A small Australian mining company has told SBS that even small miners are facing major uncertainty over the proposed Resource Super Profit tax, despite government attempts to placate junior operators.
Alkane Resources is a multi-commodity producer, but plans upcoming production of gold and the increasingly valuable rare-earth metal group, which China currently produces up to 97 per cent of.
The government is offering a rebate on exploration costs, and has touted the benefits for junior mining companies.
Alkane Resources Managing Director Ian Chalmers says other smaller miners ‘might be’ tempted by the rebates on offer when it comes to exploration, but it’s far from certain.
‘If I was (only) a junior explorer offered a rebate on the money I’d be drilling holes all over the place, but you only get the rebate if you go into production.’
When it comes to the proposed 57 per cent ‘tax shield’ on exploration costs, Chalmers is incredulous.
‘If the mine falls over, they’re going to reimburse the costs…that to me was amazing. I can’t believe a government anywhere in the world could come up with anything like that.’
Air of uncertainty
‘The cautious response is that until we see the actual detail, I’m still very vague as to how it’s going to work…and I gather it may be twelve months until we see the detail.’
Chalmers says that large and small mining companies do not necessarily speak with one voice, but he agrees large companies could get ‘hammered’ over the tax slug on ‘super profits’.
‘If I take a broader view, it does seem to be a horrible cynical ploy trying to generate votes in the big population centres of Melbourne and Sydney, and the mining industry is well out of sight of Melbourne and Sydney.’
Rare Earth could be hit
Big mining companies have been queuing up to announce projects put on hold in recent weeks, but smaller miners such as Alkane, with planned gold and rare earth metal projects, are also being hit hard with investors concerns.
‘Rightly or wrongly, it’s frightening investors away’, says Chalmers.
‘In eighteen months time when we’re looking to fund the Dubbo rare earth project, and looking for $150m or $250m, if that tax comes into being, it may be very difficult for us to raise that money, unless we end up selling our soul to the Chinese.’
Rare earth metals are used in a range of hi-tech applications, and there is increasing concern at Chinese attempts to limit production and export of the metals from its Inner Mongolia mine.
‘There’s this nagging little doubt of what is this super profit tax going to do to us. Is it going to affect us? The short answer is that we don’t know.’
Chalmers says the government probably expected a warmer welcome from small miners, but he just needs to see the detail.
‘Until we small miners understand the detail we can’t be happy or less happy, or completely negative.’