The Australian Government has announced a revised version of the mining tax that, when announced a couple of months ago, resulted in a virtual capital strike by miners. The previous tax, known as the Resource Super Profits Tax (RSPT), would have seen an additional tax on miners of 40% on profits above a threshold which was set at the 10-year bond rate.
The announcement of that tax resulted in a vigorous media campaign by both miners and government as each lobbied, via advertising, for public support of their positions. The announcement of the tax appears to have been one of many blunders that ultimately saw the resignation of the Prime Minister due to perceptions within his party that the election due later in the year was unwinnable on the current course they were following. A change of party leader immediately brought a more conciliatory tone in negotiations with miners.
After meeting with three key miners, BHP Billiton (NYSE:BHP), Rio Tinto (RTP), and Xstrata (OTC:XSRAF) the Australian government has announced that the restructured tax will now be called the Mineral Resource Rent Tax (MRRT), that the tax rate will drop to 30%, and that the hurdle rate will be 7% above the 10-year bond rate. This appears to be a major win for the mining industry and should see a spike in prices, notwithstanding other global forces/sentiment that are moving to push prices down at the moment.
Disclosure: Author long BHP