Gold Mining Execs Say Australia Becoming Expensive, Risky
By Robb M. Stewart
Of DOW JONES NEWSWIRES
JOHANNESBURG (Dow Jones)--Australia's proposed tax changes will make it a far more expensive country for mining companies and give it a greater sovereign risk than that of South Africa, chief executives from two of the world's largest gold producers said Friday.
Officers from AngloGold Ashanti Ltd. (AU) and Gold Fields Ltd. (GFI) said there remains a great deal of uncertainty whether a planned "super tax" on natural resource profits on top of a carbon tax and increased royalties will be approved in Australia and how it would be imposed, but agreed they expect to pay more to operate in the country.
"It is highly negative for Australia," said Nick Holland, CEO of Johannesburg-based Gold Fields. "It will place [the country] in second as the most expensive fiscal regime in the world."
AngloGold CEO Mark Cutifani separately said the proposed super tax was "disappointing," and risks driving investment toward other countries such as Canada and South Africa.
"South Africa has less sovereign risk, and we have a very positive relationship with the government there," Cutifani said.
Australia's Prime Minister Kevin Rudd said Thursday his government won't be deterred from introducing a 40% tax on mining sector "super profits," despite increasing opposition from industry. The proposed new tax was announced Sunday as part of a broader review of Australia's tax system.
Both Cutifani and Holland said they expect the final legislation that emerges in Australia will be different from that proposed, but for taxes to rise nonetheless.
The CEO of Johannesburg's AngloGold said the mining industry has been starved of investment for years, which has led to shortages of supply and so higher commodity prices.
"It is unfortunate to see people tax or increase the cost for the industry," Cutifani said. "Our returns haven't been that attractive."
Still, he expects the company will proceed with its majority-owned Tropicana project in Australia. AngloGold is currently undertaking a feasibility study and seeking environmental approval for open pit mining.
-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com
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