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Category Archives: BHP Billiton

Kevin Naughton
 
May 1, 2012

EVERYTHING that can be done, has been done, says the head of the state government’s Olympic Dam Taskforce as it waits for BHP Billiton to give the green light to the mine’s proposed expansion.

“Everything is lined up nicely for this decision,” Resources and Energy Department deputy CEO Paul Heithersay said yesterday.

A formal commitment to proceed from the BHP board would trigger billions of dollars in associated infrastructure projects. A board decision is expected mid-year.

Mr Heithersay addressed hundreds of miners, explorers and contractors gathered at the Hilton Hotel for the “2012 Paydirt” SA Resources and Energy Investment Conference.

“Everything the government can do is done; we have completed the EIS and Indenture processes,” he told delegates.

Heithersay said BHP Billiton was already spending “around $20 million a week on pre-commitment projects”, such as expansion of the road from Port Augusta, and engineering design work and earthworks.

Other projects included:

  • 270km of electricity transmission line;
  • 400km of gas pipeline and a gas-fired power station;
  • 105km of railway to be built from Pimba to Olympic Dam;
  • a sea landing facility south of Port Augusta for the unloading of heavy machinery;
  • an airport, complete with solar power and a 737 jet capability;
  • a 10,000 person camp as well as expansion of the Roxby Downs township; and
  • upgrades to Adelaide and Darwin harbours.

Earlier in the conference, Mineral Resources Minister Tom Koutsantonis repeated his “elephant” analogy, used in a recent presentation overseas.

“South Australia is poised to take its place among the titans of mining – not just in Australia but in the world,” Koutsantonis told delegates.

“In Olympic Dam we have tracked down an elephant, we are still in the hunt for the rest of the herd.

“These are exciting times, but they are also challenging times for our State.

“We need to manage our transition into a global mining giant in a way that benefits all South Australians.”

The minister also announced the successful applicants for exploration subsidies under the Plan for Accelerating Exploration, a subsidy program that dates back to the SA Exploration initiative (SAEI) in the early 1990s.

“Twenty-six mineral and petroleum exploration companies spread across South Australia will share about $1.7 million funding from the State Government,” he said.

Under its newer name PACE, it is to be expanded into a series of other collaborations including energy and water, subject to government funding approval.

The importance of Olympic Dam to the economy had earlier been underlined by Oz Mineral’s managing director Terry Burgess when he told delegates a recent set of job ads for work at nearby Prominent Hill had attracted 3000 applicants.

Julia’s brilliant backflip
July 2, 2010 – 1:18PM

Mal Maiden dissects Julia Gillard’s new mining tax. What does it mean for business and who is going to pay?

Is this a massive backflip by the government or a brilliant piece of re-engineering that sets Julia Gillard up for an early election? Both.

The new Minerals Resource Rent Tax is almost unrecognisable from the Resources Super Profits Tax it replaces.

Instead of being applied across the entire resources sector, it focuses on only two mining businesses, iron ore and coal, with the existing Petroleum Resources Rent Tax extending to the domestic oil and gas industry, including the fledgling coal seam gas projects in Queensland.

Prime Minister Julia Gillard and Treasurer Wayne Swan at today’s announcement. Photo: Andrew Meares

Instead of being an elaborate scheme that sees the government take 40 per cent of mining profits but also assume 40 per cent of the development costs and risk on each project, it simply taxes the miners at the mine gate, for 75 per cent of their income at that point, at a rate of 30 per cent.

This concession, that the miners pay only 30 per cent of 75 per cent of their income at the mine gate after costs to that point are deducted means that the real new resources rent tax rate is about 22.5 per cent, not 30 per cent as advertised.

Instead of forcing the big miners into a resources tax regime with the big mines still valued at book value, a fraction of their real worth, it gives them a choice (it’s complicated, but here goes): either bring their existing mines into the scheme at book value, in which case they will be able to aggressively create depreciation tax deduction over just five years, and will not be liable for the 30 per cent resources tax until their mine returns have exceeded the 10-year Commonwealth bond rate plus 7 per cent (about 12 per cent currently), or bring the mines in at market value (defined as cash flow plus the risk value of the resource) but write the value down in smaller increments over a longer period, up to 25 years, and have the tax imposed without a hurdle rate. It’s likely that the big miners will opt to inject their assets in at market value. In either case, they can claim what they invest in their mines as they go.

Inspired move

And instead of applying to all mines, the tax also exempts iron ore and coal miners with profits of less than $50 million. This is an inspired idea, and like the proposal to limit the scope of the tax and exclude not just quarries and other low value operations but copper, nickel, gold and bauxite mines it came from the big three miners who were negotiating the deal, BHP Billiton, Rio Tinto and Xstrata.

