rspt - the impact on mining shares...

There are so many things wrong with this RSPT it is not funny...

Most of those who support it have little understanding of the mining game...those that are against it, understand what a corrosive, negative net-gain tax it will be.

Lets for one minute forget all the arguments from one side or the other, for or against the tax, and look at one very simple fact which in my mind, highlights above all other arguments, the extremely negative net result this tax inflicts on everyone...

Current Scenario:

In short...with Company tax set at say 30%, which typically becomes something like 20% after expenses/depreciation, etc, are accounted for, then a $100m profit becomes $80m.

If a company has 100m shares on issue, and assuming all of the profit gets paid out to investors, then the expected 80c dividend should see a share price of $8 based on a medium mine-life based PE of 10.

So...our company is worth $800m...an asset owned by all shareholders.

In this scenario, the government has collected $20m in recurring taxes.

RSPT Scenario:

Now, lets increase the tax rate in scenario 1 to just 50% (only a 20% increase on the current 30% base tax), which is about middle of the road for what many are projecting they will actually have to pay under the new RSPT (of course, this is net...after the 6% bond-rate threshold is exceeded and various state royalties are essentially credited).

Assuming similar costs to the first scenario above, our $100m profit now becomes $60m after tax...dividends are reduced to 60c and the company gets re-valued at just $600m

The government has collected an extra $20m, but shareholders have collectively lost $200m in the value of their asset!

You can do this based on any tax ratio you like...with a PE of 10, any extra tax which de-values a company, will see a 10-fold loss in asset value for shareholders!

Use a PE of just 6, and that loss is 6-fold...increase that to 20...and yes, shareholders lose 20 times what the government collected.

Those accusing the mining industry of being greed-induced fat cats...should perhaps consider that shareholders, the real owners of these companies, are the one's who stand to lose the most...not the high-profile CEO's, who will still get paid!

The tax simply does not make sense...and causes collateral damage at so many levels it is not funny.

How many roads, rail lines, ports, power grids, gas pipelines, even townships, would not exist if not for mining? I am sick of this view that "you can only take the resources out of the ground once"...what about the infrastructure that remains, not to mention the employment, especially for rural communities who would otherwise have NOTHING!

All these things cost money, provide long-term assets for the country, and a chance at a reasonable life for many in the outback!

I think some city folk are living far too insular lives.

And...who owns these roads, rail lines, ports, etc...when the resources are gone?

Cheers!