May 31 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, said as much as half its balance sheet is threatened by Australia’s plan to boost taxes on resources producers.
The complexity of the proposal for a 40 percent super profits tax on resource companies makes it difficult to assess its costs precisely, Tom Albanese, Rio’s chief executive officer, said in an interview broadcast yesterday on ABC’s “Inside Business.” He said it may amount to more than 50 percent.
“This is half our balance sheet at risk because we have someone now coming in to say, ‘I want to be your silent partner. I want 40 percent of your pretax profits and largely written-off assets,’” Albanese said. The tax has damaged Australia’s reputation overseas and added to sovereign risk, he said.
The government set aside A$38.5 million ($32.6 million) in its May 11 budget to promote an overhaul of the nation’s tax system, including the resources levy. Mining companies oppose the tax, scheduled to take effect in 2012, and have placed full- page advertisements in Australian newspapers to lobby for changes.
Last week, the government said it will run its own advertising campaign to counter the “misinformation.” Treasurer Wayne Swan said in an e-mailed statement yesterday that the super profits tax, or RSPT, wouldn’t be retroactive.
‘Misleading’ Claims
“There has been much comment from mining companies in recent weeks about the supposed ‘retrospectivity’ of the RSPT,” Swan said. “These claims are clearly misleading, as the RSPT will apply to mining profits from 1 July 2012. It does not apply to past profits.”
Rio’s CEO said it was important to reconsider the proposal and that he’s ready to work with Prime Minister Kevin Rudd’s government on a fundamentally different approach. The world’s third-largest mining company is already paying almost 35 percent tax plus royalties, and will publish independently audited data on its tax payments later in the week, he said.
“Albanese left no doubt he’s willing to engage on a long- term, workable solution, arguably a process companies like Rio should have been involved in before the tax was announced,” said Tim Schroeders, a fund manager at Pengana Capital Ltd. in Melbourne.
Core Elements
The government “won’t back away” from the core elements of its proposal, Finance Minister Lindsay Tanner told Channel Ten’s “Meet the Press” program yesterday.
Still, Swan told parliament last week that the government was continuing to consult with industry as criticism of his administration’s proposed advertising campaign mounted.
The Shadow Minister for Employment and Workplace Relations, Eric Abetz, yesterday called for a senate inquiry into the government’s handling of its advertising campaign.
“Labor is breaking its own guidelines in order to run a partisan political campaign,” he said in a media release. “This has all the stench of a desperate government facilitating false excuses to run a political campaign at taxpayers’ expense.”
The government’s use of taxpayer money to get its message across is “a scandalous situation,” billionaire businessman Clive Palmer yesterday said on “Meet the Press.” The super-tax proposal itself is also hurting overseas investment and is likely to damage Australian jobs and livelihoods, he said.
‘National Interest’
Rudd told journalists in Melbourne May 29 that the campaign is in the national interest, while Tanner said Australia’s economy could be harmed if misinformation about the tax went unanswered. Wal King, the head of Leighton Holdings Ltd., Australia’s biggest construction company, said builders are also worried about the tax, the Weekend Australian reported May 29. He made the comments in a statement as president of the Australian Constructors Association, the newspaper said.
The mining-tax plan has prompted Rio Tinto to re-evaluate all its projects in Australia, Albanese said in the ABC interview.
“I have said to each of my managers, including during discussions this week while I’ve been in Australia, that every single project in Australia needs to be tested and retested and recalibrated, basically remodeled, on a worst-case tax assumption,” he said.
Minerals Council
The Minerals Council of Australia ran an advertisement on YouTube and began a radio campaign on May 24 against the tax, saying Australian miners will pay a levy of 58 percent, “by far the world’s highest tax on mining.” It compares with the 23 percent paid in Canada, 30 percent in Russia and 33 percent in South Africa, the council said.
Rudd’s government and resources companies are also clashing over the definition of a “super” profit, which the proposed tax sets at returns above the long-term Australian government bond rate of about 6 percent.
Rudd’s Labor party and the Liberal-National opposition coalition led by Tony Abbott are tied in the polls, according to a Newspoll survey of 1,159 people taken between May 14 and 16 and published in the Australian newspaper on May 17. Voter dissatisfaction with Rudd rose to 51 percent, from 40 percent in February, in the lead up to a national ballot that must be called by April.
Rudd would lose an election called now, according to a Herald/Nielsen poll published on May 10.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
ECU Silver Enters into Agreement to Sell Its Gold Concentrate to an International Commodities Trading Company
Tuesday July 13, 2010, 11:38 am
TORONTO, ONTARIO--(Marketwire - July 13, 2010) - ECU Silver Mining Inc. (TSX:ECU; OTC:ECUXF - News) is pleased to announce that it has entered into an agreement with one of the world's largest independent commodities trading companies to sell ECU's pyrite/gold concentrates. The gold/pyrite concentrate will be shipped and processed at a metallurgical plant in United States, owned by an internationally recognized mining company.
The terms of the agreement are for ECU to deliver an initial 10,000 tonnes from its gold/pyrite concentrate, currently stockpiled near its Velardena Property in Durango, Mexico at a rate of 1,500 to 2,000 tonnes per month, equivalent to approximately 965 to 1,285 ounces of gold per month. ECU plans to immediately commence delivery of its gold/pyrite concentrate.
Michel Roy, Chairman and CEO of ECU said, "This is a very important step for the Company as our mineral resource has a very substantial gold content. The metallurgical viability of our gold/pyrite concentrate has been further demonstrated through our agreement with a well established commodity trading company with formidable insights and knowledge of the mining sector."
ECU currently has a stockpile of gold/pyrite concentrates of approximately 12,900 tonnes containing approximately 8,500 ounces of gold. In addition, at full capacity, the Company's 320 tonne per day ("tpd") sulphide plant is capable of generating gold/pyrite concentrates at an annual rate of approximately 23,000 tonnes, equivalent to approximately 14,800 ounces of gold per year. The Company is completing an economic study which contemplates increasing sulphide milling capacity by almost five times by way of the construction of a new 1,500 tpd plant.
Stephen Altmann, President added, "The terms of this agreement are significantly better than several past offers that we have received for our gold concentrate. The sale of the gold concentrates will immediately add to ECU's cash position, since ECU will be selling its stockpile of gold/pyrite concentrate where the costs to mine these concentrates were incurred in previous years."
About ECU Silver
ECU Silver Mining Inc. is focused on the exploration, development and mining of gold, silver and base metals at its Velardena District Properties in Durango, Mexico. The Company holds a NI 43-101 compliant mineral resource of 40 million silver equivalent (0.6 million gold equivalent) ounces in the measured and indicated category and 391 million silver equivalent (6.0 million gold equivalent) ounces in the inferred category. The Company also owns two mills with a combined capacity of 820 tonnes per day. ECU's mission is to become a pre-eminent silver and gold producer through the development of its existing and potential mineral resources at Velardena.
Michel Roy ECU Silver Mining Inc. Chairman and CEO
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