Ann: Grande Cote Definitive Feasibility Study Res, page-7

re: Ann: Grande Cote Definitive Feasibility S... Another super tax casualty.

Robin Bromby From: The Australian June 17, 2010

THIS morning investors were able to compare and contrast the mining tax situation in Australia and in Senegal. And which one is the more attractive?

Thats what is called a rhetorical question given the respective announcements from DSF International Holdings and Mineral Deposits. Or the developments at BHP Billiton which is pursuing iron ore in Liberia at a time when media reports conjecture that the Olympic Dam expansion in South Australia could be stymied by the proposed resources super profits tax.

DSF announced this morning that it has withdrawn exploration licence applications at Balladonia in the southeastern section of Western Australia. A DSF subsidiary had been planning to investigate the potential for a 1 billion tonne lignite resource to support a coal to liquids project. But desktop studies shown the figures did not add up.

The culprit, according to the company, is the resources super profits tax proposal. DSF said the large capital cost, plus the uncertainty over the tax, killed the project. Even with a higher oil price and a billion tonne resource, the capital required would not be available from equity investors, debt providers or projects financiers in the foreseeable future due to the risks associated with the project and diminished returns from potential profits tax.

By contrast, MDL is getting a 15-year tax holiday in Senegal.

The company has released details of its definitive feasibility study at the Grand Cote mineral sands project in the West African country. This shows a resource of 751 million tonnes at 1.8 per cent heavy minerals, a capital cost of $US406m, and that the project would be of international significance by producing 7 per cent of the worlds zircon and 10 per cent of global ilmenite output.

MDL is planning first production in 2013 at a time when the zircon market is forecast to be in supply deficit.

Senegal has granted MDL a 25-year mining lease, a 15-year tax holiday apart from a 5 per cent royalty. No import duties will be levied on equipment coming into Senegal for the project. The Senegal government can acquire 10 per cent of the project based on a price formula, and will receive dividends once debt is paid off.

http://www.theaustralian.com.au/business/mining-energy/another-super-tax-casualty/story-e6frg9ex-1225880869270