CLIME PRESS RELEASE FOR IMMEDIATE RELEASE
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“Resources Super Profit Tax tantamount to nationalization without compensation.”
John Abernethy of Clime Asset Management believes that the RSPT is a retrograde step
that will adversely affect the value (and therefore the share price) of most of Australia’s
major miners.
He notes that: “The majority of Australians has an equity interest in the major miners and
as shareholders they will be the ones ultimately bearing the burden of this new tax.”
“It is the long established mines of our major resources companies that represent the true
targets of the RSPT. This includes the major iron ore, coal, copper and uranium mines
that have been developed over decades. Most have been constantly expanded to meet
even increasing Asian demand. Their recent incremental capital investment generates a
high return in a booming resources market, whilst historical costs have been heavily
depreciated and expensed. The introduction of the RSPT would effectively grab 40% of
the miner’s EBIT of these long established and highly profitable mines ( after a bond rate
of return on heavily depreciated capital)”, John said.
“This amounts to the partial nationalization of many of our major mining companies
without appropriate compensation to the shareholders of these companies”.
“It is curious that the major fund managers who manage and control much of the public
ownership of our major mining companies have been largely silent on the possible
introduction of the RSPT. Is this because they are conflicted by the possibility of an
increased flow of funds from higher super contributions (as a bi-product
of the RRPT), or worse, are they scared of increased regulation?”, John said.
“The RSPT would set a precedent whereby equity ownership of a company could be
devalued by government direction at any time, without fair compensation, or on fair
terms. A tax that captures the real excess gains of long established mines is appropriate
(which major miners have acknowledged), but it has to have a sensible mechanism for
defining excess or windfall profits, which this tax does not. It also has to acknowledge
that capital generated from profit is often reinvested and not distributed.”, John said.
John Abernethy is chief investment officer at Clime Asset Management and one of
Australia’s leading exponents of value investing.
For further information: john@clime.com.au or phone 89172107 (direct)
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