Australian Index Up 2%; Miners Battle Super Tax

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
24 May, 2010
New York City

Australian stocks rebound but the dollar continues to fall for the sixth day in the last seven days. Fortescue CEO says the government is adamant on super tax threshold. Healthscope Ltd permits private equity consortium due diligence in preparation of a takeover bid.

[R]6:00 PM Sydney, Australia – Australian stocks rebound but the dollar continues to fall for the sixth day in the last seven days. Fortescue CEO says the government is adamant on super tax threshold. Healthscope Ltd permits private equity consortium due diligence in preparation of a takeover bid.[/R]

The Australian dollar extended last week’s decline and closed lower for the sixth time in seven days against the US dollar after concerns that European debt crisis will spread.

The Australian dollar declined against all major currencies. The ASX 200 index in Australia increased 2.09% or 90 to 4,395.40 and of the stocks in S&P ASX 200 index, 151 increased, 38 declined and 11 were unchanged.

The deteriorating economic prospects in the euro-zone have helped push the cost of short-term borrowing in Europe relative to US attracting yield seeking investments.

Andrew Forrest, CEO of Fortescue Metals Group Ltd, has said the government is unwilling to compromise on the tax plan for the super profits tax. ‘They have said to us that the 6% threshold is non-negotiable,’ he said in an interview on the Australian Broadcasting Corp’s Inside Business Program, yesterday.

The proposed 40% tax will be levied on resource company’s returns that exceed the rate on long-term Australian government bonds, which is currently at 6%, and will be offset by royalties paid to the state governments, according to the documents released by the government on the proposed tax.

The company’s market value has declined by about $700 million since the new tax proposal.

Rio Tinto Plc will shift resources away from Australia after the government proposed a 40% profit tax on resource projects, said the company’s CEO Tom Albanese while talking to reporters today.

Healthscope Ltd, the subject of a A$1.82 billion bid, informed the Australian Stock Exchange today that it will allow the unidentified private equity group to conduct due diligence on its business.

The firm operates 43 hospitals in Australia besides running the Gribbles pathology chain in Australia, New Zealand, Malaysia, Singapore and Mauritius.

Transurban group, the Australian toll-road operator has said that the takeover offer made by three of its biggest shareholders did not clearly reflect the long-term value of the company.

‘We have the best of class suite of assets and we have a pipeline of attractive growth projects at various stages of development and delivery. We also have a healthy balance sheet to provide sufficient funding certainty to the growth and delivery of these projects,’ Chairman David Ryan said in his letter to the stockholders filed with the stock exchange.

An equity fund raising effort to help in the acquisition of Lane Cove Tunnel in Sydney has significantly improved the funding position of the company for other projects in the city, including planned upgrade of its Hills M2 and M5 toll roads, the letter said.

ASX Movers

Murchison Metals Limited led gainers in the S&P ASX 200 index with a rise of 8.9% followed by St Barbara Limited 7.2%, Macmahon Holdings Limited 7.0% and Mineral Resources Limited 6.7%.

GrainCorp Limited led decliners in the S&P ASX 200 index with a loss of 3.6% followed by Emeco Holdings Limited 3.6%, Mirabela Nickel Ltd 3.6%, Ausenco Limited 3.2% and Downer EDI Limited 3.2%.

Other Movers

BHP Billiton plc advanced 2.8% to A$37.80 after the company said it still sees returns on its petroleum operations in Western Australia and the Gulf of Mexico as competitive, amid tax and regulatory debates affecting the two regions.

Healthscope Limited added 0.1% to A$5.25 after the healthcare service provider permitted to a private equity consortium to conduct due diligence on the company.

Rio Tinto Limited advanced 3.8% to A$64.15.

Transurban Group rose 0.6% to A$4.41. The takeover bid from its three biggest shareholders didn’t reflect its growth prospects, the Australian toll-road operator said.