These two measures see the number of companies affected by the new tax fall from about 2500 under the original proposal to about 320, significantly reducing the risk that the deal will be seen as one cooked up by the big three miners for the big three miners.

The existing 40 per cent Petroleum Resources Rent Tax is also being extended, to cover not just offshore projects but the entire Australian oil and gas industry, including the merging coal seam gas producers and exporters in northern Queensland, and the oil and gas groups will also be able to elect to inject their assets at market value, and expense their development costs as they go.

Gillard makes the call

So if radical change to the original proposal qualifies as a backflip, this certainly is one. But it’s a backflip from a tax proposal that was launched and prosecuted by Kevin Rudd, not Julia Gillard. Treasurer Wayne Swan was involved in the talks this week, but the key figures were Gillard, who in personal calls to BHP chairman Jac Nasser and other convinced the big miners that she was genuine about settling the dispute, and resources minister Martin Ferguson, who Gillard inserted into the process after her appointment as PM.

And it is one that has been achieved at a manageable cost to the budget. The tax take in the first two years to 2013-14 falls by $1.5 billion to $10.5 billion, as the government loads in higher commodity price assumptions that are closer to what is actually being achieved this year, cuts its linked cut in corporate tax by one percentage point to 29 per cent, and axes its poorly received exploration tax rebate.

The deal seems to cover all the bases. It satisfies Gillard’s only condition, that the government’s tax take from the resources boom rise. And it exempts most mines from a new tax, while charging those captured by the regime less than the 50 per cent plus total tax rate they faced under the Rudd version.

The iron ore and coal miners will pay corporate tax after the resources tax has been paid, and when coal and iron prices are high as they now, will face a total tax bill of more than 40 per cent, with a maximum above 45 per cent, according to one person close to the negotiations.

There’s a way to go. The Greens have been making ominous noises about blocking a compromise, for example. But Gillard’s backflip is politically marketable – and an election campaign must surely now be just around the corner.

mmaiden@theage.com.au

By staff writers
NEWS.com.au
June 05, 2009 02:41pm

MINING giant BHP Billiton may launch a new takeover bid for rival Rio Tinto, after the two announced a $US10 billion ($12.47 million) joint venture and the death of the Rio Tinto- Chinalco deal.

“We obviously can’t rule in or rule out anything,” BHP Billiton chief executive Marius Kloppers said.

“As a result of our previous bid for Rio, there are a number of conditions that I can point at and those obviously still remain.”

Mr Kloppers pointed to the more than $US10 billion savings the two companies say they seek from the WA joint venture, which “were such an important part of our original desire to put these two companies together”.

BHP Billiton’s hostile bid for Rio fell through last year amid concerns over Rio’s debt burden resulting from its 2007 acquisition of Canadian aluminium giant Alcan.

BHP Billiton cannot make a fresh bid for Rio until November 25 this year – 12 months after its last bid collapsed – under the UK’s Takeover Code rules.

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Dave of Perth Reports from the UK in February said top institutional investors had urged BHP Billiton to relaunch a takeover bid for Rio Tinto to scupper its now abandoned deal with Chinalco.

Chinalco-Rio Tinto deal dead

Overnight, Rio Tinto walked away from what would have been the biggest deal in Australian corporate history, its $US19.5 billion ($24.4 billion) alliance with Chinalco.

Rio Tinto chairman Jan du Plessis said in a letter to shareholders the planned deal with Chinalco was now dead and his company would pay it a $US195 million ($243.2 million) break fee.

“The transaction announced and recommended by the boards will now no longer be pursued,” Mr du Plessis said.

In a statement, Chinalco president Xiong Weiping said he regretted the deal was off.

“In recent weeks Chinalco has worked hard to respond constructively and engage with Rio Tinto to make appropriate amendments to the transaction terms … to better reflect the changed market background and feedback from shareholders and regulators.

Rights offer

Rio Tinto, saddled with about $US38.7 billion in debt, had been pursuing a tie-up with Chinalco.

With the deal off, Rio Tinto will seek to raise $US15.2 billion in a rights issue, which shareholders in Rio Tinto and its London-based Rio Tinto Plc can take part in.

Shareholders will be offered 21 new shares for every 40 shares held at $28.29 or 1400 pence each.

Rivals to team up

With the Chinalco deal off, BHP Billiton and Rio Tinto announced a 50/50 joint venture, combining all their iron ore assets in Western Australia. It is expected to save them $US10 billion.

The joint venture deal is likely to annoy Chinese steel producers, which have long believed the big Australian iron ore producers hold too much power to decide iron ore prices.

BHP Billiton is the world’s biggest mining company and Rio Tinto is the third largest.

“I am delighted that we are able to announce a transaction that can deliver significant real and quantifiable synergies to our shareholders,” BHP Billiton chairman Don Argus said.

