The mining industry will reject any compromise offer on the government’s RSPT proposal, even if the government increases the uplift rate to as high as 15%, a senior coal industry source has told Crikey.
Laura Tingle and Louise Dodson in the Financial Review led strongly this morning with speculation the government would dump some of the promised positives of the RSPT package that have failed to find favour with the industry, including the resource exploration rebate, and significantly increase the uplift rate from the current proposed level of 6%. However, the 40% taxation rate would be left intact.
The industry has been running an aggressive and extraordinarily costly campaign across print, media and radio against the government over the issue and coordinating it with opposition leader Tony Abbott’s office and a number of media commentators.
As Crikey predicted on Monday, yesterday the industry rushed out specially-commissioned modelling by KPMG purporting to show a shift to a PRRT-type model with no transferability and deductibility of losses would be damaging to most sectors of the industry. Australia’s oil exploration sector has thrived under the PRRT since it was introduced by the Hawke government in the 1980s.
According to the coal industry source, the sector is concerned about appearing stubborn in the event the government offers a compromise. The KPMG modelling was ordered by the industry in order to undermine the impression it is behaving obstinately in the face of a government backdown.
But the industry also believes its advertising campaign is working very well and that the Government’s own campaign, if anything, is actually counterproductive, making viewers more likely to oppose the tax.
The industry has been regularly playing up the issue of the ‘sovereign risk’ posed by the RSPT, with the term appearing now to apply to any government decision big business doesn’t like.
However, the scale of ‘sovereign risk’ allegedly posed by the Australian government has again been put in context by overseas events.
According to the European edition of the Financial Times, Guinea has threatened to take away Rio Tinto’s rights to part of the huge Simandou iron ore project in the country. FT reports:
The government of Guinea has raised the stakes in a dispute with Rio Tinto by threatening to strip the Anglo-Australian mining group of more of its rights to one of the world’s biggest undeveloped iron ore deposits.
Officials in the military-backed government of Guinea have been angered by what they see as Rio’s failure to acknowledge an earlier administration’s 2008 decision to reclaim the rights to half the Simandou deposit. The warning follows a flurry of multibillion-dollar deals in the volatile mineral-rich west African nation as miners seek to capitalise on the soaring price for iron ore.
FT quotes correspondence from the Guinean government to Rio warning: “If you persist in not respecting decisions legally taken by the public authorities of our country, we will regrettably have to apply the full force of the law.”
“In 2008 Guinea stripped Rio of Simandou blocks one and two, accusing the group of taking too long to develop a mine and violating the terms of its exploration rights at least twice,” the FT says.
Rio has not told local investors about the threat, nor have there been any concerns about overseas ‘sovereign risk’ from the commentariat.
So if Australia’s tax brawl represents sovereign risk to Rio, what is the looming brawl in Guinea?