How those mining super-profits going?

In 2010 the then Rudd government introduced a Resource Super Profit Tax on mining operations to “share” the benefits of the mining boom with the Australian community (or some such propaganda).

Today the ABS put out the latest installment in what is a very occasional data series – 8415.0 – Mining Operations.

Coal mining profits fell by over 88 per cent during 2012-13, according to a report released today from the Australian Bureau of Statistics (ABS).

Mr Chris Thompson, ABS Director of Annual Industry Statistics, said that this was largely due to the value of sales dropping by 16.9 per cent during the year.

“While coal miners reduced expenses by 2.6 per cent, it wasn’t enough to offset the sales decline,” said Mr Thompson.

“Metal ore mining profits also declined by 41.4 per cent and their sales fell by 8.9 per cent. Total expenses grew by nearly 10 per cent, mostly in non-wage expenses, which contributed to the fall in profits.”

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37 Responses to How those mining super-profits going?

  1. TonyOrlando

    Coal mining profits fell by over 88 per cent during 2012-13

    In which case they presumably wouldn’t be affected by the super profits tax. On the other hand if the opposition party is promising to abolish said tax, there is a huge incentive to suppress profits for a couple of years and declare them down the track.

  2. Myrddin Seren

    Coal prices have fallen below the costs of production in many cases – especially in the thermal sector.

    The situation would be as bad if not worse than in the 2012-13 reporting period.

  3. LordAzrael

    My employer which provides geological services to the coal industry went into liquidation yesterday after two years of difficult trading conditions. 160 jobs lost.

  4. Ripper

    Total expenses grew by nearly 10 per cent,

    Carbon Tax.

  5. .

    So Tony you don’t want to repeal a law without any current effect?

    Why should we stop passing laws without any immediate foreseeable effect?

    They should pass as many laws as possible!

    What could possibly go wrong?

  6. Motelier

    I bet the ABS have not figured in the loss to all of the other industries tha t provide support to the mining industries.

    IMHO the MRRT was designed to ruin the booming economies of the mining states. It has certainly been successful at a regional level.

    The returns to the states will be lower because of this.

    KRUDD amd Shane Wand should be investigate for treason.

  7. Bruce of Newcastle

    The irony is the states immediately all put up their royalty rates, which white anted the supposed revenue from RGR’s mining tax.

    And the royalty rises operate as costs, making it even harder for the companies to make a profit. So they eat up company tax receipts too. Then the companies have to sack workers, ripping union membership fees off the unions, and destroying income tax receipts. If there is another better example of Laffer Curve stupidity I don’t know what it is. The ALP are dumber than a box of rocks, and that is an insult to rocks.

  8. tgs

    TonyOrlando
    #1332878, posted on June 4, 2014 at 11:59 am

    In which case they presumably wouldn’t be affected by the super profits tax. On the other hand if the opposition party is promising to abolish said tax, there is a huge incentive to suppress profits for a couple of years and declare them down the track.

    The point being that mining is an extremely cyclical industry predicated on long capex cycles. Mining operations can be unprofitable for long periods of time during periods of suppressed prices because it is less costly to run at a loss rather than to shut the whole operation down only to restart it again a few years down the track.

    Due to the cyclical nature of the industry they need to be able to make profits during the good times to offset the losses during the inevitable bad times. If you reduce their ability to make profits then you reduce the expected NPV of marginal operations leading to less economic activity, jobs and wealth creation for the rest of the country. Mining only directly empploys a small percentage of the workforce but the proportion of jobs that rely on mining in some way: e.g. our big mining services industry, professional services, banking, law, accounting, finance, etc. is surprisingly large.

  9. tgs

    Woops, those quote tags should be the other way around.

  10. H B Bear

    Snic – could we get the Wombat Whisperer to explain to us how this will work again? For the LOLs of course.

    The Goose got a bit of radio time today – the ALP brains trust must think the Australian electorate are goldfish and will ever give a rats arse what this mentally deficient cretin has to say.

  11. Helen

    160 jobs lost.

    I am sorry.

  12. Helen

    Lord Azrael, we have a dozer operator job going if you need one. Lots of fresh air in the middle of no-where, good cooking, hot water shower, weather mild, pleasant company. Wifi, so you can still talk on the Cat.

