AUSTRALIA’S junior miners attacked the Gillard government’s new tax plans, after being left out of the deal agreed with the big miners.

The world’s largest miners today celebrated their win in the resources tax battle after newly appointed Prime Minister Julia Gillard managed in less than a week what her predecessor Kevin Rudd could not achieve in two months, a new resources tax the mining giants were happy with.

BHP Billiton, Rio Tinto and Xstrata negotiated the deal with the government and moved quickly today to hail the new tax as an improvement on the previous controversial proposal.

Despite the majors claiming a win with the new resources tax, the mid-tier miners and juniors have said the deal was designed by the big players, with the smaller miners “stuck on the sidelines”.
Emerging Pilbara miner BC Iron’s managing director Mike Young said the government had been “done over” by the major miners.

“The big foreign-owned miners, the three big bad guys that Tony Abbott sided with, have done the government over,” he said.

“Real Australian companies, like BC Iron and Atlas Iron, sit on the sidelines and don’t get consulted.

“To sit down across the table with three companies, who two weeks ago they were calling liars and cheats… it just shows how disingenuous the government is.”

The criticism of the new tax came as a rally in the Australian stockmarket faltered, with the benchmark S&P/ASX 200 index slipping into the red by mid-afternoon.

Mr Young also said that the new proposal does not mitigate sovereign risk, because the tax has not been taken off the table.

“It is a move in the right direction but the government basically botched it when they brought it in and they have now rushed through a consultation process and excluded 99 per cent of the mining companies in Australia,” he said.

“They have done that for political expediency and to take it off the table as an election issue.”

The headline rate of the mining tax, which has been renamed the mineral resource rent tax, is reduced to 30 per cent, from the original proposal of 40 per cent, and it will only apply to coal and iron ore, which are Australia’s two biggest exports.

Ernst and Young’s global mining and metals leader Mike Elliott said the headline rate of 30 per cent falls to 22.5 per cent, when the new 25 per cent “extraction allowance” was factored in.

“There seems to be more significant concessions than what appears (in the government announcement),” he said.

In its fact sheet on the new resource tax, the government describes the extraction allowance as a “further shield from tax the important know-how and capital that mining companies bring to mineral extraction”.

Under the new proposal, the government has also responded to one of the major complaints about Rudd’s tax plan, which involved the tax being applied retrospectively.

The government will now allow companies to insert their mines into the new tax regime at market value rather than book value, thus allowing them to claim back against depreciation of the assets.

The three major miners all got behind Ms Gillard and her tax plan, in a sign they will cease their strong public lobbying against a new tax regime for the sector.

BHP Billiton chief executive Marius Kloppers said the miner was encouraged that the MRRT design was closer to BHP’s frequently stated principles of sound tax reform.

“At the request of the prime minister, there have been constructive discussions in the last week with the deputy prime minister and the resources minister, which have resulted in a material improvement from the original tax proposal” Mr Kloppers said.

Xstrata immediately reinstated the underground expansion of its Ernest Henry copper mine in Queensland, which it had suspended citing the impact of the original tax plan.

Rio Tinto Australia managing director David Peever said recognition of market value for existing mines and a reduction in the headline rate represented significant progress in achieving Rio Tinto’s fundamental principles of tax reform.

“The Prime Minister’s announcement follows constructive discussions over the past week between the government and mining companies. There is, however, still a lot of work to do,” Mr Peever said.

The revised tax proposal also allows for onshore oil and gas projects, including the booming coal seam gas sector in Queensland, to be covered by the existing Petroleum Resource Rent tax, levied at 40 per cent.

The support of the big miners and oil and gas players will boost the government’s relationship with the sector but the smaller players are frustrated at being excluded from negotiations.

Atlas Iron managing director David Flanagan said the mid-tier miners were involved in the previous consultation process but this week’s negotiations only involved the top three miners.

“We don’t know if this is a good deal for the whole sector,” he said.

“For the time being, at least, BHP and Rio, have the advantage of understanding what is in the documents.”

Mr Flanagan said it was definitely a “big new tax”.

“We still need to sit down and work out how badly this will affect our business.”

Outspoken mining magnate Clive Palmer also rejected the new mining tax deal, which he said would hurt the economy.

“This is still a tax and it’s still a large tax,” Mr Palmer told Sky News today.

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