Thursday, May 27, 2010

Citigroup (NYSE:C): BHP (NYSE:BHP), Rio Tinto (NYSE:RTP) Projects May be Delayed because of Australia Super Tax

Citigroup (NYSE:C) says the proposed super tax on mining companies in Australia could result in mining projects of BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) being delayed for about a year, countering the purpose of the destructive tax in the first place.

“The iron ore market is in deficit until 2012, but tips into growing surpluses in 2013 onwards as supply growth accelerates,” Citigroup analysts Clarke Wilkins, Craig Sainsbury and Daniel Seeney said in a note to clients. "Delaying Australian unapproved projects by 12 months would dramatically reduce the surplus in 2013-14.”

Also affected would be Fortescue Metals Group (ASE:FMG), which is the third-largest iron ore exporter in Australia.

All of this could also have a negative impact on the global steel market, where steelmakers would bear the brunt of the tax, and whatever they end up passing on to the enduser will result in inflation.

I have a better idea, like all governments, the Australian government needs to become smaller, and that way they don't have to have such a negative impact on the rest of the world, as all governments do.

The oppressive tax is scheduled to start in 2012.

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