Chinese firms are using a foreign based subsidiary or team up with a Western firm to do foreign investments. This structure holds 2 main benefits for the Chinese investors: they obtain an experienced western staff with knowledge of the way of doing business in the target countries; and they are viewed much more favorably by regulators when trying to execute deals.
- The fight of Anglo American and Codelco over Minas Sur appears to become a long term court fight. The longer this court fight stretches, the more inclined Anglo American will be to find a compromising deal, as the uncertainty about the ownership structure will delay all investment decisions for the company in the mining region.
©2011 | Wilfred Visser | thebusinessofmining.com
Categories: Mining Week
Anglo American, Australia, business, China, coal, Codelco, copper, Gloucester, iron ore, legal, Mid West, Minas Sur, mining, mining business, Mitsubishi, Murchison, Oakajee, synergy, Western Australia, Yancoal, Yanzhou
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