The Rising Influence of Rising Affluence

[DewDiligence]

More on the same story…

http://online.wsj.com/article/SB20001424052748704342604575221700829646686.html

›Australia Throws a Curveball at Its Miners

By MOHAMMED HADI AND ALEX WILSON
MAY 4, 2010

Feeling like it missed out the last time around, Australia wants its piece of the next commodities' bull market.

The government is pitching a Resource Super Profit Tax on mining profits. This is part of an overhaul targeting "the proceeds of the next mineral boom," for the broader economy. For example, non-mining corporate taxes will fall.

Had the tax been applied during the decade to March 2009, the Treasury would have collected an additional $32 billion in revenue, Morgan Stanley says. No wonder investors in mining stocks rushed to the exits, even though the proposal could change substantially. It has to pass Parliament first.

Hard hit were speculators who, having seen about $22 billion spent on Australian natural-resource assets this year, have been picking the next target. Such targets, both real and imagined, plunged on Monday. Shares of Macarthur Coal, which has an outstanding $3.8 billion offer from Peabody Energy, slid nearly 10%. The stock ended Monday 12.5% below Peabody's offer. Whitehaven Coal, a subject of recent speculation, fell nearly 7%.

This retreat makes sense. Even if not scared off entirely by uncertainty on key government policies, buyers will pay less. And they can always hunt elsewhere. Citigroup points out that South Africa tops the world for reserves of nonenergy resources, with $2.5 trillion worth.

As always, though, indiscriminate selling provides opportunity. Companies based in Australia, but with mines outside the country, won't be affected. On Citi's list of stocks unlikely to see much—or any—impact to net present value, Lihir Gold and Paladin Energy both tumbled nearly 4% anyway.‹