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2012 Americas School ofMines
www.pwc.com
AustraliaAustralia
Wayne Huf
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Section One
Some Background on Australia
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Top 10 Deadliest Animals in Australia
1. Box Jellyfish
2. Inland Taipan Snake
3. Saltwater Crocodile
4. Blue Ring Octopus
5. Stone Fish
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5. Stone Fish
6. Redback Spider
7. Brown Snake
8. Tiger Snake
9. Great White Shark
10. Funnel Web Spider
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Comparable in Area – Mainland USA
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Population -22,000,000.
Six states and twoterritories.
Major cities located onthe east coast.
70% of Australia isdesert.
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desert.
21,262 miles ofcoastline.
2,547 miles from eastto west.
Sixth largest countryby area.
The Great Sandy Desert
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Rabbit Proof Fence Nullarbor Plain
The longest straight section of sealedhighway in the world (91.1 miles) islocated in Western Australia.
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The Rabbit Proof fence waserected to help control theinfestation of rabbits introducedby Europeans.
The fences took six years to build. When completed in 1907, theRabbit-Proof Fences stretched 2,021 miles (3,253 km).
Government – Lower House - a Hung Parliament
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General State of the Economy
• The unemployment rate remains steady at 5.2%.
• Poor consumer sentiment and under-performing housing sectorsthrough 2011 and early 2012 have weighed on domestic demand.
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• Housing prices have started to stabilise in 2012.
• Home mortgage rates around 6.5 to 7.0% - Reserve Bank is easing
• Retail sales remain near multi-decade lows.
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The Two Speed Economy
• For example, rental costs inmining areas in WA and Qldhave risen dramatically since themining boom.
• In towns such as Port Hedlandin WA weekly rents have
• Strong growth in the “miningstates” of Queensland andWestern Australia
• In 2011 final demand for goodsand services grew by –
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in WA weekly rents haveincreased from $600 in 2007 to$1,500 in 2011.
and services grew by –
- Western Australia 16.4 %
- Queensland 9.3 %
- Rest of Australia 1.3 %
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Sources: ULC School of Energy & Resources Australia
Section Two
Australian Mining Industry
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Mining investment most favoured jurisdictions -2012
Country Total Points
Australia 57
Canada 52
Chile 51
Brazil 45
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Mexico 43
United States 41
Colombia 39
Botswana 37
Peru 36
Ghana 36
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Sources: Behre Dolbear 2012 Ranking Of Countries For Mining Investment Where “Not ToInvest”
Iron ore production– 2011 useable ore
Country Mt
Australia 480
Brazil 390
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India 240
Russia 100
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Ensham Coal Mine – Queensland floods 2008
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Northern Territory 0.2%
Tasmania 0.1%
Value of advanced mining projects, by state andterritory, October 2011
$231.8 billion
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South Australia 0.4%
Western Australia 63.6%
Queensland 29.6%
Victoria 2%
New South Wales 4%
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Australian energy and minerals export earnings
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Australia’s resource exports by selectedcommodities 2010 – 2011
30000
40000
50000
60000
70000
$m
illio
ns
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0
10000
20000
30000
$m
illio
ns
Sources: BREE, ABS
Forecast value of export sales 2009 – 2016
50
60
70
80
90
$b
illi
on
s
Forecast export production values
Iron Ore
Metallurgical Coal
Thermal Coal
Aluminium*
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0
10
20
30
40
50
2009 2010 2011 2012 2013 2014 2015 2016
$b
illi
on
s
Aluminium*
Copper
Gold
Nickel
Uranium
Sources: ABARES / Foreign ownership of Australian mining profits
Breakdown of iron ore output – typical dollar
Foreign Profitsreinvested in
Australia32%
Interest
Tax11%
Profit toAustralianOwners
12%
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Foreign Profitoutflows
8%Wages andcontractors
12%
other costs19%
Depreciation5%
Interest1%
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Sources: Foreign ownership of Australian mining profits Now are we selling the farm?
Employment in the Australian mining industry
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Employment in the Australian mining industry
• Mining companies are lowering their recruitment standards in orderto find desperately needed workers.
• Strong investment in delivering fly-in fly-out workers.
• Non-mining firms in WA and Queensland are finding it harder to
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• Non-mining firms in WA and Queensland are finding it harder tofind staff than similar firms in other states (e.g. hospitality industry).
• Last week, Rio Tinto announced it was launching one of Australia'slargest recruitment drives to fill 6,000 positions in four months.
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FIRB approvals 2006-10 mining industry $ billion
0 10 20 30
2009 - 10
2008 - 09
Iron Ore
Copper and Gold
Coal
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2008 - 09
2007 - 08
2006 - 07
Coal
Uranium
Bauxite
Nickel
Other
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Sources: Foreign Ownership of Australian mining Now are we selling the farm?
Three Tiers of Mining Taxation in Australia
Mining Royalties
• Turnover based tax.
• Calculated as % of valueor $ per tonnage.
• Payable quarterly
• Profit based tax.
• Effective tax rate of22.5%.
• Focused on the impliedprofit at the “point the
• Profit based tax.
• 30% rate.
• Deduction for Stateroyalties/MRRT paid(rather than tax credit).
Tier 1State Taxes
Tier 2Mining Tax
Tier 3Company Income Tax
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• Payable quarterly(quarterly returns).
• Non-refundable,therefore still a cash costwhen no MRRT payable.
Stamp Duty
• Tax on transfer ofcertain assets includingmining rights
profit at the “point theresource is extracted.”
• State Royalty deduction“grossed up” at MRRTrate.
• Immediate deductionfor capital expenditure.
• Losses carried forwardincrease in value(LTBR+7%).
(rather than tax credit).
• Generates tax offsets forshareholders (fullimputation system).
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Carbon price – the basics
Carbon price mechanism will start on 1 July 2012
Fixed price phase (1 July 2012 to 30 June 2015) -$23 for each permit to emit a tonne of CO2 above25,000t threshold
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Price increased annually by 2.5% until 2015 whenflexible price phase / ETS begins on 1 July 2015
Flexible price phase subject to a transitional $15/tfloor and a ceiling of $20t above international priceincreasing by 4% and 5% annually
Carbon tax – who will pay?
Approximately 500 companies are expected to have a direct permitliability:
Number:
Electricity generation 60
Mining 100
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Mining 100
Natural gas retailers 40
Industrial processes (cement, chemicalsand metal processing) 60
Oil and gas, LNG 40
Waste disposal 190
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Questions?
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