By midday, BHP soared $2.83, or 8.06 per cent, to $37.94, while Rio advanced $6.60, or 9.87 per cent, to $73.50.

http://www.news.com.au/business/story/0,27753,25590805-462,00.html?referrer=email&source=eDM_newspulse

AAP
May 27, 2009 10:56am

BHP Billiton predicts the global economic recovery will be slow and protracted, but says there’s reason for some cautious optimism in China.

Chief executive Marius Kloppers told a minerals conference in Canberra that it would be another six months before there were clear signs of the true situation for the company’s markets in China and the OECD.

“The best we can say in the medium term is that conditions remain uncertain,” he said.

In the US, there was still a downside risk with unemployment remaining a problem. The economies of Europe, especially the UK and Germany, were still a worry, and Japan was weak.

On China, Mr Kloppers said there were a few reasons for optimism including early signs about growth, Chinese loan activity and in the construction and real estate sectors.

“If all of these trends continue in the second quarter they will give us some reason to be cautiously optimistic,” he said.

But Mr Kloppers stressed the need for caution because there were still issues around Chinese exports, adding the company did not expect in the medium term a sharp return to overall economic activity.

“We probably believe as a company the economic recovery will be both slow and protracted,” he said.

http://www.news.com.au/business/story/0,27753,25545415-31037,00.html

Cosima Marriner and Peter Martin
May 22, 2009

THE chairman of Australia’s largest company, BHP Billiton, has contradicted assurances by the Rudd Government, Treasury and Reserve Bank that an economic recovery is imminent, warning instead it will be “protracted and complex”.

Speaking at his old high school in Brisbane yesterday, Don Argus said he was “pessimistic” about prospects for recovery in the short term.

His comments follow spirited defences by Treasury Secretary Ken Henry and Reserve Bank governor Glenn Stevens of growth forecasts in last week’s federal budget. The economy is projected to grow above 4.5 per cent from the middle of 2011, a forecast economists have questioned and Opposition Leader Malcolm Turnbull has labelled “completely unbelievable”.

“(Dr Henry and Mr Stevens) have got the levers of the economy,” Mr Argus said. “I’ve got a balance sheet, I’ve got revenue statements, I deal with customers, I’m a contributor to the Australian economy … I’m just calling it from where I see it.”

Mr Stevens tipped on Tuesday that “a recovery will get under way towards the end of the year”. But Mr Argus warned it would be a “pretty tough” 2009 and 2010. “We can hope for recovery. We should also have contingency plans for scenarios where world capital markets continue to provide surprises on the downside.”

He said that while some people would call his comments pessimism, “I prefer to call it caution that 50 years in corporate life engenders … The current outlook is very uncertain.

“It’s very much reliant on the Government, corporate and regulatory response to the global financial crisis. It will be a difficult transition period. Governments and corporates have to pay off debt and rebuild their balance sheets.”

He predicted that Australians who had so far been shielded from the impact of the crisis would start to be affected, as the Government was forced to pay back debt incurred with its stimulus packages. “They can’t do that without budget cuts and increasing taxation.”

Mr Argus based his analysis on an International Monetary Fund report, his own analysis of the 1987 crash, and business conditions BHP is experiencing. “The IMF report makes it easy to conclude that the road to economic recovery will be slow, hence my cautious response to the recent political rhetoric.”

He said the recovery would be under way when financial institutions had access to good liquidity and had dealt with distressed assets, and weak institutions had been recapitalised.

His comments came as it was revealed Australians paid off $19.7 billion of credit card debt in March — the second-biggest amount on record — as $900 and $950 cheques directed at single-income families, carers and parents of children at school went out. The record for card repayments was in December, when stimulus cheques of between $1000 and $2000 went out.

There was also a spending surge in March, with credit cards getting their second-biggest work-out on record, again exceeded only in December. “We’re both spending and saving at the same time,” CommSec economist Savanth Sebastian said.

The next stimulus payments began hitting bank accounts in April, suggesting spending and saving will continue to climb.

Some of the extra spending appears to have gone on cars, passenger vehicle sales up a seasonally adjusted 1.8 per cent in April after months of decline.

The rebound is consistent with a Westpac-Melbourne Institute survey this week showing a rise in consumer sentiment.

Other figures showed that average full-time earnings climbed 5.6 per cent to more than $61,000 in the year to February. But the rate of increase is slowing as fewer hours and less overtime are worked.

“Workers in the public sector are enjoying better conditions than private sector workers,” said Commonwealth Bank economist James McIntyre.

“Public sector households are getting the benefits of significant interest rate cuts, stimulus payments, petrol price falls and tax cuts without the job security concerns.”

Meanwhile, new figures yesterday showed investment in minerals and energy projects hit a record high in April, defying budget forecasts.

http://business.theage.com.au/business/bhp-at-odds-on-recovery-20090521-bh6e.html