  13. Dr.Sir Fred Lenin

    I have been reliably informedthat the reason this Tax did not raise sqillions as planned was because kevvie and waynnie ran out of writing room on the back of the drink coaster,this is also the reason why NBN is so far behind schedule ,and the safety issue was not implemented on pink batts.
    These issues are understandable when a reasonable explanation is given,there was no need for any inquiry.

  14. TonyOrlando

    Due to the cyclical nature of the industry they need to be able to make profits during the good times to offset the losses during the inevitable bad times.

    Which is why the super profits tax allowed them to write off bad years as well. If you like it is a super-profits averaged over a number of years tax.

    Of course I don’t know if mining companies have minimized profits to declare them down the track when the tax is abolished. But if they didn’t they are imbeciles and should immediately sack their accountants and hire me instead.

    Of course all the royalty increases brought in by the Liberal state governments DO have the potential to damage the mining industry, as these are paid year in, year out regardless of commodity prices or profitability of the individual mine.

  15. .

    Tony

    Do you agree that a “super profit” is when the rate of return exceeds the risk free rate of interest? This is what Swan and Rudd said and what their policy was.

    This policy was written by dumb people who believe all profit is wrong, and wanted to punish success, without regard to how much taxes (in excess of other industries), regulation and negative rates of effective protection the mining industry cops – despite this, it is a major export earner and has the highest/second highest inter industry multiplier in the economy.

    Either it is pointless and is a nuisance or is deliberately there to try to make millions unemployed.

  16. MemoryVault

    I have been reliably informed that the reason this Tax did not raise squillions as planned was because kevvie and waynnie ran out of writing room on the back of the drink coaster, this is also the reason why NBN is so far behind schedule, and the safety issue was not implemented on pink batts.

    By God, I think you’ve stumbled onto something profound, Dr Sir Fred Lenin. If you are correct then the answer to getting some sound economic planning from our governments is as simple as –

    Give the politicians bigger drink coasters.

  17. Bruce of Newcastle

    Do you agree that a “super profit” is when the rate of return exceeds the risk free rate of interest?

    That is rubbish. Most mining companies would not give board approval to a project with IRR less than 15%, and the sweet spot in my personal experience over several decades is an IRR of 30%. If its much lower than that the risk is too high, and if its higher than that the board don’t believe your numbers. Goalseek is your friend.

    For that matter the banks mostly have an ROI of 18% or so at present. It used to be much higher. Unless government has a realistic understanding of what ROI will get investors to open their wallets they are screwed, and so is our economy. All you can say is the Libs have half an idea of reality. The ALP are in fairyland. And the Greens are beyond the limits of the known universe.

  18. .

    I’ve seen local councils plan to get rid of pot plants in civic centres as a response to multi million dollar overspend in old capital works remediation and unsustainable wages growth agreed to with the union…

    Maybe they needed bigger coasters in that meeting with the USU reps…or the nursery.

  19. Ant

    Oh, not profits.

    It won’t matter to leftists. The parasites will simply move on and plunder the next industry they can stick their probiscus into.

  20. JakartaJaap

    Surely educated men like Kevni and The Goose would have used multiple coasters and filed them in a series, stuck together by sticky tape so they could concertina out. The resulting spread sheet would have provided a much better basis for the tax.

  21. phantomrider

    Never good hearing jobs go, welcome to the new world.

  22. tgs

    Which is why the super profits tax allowed them to write off bad years as well. If you like it is a super-profits averaged over a number of years tax.

    I don’t think you understand the policy as well as you think you do.

  23. Myrddin Seren

    Unless government has a realistic understanding of what ROI will get investors to open their wallets they are screwed

    Pretty sure we are on this track. See Lord Azreal’s comment above. The 160 jobs ( anyone know which company ? ) will be a mix of technical, IT and admin jobs. No union leaders will be screaming about the ‘injustice’ of it all and the middle class gets whacked again, with more flow on to come.

  24. Dr.Sir Fred Lenin

    Jakarta jaap,my informant informs me that what you sggested ,filing coasterswas tried ,it was a failure,the wet coasters stuck tgether and when separated the writing came off, This of course would explain the many mistakes they made,lack of information,any drunk could have told them the coaster would stick together.

