Australia Flexible on New Tax on Miners

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

The benchmark index in Australia rose 1.7% leveraged by commodity stocks as the government announced that it is prepared to lift the threshold definition of a super-profits tax from 6% to 11% or 12%, is the same as the petroleum resources rent tax.

[R]5:30 PM Sydney, Australia – Stocks in Australia rebounded after the government showed willingness to negotiate on the proposed mining industry super tax of 40%. The flexibility from the government on the tax issue and improving sentiment in regional trading supported gains in resource stocks. Australia’s capital expenditure declined 0.2% in quarter ending in March.[/R]

The benchmark index in Australia rose 1.7% leveraged by commodity stocks as the government announced that it is prepared to lift the threshold definition of a super-profits tax from 6% to 11% or 12%, is the same as the petroleum resources rent tax.

However, the government will withdraw the 40% taxpayer-funded compensation offered for projects that fail.

Mining companies are seeking more discussions on the retrospective application of the new tax, different rates for different minerals and the 40% tax rate.

Gains were pared after a government report noted a decline in capital expenditure in the quarter ending in March.

BHP Billiton, Rio Tinto gained after the Australian reported the possible compromise on proposed tax threshold.

However, Treasury Secretary Ken Henry told a senate committee today that he wasn’t aware of plans to change the proposed threshold.

In Sydney trading, the ASX 200 Index edged up 1.7% or 72 to 4,379.20.

Of the ASX 200 Index stocks 153 rose, 39 dropped and 8 were unchanged. Panoramic Resources led gainers in the index shares with a rise of 14.2% followed by Mincor Resources increasing 13.8%.

The Australian dollar climbed 0.7% to 83.61 U.S. cents.

Capital Expenditure Falls 0.2% in March

Australian Bureau Statistics reported today that the country’s capital expenditure dropped 0.2% to A$27.7 billion in March, but rose 1% from the comparable period a year ago.

Investment on building and structures gained 6.7% in March from a quarter earlier but fell 1% to A$13.6 billion from a year ago in March.

Also, equipment, plant and machinery declined 6% to A$14.1 billion in the three months to March from the December quarter, but rose 3% from a year earlier.

Companies estimate that capital expenditure will fall 2.5% to A$108.7 billion in the year ending June 30 from a year ago.

Managed Funds Rise 2% to A$1.4 trillion

Separately, the bureau noted that the total consolidated assets of managed funds by institutions rose 2% to A$1.4 trillion in March from a quarter earlier.

Consolidated assets of superannuation funds increased 4%; public unit trusts 1%, but common funds decreased 1%; cash management trusts 4%; and life insurance offices and friendly societies remained virtually the same.

The increase in the quarter for equities and units in trusts was 3%; assets overseas 5%; land and buildings 2%; long term securities 2%; loans and placements 2% and cash and deposits 0.3%.

However, the assets to decrease were short term securities 1% and other assets 0.2%.

James Hardie Reports Net Loss of US$84.9 million

James Hardie announced today that it recorded a net loss of US$84.9 million in the year ended in March from a profit of US$136.3 million as net sales declined 6% to A$1.1 billion from US$1.2 billion a year ago.

EBIT including asbestos and ASIC expenses dropped from US$173.6 million to a loss of US$21 million.

However, for the fourth quarter the net loss eased to US$2.3 million from US$129.6 million in the comparable year ago period as sales climbed 14% to US$274.9 million in the period.

The appreciation of the Australian dollar led to unfavorable asbestos adjustments of US$24.2 million for the full year and US$224.2 million for the year.

According to the company, though operating costs are mounting, it is confident of delivering “good financial results in current market conditions.”

In order to increase the company’s presence in the convenience store market segment in the eastern states of Australia, 7-Eleven Stores Pty Ltd has agreed to buy 295 gasoline filling stations from Exxon Mobil Corp.

‘The deal will build on the company’s position as the leader of the convenience stores segment in the country, taking the number of 7-Eleven Stores from 400 to more than 650’, Chairman Russell Withers said in an e-mailed statement. The sale is expected to complete in the next few months.

Aquila Plans to Sell Its Stake in Belvedere

Aquila Resources Ltd, a partner with Vale SA in Australia, is planning to sell its 24.5% stake in the Belvedere coking coal project to focus on other projects including an iron ore mine.

‘By the end of the year, we’ll be out of Belvedere and if Vale does not exercise its option of buying it, we will sell the stake. The sale proceeds will go towards funding other projects’, said Russell Tipper, General Manager of iron ore at the Perth-based company in an interview.

ASX Movers

Panoramic Resources Limited led gainers in the S&P ASX 200 index with a rise of 13.0% followed by Mincor Resources NL 12.8%, PaperlinX Limited 10.4% and Macmahon Holdings Limited 9.3%.

Ausenco Limited led decliners in the S&P ASX 200 index with a loss of 17.8% followed by TOWER Australia Group Limited 8.8%, Spotless Group Limited 4.6%, OM Holdings Limited 4.6% and Sundance Resources Limited 4.0%.

Other Movers

Aquila Resources Limited added 3.0% to A$8.56 after the company upgraded the resource and maiden reserve statement for its Washpool hard coking coal project in central Queensland.

BHP Billiton plc advanced 3.5% to A$38.58 after the mining company said it will raise the price for coking coal to about $225 a metric ton in the third quarter, according to Nikkei English News.

Foster’s Group Limited fell 0.5% to A$5.50 after the company’s plan to spin off its wine unit may prompt bids from SABMiller Plc, Asahi Breweries Ltd. and other global beer makers, attracted by the wider profit margins in Australia, fund managers said.

Rio Tinto Limited increased 4.3% to A$66.81 after a note by EMED Mining equity research specialist, Edison Investment Research said that the reconnection of the power last month at the Rio Tinto copper mine in Andalucía, Spain, marked an important milestone in the restart process.

TOWER Australia Group Limited decreased 9.2% to A$2.16 after the company announced an equity raising to support growth opportunities in the “medium term.” The company is raising approximately A$96 million in equity in a one for seven renounceable pro rata entitlement offer.