viability of toro, page-11

Hi Stevenjd,

i stand corrected, however, I believe the 40% is taxed on EBIT above the 10 yr bond rate. This only comes in AFTER allowing for all previous capital expenditure within the company (ie. regardless of the project).

Therefore, smaller resource companies such as TOE would most likely not being paying the tax until EBIT covers all previous expenditure.

I wonder whether it would pay for a BHP to simply take out one of these smaller resource companies in order to utilise these previous capital costs??

Anyway, that is how I read it. So TOE would most likely not be paying this tax for many years to some after they become producers. They would probably need to claw back over $100m in capital before it kicks in and then it will be based on amounts greater than the 10 yr bond rate.

Also, remember that royalties will essentially be rebated by the government, which would be a mjor benefit for smaller resource companies as they are hit on production day 1 regardless of whether they are making any money.

I don't expect the resources tax to actually happen in the current format. I do think we will have a resources tax, however, it will be on a 10 yr bond rate + a risk premium (which they should have stated on day 1 and the uproar would not be as great)