Miners back off on ad campaign

Published in the Canberra Times, June 2010 by Rebecca LeMay

Shares rebound as Gillard offers to negotiate tax

A ceasefire between the mining sector and Federal Government following Julia Gillard's rise to power sent mining stocks higher and saw resource super-profits tax advertisements suspended.

Australian mining stocks jumped yesterday amid signs Ms Gillard would be more open to tweaking the proposed tax than her predecessor.

Ms Gillard, who ascended to the prime ministership after Kevin Rudd declined to contest a leadership ballot yesterday, told her first press conference as parliamentary leader she would throw the doors open to the mining sector.

Later in Parliament, she asked those in the mining sector to open their minds and reiterated the Government's view it would be fairer for miners to pay more tax, which they could afford.

The Government would negotiate with the mining sector over the proposed resources tax, not just consult it, Ms Gillard said.

Her comments were welcomed by mining giant BHP Billiton, the Minerals Council of Australia, the Queensland Resources Council and the Association of Mining and Exploration Companies, which all pledged to suspend their anti-resources tax ad campaigns immediately.

The West Australian Chamber of Minerals and Energy also called a ceasefire in the ad war.

The chamber said a planned expansion of its campaign had been suspended and existing ads were under urgent review pending confirmation the Government would engage in genuine consultation and provide a clean slate for discussion parameters.

Others were more circumspect.

Gas-focused Santos said it welcomed Ms Gillard's comments, but remained concerned about the tax's impact on the resources sector.

Among those who took a firm line by calling on Ms Gillard to abandon the tax altogether were Queensland mining billionaire Clive Palmer, mining consultant AMEC, the Chamber of Commerce and Industry of Western Australia and Fortescue Metals Group chief executive Andrew Forrest. Fortescue shares closed up 11c, or 2.48 per cent, at $4.54 after rising more than 4 per cent in earlier trade.

Fortescue was among the most sold-off stocks when the tax was announced, after saying the tax had forced it to shelve two iron ore projects worth about $17 billion because financiers did not value a 40 per cent rebate on losses. Rio Tinto was up $1.19, or 1.69 per cent, at $71.73 while BHP Billiton finished 51c, or 1.3 per cent, firmer at $39.65.

Among smaller companies, Flinders Mines was up 1c, or 12.05 per cent, at 9.3c and Gindalbie Metals rose 7c, or 5.93 per cent, to $1.25.

EL&C Baillieu Stockbroking director Richard Morrow said investors had initially responded positively to the new Labor leadership, but there was a small amount of late profittaking among mining stocks.

"There was an initial knee-jerk 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 [Treasurer 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."

Mr Morrow said the leadership change would likely push up the Australian dollar.

Wealth Within chief analyst Dale Gillham said Mr Rudd's poor handling of the tax proposal was the nail in the coffin for his leadership.

"Quite frankly, Julia Gillard will have about two months to show she can do what is right for the Australian people," Mr Gillham said.

"If Julia Gillard moves quickly to resolve the issues around the resource rent tax, then maybe this will work positively towards putting more confidence back into our market and we may see it finally start to gain positive momentum."

Mr Forrest congratulated Ms Gillard on her new role and asked her to listen to the Australian people on the controversial tax proposal.

"We heard you, new Prime Minister, very clearly, that you are going to negotiate. We welcome that," Mr Forrest said.

He said every day that the tax debate dragged on further damaged the Australian mining industry and the economy.

Mr Forrest said the tax in its original forth was now dead and the Government should take it off the table. "It's now proved the tax is deficient," he said.

"It's been out there in the market place and the bankers and the financiers give it no credit, while we have now a disproved theory, so it should be put down completely and let's look at something that's fairer and stronger for the economy."