Federal Resources Minister playing politics
Federal Resources Minister playing politics with the future of small mining companies
Perth; November 22, 2010:
Claims by Federal Resources Minister Martin Ferguson that Fortescue’s recently revealed expansion plans undermined the company’s criticism of the Mineral Resources Rent Tax (MRRT) has demonstrated the Minister’s lack of understanding of how the proposed tax is affecting small mining companies.
"Every time we talk to an international bank or financier, their first question is 'what damage could this proposed tax do to the mining industry?’,” Fortescue Chief Executive Officer Andrew Forrest said.
“We know first-hand that it is the single biggest issue confronting financiers interested in investing in Australian iron ore mining projects.”
Last Friday, Fortescue announced it had approved a project to increase its iron ore production from 55 million tonnes per annum (Mtpa) to 155Mtpa. In a subsequent interview, Minister Ferguson was reportedly critical of Fortescue Chief Executive Officer Andrew Forrest and stated Fortescue had not been deterred from further major investment by the MRRT.
Contrary to Mr Ferguson’s claims, Fortescue has consistently stated that the MRRT would:
- have prevented Fortescue from obtaining finance back in 2006 when it was financing its initial project; and
- deter future investment by the next wave of entrepreneurial companies lacking a balance sheet to underpin their projects.
Fortescue was able to overcome the threat of the MRRT (which remains a huge concern of potential financiers) and approve expansion only due to its established balance sheet, strong cash flows and proven record in getting projects done within budget and within schedule.
“These are not luxuries that a prospective start up company enjoys. It remains the case that the MRRT will act as a serious deterrent to new companies, and Fortescue’s ability to raise funds is not evidence to the contrary,” Mr Forrest said.
"Minister Ferguson and the Government know the impact this has on companies seeking to achieve what Fortescue has done, but they consistently makes these misleading comments to seek to achieve support for the MRRT.
"It is a sad day when one of the biggest ever expansion projects in the Pilbara elicits no congratulations from a Federal Resources Minister but merely a petty snipe that demonstrates a profound lack of understanding of the arguments against the MRRT.”
Some of Fortescue’s continued key concerns with the MRRT remain:
- It is narrow and discriminatory, applying only to iron ore and coal;
- It does not recognise the huge cost of investing in infrastructure which will impact Fortescue and all other emerging companies;
- The tax favours the big three companies who did the MRRT deal with the Government because they do not have to borrow funds to invest in new infrastructure and they will have access to huge deductions for their existing projects;
- Increases in state and territory royalties will not be credited making mining companies bear the risk of any increases;
- It is likely to be unconstitutional because of the discrimination between the states;
- The Government has not released the assumptions underlying the tax, even though they keep reviewing the expected revenues;
- Industry has no way of knowing how much of the $7.3 billion now estimated to be raised in the first two years will be paid by the three companies who negotiated the tax;
- It is unreasonably complex and will not replace or simplify any other taxes; and
- Mining companies already pay a profits tax ie company tax. This MRRT will see Australian miners pay the highest profits taxes in the world at 45 per cent.
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Phone: 08 9386 1233
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