gbg potential sp projections, page-60

For what its worth, here's an analysis which just came through from senior resource analyst at RBS - James Wilson.

Event:
• News reports are coming in regarding the potential to remove the diesel fuel rebate for mining companies at next weeks May 8th budget.
• Weakness seen in big miners such as AGO, FMG, OZL, RIO, BHP, WHC & NHC
• Iron ore fundamentals appear in tact (see yesterdays iron ore note) so present weakness is likely because of this diesel rebate issue.

The Diesel excise rebate explained:
• Currently the excise tax is 60c of which 38c is rebated to mining companies. The excise itself is used to fund national road infrastructure projects and to repair roads, however most of it goes into general revenue. It's this action that has the miners in a huff as almost all of them use roads they construct privately.

What the government / companies are saying:
• Key Independent Tony Windsor has said he is unlikely to support such a change to the diesel fuel rebate.
• BHP has been quoted as saying Olympic Dam's expansion would likely be delayed if the rebate is scrapped.
• RIO's Tom Albanese has said that the cost would mean an additional $500m in annual costs.
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• Oz Minerals has suggested that axing the rebate would cost them an additional $20m a year, FMG has suggested an additional $145m.
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• Of the $5bn in fuel tax credits, $1.7bn came back to the mining sector.
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• The diesel rebate also applies to agricultural, fisheries and forestry.
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• The independents oppose it (quoted in the AFR), the Green's are strongly for the axing.
Is it likely to pass? - conviction is divided at the moment, caution prevails
• Our contacts in industry suggest that it's currently 50:50 on weather or not this will be included in the budget.
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• This will be seen as yet another issue for the mining companies to rebuke against the government. Expect strong back-lashes from the mining companies through advertising / TV etc..
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• MRRT taxes are already on the table so this will be seen as further taxing of mining companies. MRRT was due to come in on July 1 but speculation is mounting on weather it will get across the line. The abolition of the diesel fuel rebate could be seen as a secondary source of income for the government (with thanks to Warren Edney @ RBS for this bit).
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• Further updates when they come to hand.