Life begins under mining & carbon taxes

Resources Corner

by Clive Tompkins

Resource and mining companies making news include Nexus Energy, who have progressed its heads of agreement with Royal Dutch Shell and Osaka Gas to advance the Crux gas venture. Joint venture partners Origin and ConocoPhillips will auction off a $3 billion stake to fund the second stage of development in their LNG project. Gold producer Resolute Mining is eyeing a major expansion of its flagship Syama gold mining operation. Rio Tinto has completed the construction of its Yarwun alumina refinery expansion and Woodside has received regulatory approval to sell part of its stake in the Browse LNG development to Japan Australia LNG.
 
Resources News
Scepticism continues to surround the controversial Minerals Resource Rent Tax (MRRT) which commenced from the start of the new financial year.  Taxation experts say the new tax will yield less than the $13.4 billion the Federal Government has predicted it will over four years, due to falling commodity prices.
 
Atlas Iron Limited’s (ASX:AGO) Managing Director Ken Brinsden weighed in on the debate, claiming the iron ore miner is not liable to be paying the MRRT in the foreseeable future, unless a material change in the iron ore market occurs. As a result Mr Brinsden does not believe the government will generate the projected revenues.
 
The MRRT applies to companies that mine iron ore, coal and some gases and is taxed on certain profits from new and existing iron ore and coal projects, at a rate of 22.5 per cent. Fortescue Metals Group (ASX:FMG) is currently challenging the tax on constitutional grounds, forcing the government into the High Court regarding the legislation.
 
In addition to the MRRT the nation’s biggest miners, which include coal producers, have also been hit with the carbon tax. Almost 300 companies are liable under the carbon pricing legislation. Santos Limited (ASX:STO) says its carbon bill will reach $80 million per year. Xstrata Coal says under the scheme’s fixed price period, it expects to pay about $250 million per year.
 
Confirming commodity prices are softening, the Reserve Bank of Australia’s index of commodity prices eased 0.7 per cent in June compared to the month before. The index provides a measure of price movements in rural and non-rural commodities and the most recent result was dragged down by falls in oil and thermal coal prices.
 
Company News
 
Nexus eyes floating LNG platform
Nexus Energy Limited (ASX:NXS) has finalised an agreement to advance the Crux gas venture with Royal Dutch Shell and Osaka Gas in Western Australia’s offshore Browse Basin. The oil and gas explorer is striving to secure enough gas in the region for a stand-alone floating liquefied natural gas project. Under the deal Nexus which owns the rights to the petroleum liquids in the gas will acquire 17 per cent of the whole platform. The agreement is pending board approval.
 
Origin and ConocoPhillips to sell $3B LNG stake  
Origin Energy Limited (ASX:ORG) and joint venture partner ConocoPhillips have agreed to expand their $23 billion Australia Pacific liquefied natural gas project in Queensland into two production units.  Origin’sManaging Director Grant King says  “The final investment decision for the Australia Pacific LNG project’s second train marks a major milestone for the project”.
The two energy giants will auction a $3 billion stake in the project to assist funding stage two of the development. The expansion is expected to produce LNG output of 9 million tonnes per year.
 
Resolute approves Syama gold expansion
Resolute Mining Limited’s (ASX:RSG) board has backed a major expansion of its flagship Syama gold mining operation in West Africa. The Australia and Africa-focused gold producer says average annual production will now increase to 270,000 ounces over the first nine years of operations and will extend Syama’s mine life to 15 years.
 
Rio completes Yarwun expansion
Rio Tinto (ASX:RIO) has completed construction of its Yarwun alumina refinery expansion in central Queensland, which cost the global miner $2.4 billion. Rio’s Chief Operating Officer, Armando Torres says, "The Yarwun expansion project will more than double production at the refinery to 3.4 million tonnes of alumina per year making Rio Tinto Alcan the world's leading bauxite and alumina producer."
 
Woodside receives approval to divest part of Browse LNG
Woodside Petroleum Limited (ASX:WPL) has received the go ahead from The Foreign Investment Review Board to sell part of its stake in the Browse LNG development to Japan Australia LNG. Woodside says it is now working with the Browse joint venture partners to finalise the sale. The oil and gas company will decrease its stake from 46 per cent to 31.3 per cent, for $US2 billion.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.