The misguided and damaging taxation of the mining industry in Australia may have received another blow, as Morgan Stanley (NYSE:MS) said BHP Billiton will probably halt development on their Olympic Dam project in response to the 40 percent tax on mining profits in the country, scheduled to begin in 2012.
Included in the project is the largest known uranium deposit in the world.
Morgan Stanley analyst Craig Campbell said, “Our modeling of this project shows that the resources super profits tax reduces the net present value of the project to an extent that it becomes negative.”
With the cost of expansion for the mine expected to be from $20 billion to $40 billion, it's highly unlikely BHP will commit to something that once they start, could crush their earnings for years based on the super tax.
This could over the long term benefit uranium miners like Cameco (NYSE:CCJ) who will also benefit from the end of the 'Megatons to Megawatts' initiative of the Russians, which will remove about 24 million pounds of uranium from the market in 2013, the year it ends.
Increasing demand for uranium makes this a good play for uranium producing companies with a lot of exposure to the commodity.
2 comments:
BHP Billiton are probably finding this whole tax saga quite convenient, as there are several other factors holding up the expansion of Olympic Dam.
Apart from the serious legal and environmental concerns, there's the unmentioned issue of seismic activity.
Last year's incident that paralysed the main shaft activity is still a mystery. It could turn out the the whole expansion operation is unsafe and unviable, and BHP can conveniently blame the Australian government, when it abandons the project
Not aware that BHP have done any significant work on Olympic Dam since the alleged Clark Shaft incident either.
The local tribe refused their signatures to BHP Biliton a few years ago. Seeing as all minerals are owned by the aborigines, then it would seem quite foolish to underestimate them and deliberately put one foot inside an offshore Jail. Jacko
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