Mining super tax hope lifts profits
Published in the Courier Mail, June 2010
by Louise Brannelly
Resource stocks and the Australian dollar received a boost yesterday as the toxic relationship between big miners and the Federal Government showed signs of improving.
Prime Minister Julia Gillard told her first news conference as parliamentary leader she would throw the doors open to the mining sector and negotiate over the controversial resource super profits tax.
The market interpreted this as a sign the Government would water down the controversial tax.
Among the big miners, Rio Tinto rallied $1.19, or 1.69 per cent to $71.73, BHP Billiton 51c, or 1.3 per cent, to $39.65, Macarthur Coal 74c, or 6.4 per cent, to $12.34 and Fortescue Metals 11c, or 2.5 per cent, to $4.54.
"It's a very dramatic development," said Stephen Halmarick from Colonial First State Global Asset Management.
"The markets will be looking to her to move quite quickly to stabilise the debate and come to a resolution."
The Australian dollar was trading at US87.43c last night, up US0.40c, after getting an initial boost following reports of a change in the Labor Party's leadership.
"The (Aussie dollar's) high was the initial reaction to the news that the ex-PM had resigned and after that it came down again," said Lee Wai Tuck, a senior currency analyst with financial markets research group 4Cast.
IG Markets strategist Ben Potter said the general feeling in the market was that Ms Gillard would adopt a more flexible and consultative approach with miners.
"She went to great lengths to reiterate this point in her acceptance speech," he said.
"Many brokers have suggested current mining stock valuations were attractive, even with the RSPT in its current form.
"Now that it looks more likely to be watered down under the new PM. this could easily be the catalyst for a significant rerating of the sector. We could even see the return of some offshore investments."
EL&C Baillieu Stockbroking director Richard Morrow said investors initially responded positively to the new Labor leadership but there was a bit of late profit taking among mining stocks.
"There was an initial kneejerk uplift in the market in the resources sector right at the start of play and then everyone held their breath until the new Prime Minister made her first statements," Mr Morrow said.
"The noises that are coming out of that sector and both Ms Gillard and her deputy (Wayne Swan) are very encouraging for the mining companies.
"It involves both parties with an act of good faith in cancelling their public slanging match."
The broader sharemarket closed marginally weaker as financial and property stocks responded to a tightening of their wholesale funding costs and continuing negative news from the US housing market.
The benchmark S&P/ASX 200 Index lost 6.4 points to 4479.7.
Wealth Within senior analyst Janine Cox said negative offshore leads would continue to have most effect on the domestic bourse.
Also boosting the Aussie dollar was news the US central bank said interest rates would remain low until next year to stimulate the US economy.
