Rudd can't afford to pooh-pooh public statements by miners
WHEN it comes to misinformation, the Rudd government has been pretty shifty about its decision to mount a $38 million advertising campaign to counter what it claims is "an active campaign of misinformation" about its proposed resource super-profits tax (RSPT). The ad campaign began on May 28 after Special Minister of State Joe Ludwig obligingly granted an exemption from the vetting requirements for government advertising campaigns, which means it would have to be on the basis of "a national emergency, extreme urgency or other compelling reason". Ludwig acted on advice from Treasurer Wayne Swan. Notably absent was any identification as to who was promulgating this co-ordinated campaign of misinformation.
However, it's worth noting that Swan wrote to Ludwig on May 10, the day before the federal budget and three days after the Minerals Council of Australia began an ad campaign in relation to the RSPT. Ludwig's statement referred to paid advertising, so it appears that the exemption may be based predominantly on the MCA's ad campaign, and possibly some of the criticisms made by Fortescue Metals chief and sometime Kevin Rudd mate, Andrew "Twiggy" Forrest, and coal mining magnate Clive Palmer.
. If so, that ignores the flood of public statements from mining companies across the board, many of which have been sent to the ASX, and which universally attack the proposal as ill thought through and damaging in its current structure. The government has suggested that criticism by miners has been a factor in the fall in the share price of mining companies and has argued that they would do better to consult with the government on possible changes to the new tax.
But that ignores that listed mining companies are required by law to comply with the ASX continuous disclosure requirements to maintain an informed market -- and that means making immediate disclosure of any price-sensitive information in their possession. Where miners consider the impact of the RSPT would be material, they have an obligation to inform the market. There's also section 1309 of the Corporations Act under which it is a criminal offence to provide information to the ASX which is false or misleading or omits matter which renders the information misleading.
Where the provision of such information is deliberate, the person responsible can be liable for a fine of up to $220,000 or five years jail or both; where it is not deliberate but reasonable steps weren't taken to check the accuracy of the information, the penalty can be a fine of up to $110,000 or two years jail or both.
It's a fairly safe bet that the government is not about to suggest that any of the suggested impacts of the RSPT which have been provided to the ASX would fall foul of section 1309. But if they are not false or misleading, it follows that they are accurate.
Meanwhile, Rudd yesterday cast aspersions on Xstrata's announcement that it had suspended, with immediate effect, $586m of expenditure to develop the $6 billion Wandoan thermal coal project and a $600m project to extend the life of the Ernest Henry copper mine.
Xstrata said the two projects would have created 3250 new jobs, which were now at risk, and laid the blame squarely on the RSPT. It said the decision to suspend expenditure flowed from the initial findings of the company's ongoing review of planned investment into its Australian operations as a result of the proposed RSPT.
Analysis by the Australian management team demonstrated that neither project would be viable if the RSPT was imposed. The tax would almost entirely eliminate the NPV (net present value) of the Wandoan coal project and substantially reduce the value of the Ernest Henry underground shaft project.
Chief executive Mick Davis said the RSPT had created significant uncertainty for the future of mining investment in Australia and would impair the development of previously approved projects and exploration to the point that continued investment could no longer be justified. Rudd initially dismissed the Xstrata statement as "part and parcel" of a tense debate between the mining industry and the government over the RSPT and that he had always expected there would be claims made by miners, including threats of project closure and threats to freeze projects.
If Rudd believes what he said then he is in denial. Xstrata is acting, not just threatening to do so; development work on Wandoan and the Ernest Henry underground projects has ceased.
But Rudd went further. "It is passing strange that when we have a new tax system which is announced just one month ago, that we have 12 months to go before drafting this legislation, 24 months away from the start of a new system that a company of this nature would issue a statement at this time" he said.
That remark simply demonstrates Rudd's lack of understanding as to how the mining industry works and the long lead and expenditure that has to go into developing a project such as Wandoan to the point where a final decision is made to proceed.
In the case of Ernest Henry the decision to expand the production and life of the mine was announced in December with work on construction of the underground mine and construction of a magnetite processing facility slotted to commence in the first half of 2010.
The Xstrata board was at the point where it had to commit funds to sinking the underground shaft and to continue drilling and other expenditure on Wandoan. Xstrata has already spent more than $300m on Wandoan over the past three years. The company simply cannot continue to spend shareholder's money if its work shows that imposition of the RSPT would mean the projects would no longer be viable.
Rudd went on to suggest that other issues may have delayed the development of the project. "It is our understanding that there are a number of other existing issues impacting on this particular development (Wandoan) including rail access, port infrastructure and power supply".
He seems to be suggesting that Xstrata is not telling the truth or that it was telling half-truths, and therefore is misleading, by omitting to give the full reason. If so that's a serious accusation and he should be prepared to back it up.
Xstrata's statement was released to the London Stock Exchange, its home exchange, and was signed off by the auditors and approved by the board. Companies generally take great care in releasing statements to stock exchanges because investors act upon the information disclosed and the directors can be held liable if the information is untrue or misleading.
Politicians like Rudd are protected by parliamentary privilege and almost certainly would also have immunity under the "Shield of the Crown".
