Management Comment on the Resource Super Tax

Mincor has received requests from shareholders and analysts for clarity regarding the impact of the proposed new Resource Super Tax. Mincor is not able to provide this clarity as it has not yet been able to definitively model the new tax on a full corporate basis. A great many details remain unclear. The Government has expressed the view that the new tax is in the national interest and has urged the mining industry to participate in the consultation process. Mincor intends to do so.

However, it is the opinion of Mincor's management that the new tax will undermine the viability of the Australian mining industry and damage Australia's reputation as a safe place in which to invest. We make the following specific observations:

• The tax is not a tax on "super profits" - it is a tax on all profits, all the time.
• In this regard it is fundamentally different to the Petroleum Resource Rent Tax, to which it is frequently and erroneously compared.
• The new tax appears to generate a total tax rate for mining companies of approximately 57% and, as such, represents a substantial new impost on Australia's most successful industry.
• The high tax on profits, and the effective subsidies for marginal and failed mines, is likely, over time, to erode capital and operational discipline and lead to the loss of the Australian mining industry's present status as the most competitive and innovative in the world.
• The tax thus represents a profound restructuring of the Australian mining industry, in effect its partial nationalisation.
• In our view it is certain that the tax will drive new mining investment offshore and deter foreign investment in Australian mines and exploration
• The new tax will not accrue franking credits - disproportionately disadvantaging Australian-resident shareholders. 
• The tax essentially replaces the existing royalty regime and, as such, will further penalise profitable and efficient mines while sparing marginal and badly-managed operations.
• Being profits-based, the new tax will not collect an equal return for the community from all of Australia's mineral resources. Well-managed mining operations with high profits will pay high taxes while poorly managed operations with low profits will pay low taxes, even though both will extract Australia's natural resources at the same rate.
• The tax will inject enormous volatility into government revenues by hitching Australia's tax base more tightly to the boom and bust cycle of the mining industry, and by doing so in a way that ties tax revenues to the volatility of profits rather than the relative stability of royalties.
• The new tax will substantially increase tax complexity for mining companies, not least due to the extra paperwork that will be required to first calculate and pay State royalties and then to claim them back from the Federal Government.

In essence we believe that the new Resource Super Tax calls an end to the resources boom in Australia. It will slow the mining industry down at a time when commodity prices are high, costing Australia an historic opportunity to maximise its national wealth, and will then subsidise the much-diminished industry when commodity prices are low. The tax will impoverish the future of every Australian working family.