minemakers likely to risk tax

http://www.smh.com.au/business/minemakers-likely-to-risk-tax-20100601-wved.html


Minemakers likely to risk tax BARRY FITZGERALD
June 2, 2010

MINEMAKERS' feasibility study of its Northern Territory phosphate project is about to become the first into a proposed new mine since the Rudd government's May 2 announcement of a proposed 40 per cent resource rent tax.

It is not the first-mover status the company was looking for. But it has got it anyway, with the release today of its full feasibility study into the development of the Wonarah project.

Wonarah is expected to emerge as a goer, even with the proposed tax in place. But the report is also expected to confirm that its overall tax burden under the tax would be the highest in the world, at 57 per cent.

Minemakers chief executive Andrew Drummond could not talk specifics late yesterday before the feasibility study was lodged with the stock exchange. But he did give a strong feel for what Minemakers thinks of the tax plan after spending $23 million of risk capital to date on getting Wonarah to the starting stalls.

''It's all about a tax grab,'' he said. ''Anybody who believes that you get more mines, and bigger ones, with a big new tax has got to be [Treasury secretary] Ken Henry or someone equally as stupid.''

Minemakers' feasibility study is expected to show that any way it is cut, there would be less in the development of Wonarah for shareholders under the new resource tax. Growing global demand for fertilisers and expected positive returns mean the project is still likely to go ahead, even with the tax.

Wonarah's phosphate rock is one of the key inputs of the global fertiliser market. Demand for fertiliser has rebounded strongly since the end of the slump that came with the global financial crisis.

Farmers worldwide stopped fertilising the moment the GFC hit in mid-September 2008, but the poor soils of the high-growth economies of China, India and Brazil mean that the farmers can only underfertilise for so long.

Phosphate rock prices reached as high as $US450 a tonne before the GFC but fell to as low as $US90 a tonne in the following months. The price has since risen to $US135 a tonne, with the slump in the US exchange rates helping the economic case of would-be Australian producers, if sustained.

Despite the rebound in phosphate rock prices, Minemakers shares have been under pressure. Their weakness can be attributed to the May 2 announcement of the resource rent tax. The stock, which was trading just shy of 40? a share in late April, weakened to 25? before going into a trading halt ahead of the announcement on the Wonarah feasibility study.

Source: The Age