Australian mineral resources tax is initially set at 30%

Summary After a series of negotiations and high-level government turnover, the Australian government finally released a draft on the controversial mineral resource tax issue last Friday. The draft proposes that the mineral resource use tax is only for iron ore and coal mines, and the tax rate is set at 30%. This draft and the previous Australia...

After a series of negotiations and high-level government turnover, the Australian government finally released a draft on the controversial mineral resource tax issue last Friday. The draft proposes that the mineral resource use tax is only for iron ore and coal mines, and the tax rate is set at 30%.  

This draft has already made some concessions compared to the plan originally planned by the Australian government. However, analysts believe that if the draft is officially implemented, it will increase the cost of Chinese companies investing in mining in Australia. If the supply of minerals continues to be in short supply, The cost of the increase in mineral resources tax is likely to be paid by the ore importers such as Chinese steel mills.

According to the reporter, the latest draft published by the Australian government covers the mining tax collection methods, including taxation cases for existing projects, new projects and joint ventures. At the same time, the mineral resource use tax is only specified for iron ore and coal mines, and the tax rate is set at 30%. The draft also allows for tax deductions for expenses incurred by related companies during exploration, development and processing.

Although the resource tax rate has been reduced from 40% to 30%, the new resource tax will still have a significant impact on Australia's local and Australian investment companies. At present, Australia mainly levies taxes on mining companies based on production. The levy tax rate imposed by each state is only between 2% and 10%.

Hu Kai, an analyst with United Metals, pointed out that the resource tax is likely to increase the risk of companies investing in Australian mining and have an impact on the return on investment. According to Hu Kai’s calculation, according to the current price of iron ore of US$170/ton, about 20~30 US dollars of profits need to be paid as an additional tax.

In recent years, domestic steel mills and other enterprises have accelerated the pace of investing in mineral resources overseas. Among them, Australia is the gathering place for Chinese companies to invest in mining. At present, in addition to Baosteel, Shougang and other companies have participated in several small and medium-sized mining companies in Australia, Sinosteel, Anshan Iron and Steel, CITIC Pacific and other enterprises, but also achieved a comprehensive control of a number of mining companies and mining resources in Australia. In terms of coal, in 2009, Yanzhou Coal (32.13, -0.47, -1.44%) also acquired 100% of Felix Coal in Australia for A$3.333 billion.

It is worth noting that after Australia announced its intention to levy a resource tax last year, companies such as Baosteel, Anshan Iron and Steel, and Sinosteel, which have invested in Australia, have indicated that they are expected to have an impact on the cost of the company's investment projects. A senior executive of Chinalco has also told this reporter that in theory, the bigger the scale, the higher the profit, and the more affected. After the resource tax was imposed on Australia last year, investment banks such as Goldman Sachs have lowered their earnings forecasts for CITIC Pacific's magnetite projects invested in Western Australia.

It may not be the Chinese companies that are affected by the investment in Australia. "My Steel" research center analyst Zeng Jiesheng told this reporter yesterday that at present the iron ore supply is still relatively concentrated, the seller's pricing power is very strong, and the overall market is in short supply. Once the resource tax is levied, it is likely that the mine will increase. The cost will be transferred to downstream steel mills. From January to April this year, 43% of China's imported iron ore came from Australia, and Australia is China's largest importer of iron ore.

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