  25. TonyOrlando

    I don’t think you understand the policy as well as you think you do.

    Quite possibly, but take it up with the ATO
    https://www.ato.gov.au/Business/Minerals-resource-rent-tax/In-detail/MRRT-in-detail/Allowances/MRRT-allowances/?page=7

  26. tgs

    Quite possibly, but take it up with the ATO

    Right, there appears to have been some misunderstanding.

    When talking in terms of ‘super profits’ I thought we were talking about the Resources Super Profits Tax, which is the tax which was replaced by the MRRT (which you have linked to on the ATO’s website).

    I still oppose the MRRT but concede your point.

  27. Token

    Quite possibly, but take it up with the ATO

    he says he doesn’t know

  28. Bruce of Newcastle

    The 160 jobs

    Myrddin – In my area its probably been a couple thou jobs direct and indirect this quarter. Here’re a thousand in just two announcements last month in the Newie Herald, and there have been half a dozen other announcements I recall.

    Its the ALP’s fault. They went with Rudd and screwed their own base. And don’t get me going about Mr Carbon Combet, ex coal union guy.

  29. phantomrider

    Best days of coal have past us get use to it. GAS IT UP !

  30. Token

    Best days of coal have past us get use to it.

    LOL, you are so wise, that is exactly what happened in Germany when they closed their nuclear power plants, isn’t it?

    You are so funny.

  31. .

    We’ve run out of coal? LOL

  32. Bruce of Newcastle

    Phantomrider – The Poms discovered some coal under the North Sea a couple months ago. Up to 23 trillion tonnes. Which would itself power the world at the current rate for over 2 thousand years.

    We won’t be at peak coal for centuries. And since coal is easy to convert to crude oil, the idea of peak oil is just as silly.

  33. Myrrdin Seren

    Bruce of Newie

    They went with Rudd and screwed their own base

    The NSW Libs tried to gladhand unemployed-moi for funds for the next state election.

    I ( politely ) told the canvasser that, like so many of my professional friends, I was without a paycheck and that as far as I could tell, the NSW government was indifferent if not outright hostile to the resource sector in NSW – and that they were killing their base.

    The canvasser told me I was the third person just on that day to tell him the same thing.

    As far as I can tell, the NSW Libs could not care less for their traditional support base, so I guess we will see them going hard for taxpayer funded election campaigns so that they can totally ignore the peons and cosy up to their preferred interest groups of luvvies at cocktail parties and rich spivs like Nathan Tinkler.

  34. Andrew

    In which case they presumably wouldn’t be affected by the super profits tax.

    No. Mostly because of all the projects cancelled when the govt announced that making more than 4% IRR on a project is liable for specific punishment. Those don’t pay any RSPT / MRRT at all.

    On the other hand if the opposition party is promising to abolish said tax, there is a huge incentive to suppress profits for a couple of years and declare them down the track.

    Yep. They massively shorted commodity prices, driving them down to levels where they became bankrupt as a clever tax minimisation policy. In fact, they successfully lobbied for the World’s Biggest Carbon Tax ™ to be imposed on them for 3 years until Kevni promised to repeal it after the 2013 election – again, a clever ploy to minimise reported earnings for 2 years.

    Of course all the royalty increases brought in by the Liberal state governments DO have the potential to damage the mining industry, as these are paid year in, year out regardless of commodity prices or profitability of the individual mine.

    A genius consequence of the Gillard-Goose tax rewrite, in which the Feds pay for state royalties.

    But I’m confused – are you saying that higher taxes on an industry have the potential to damage said industry??

  35. TonyOrlando

    But I’m confused – are you saying that higher taxes on an industry have the potential to damage said industry??

    Of course – what we really need is a graduated tax system where less profitable firms are not taxed out of existence, but where firms making super profits on the back of a publicly owned resource pay a higher rate of tax once their profits reach a certain level.

    Know ye of such a system?

  36. Andrew

    the Australian electorate are goldfish

  37. Andrew

    Of course – what we really need is a graduated tax system where less profitable firms are not taxed out of existence, but where firms making super profits on the back of a publicly owned resource pay a higher rate of tax once their profits reach a certain level.

    I do. It’s called the We Meant Well at the Time, and the Words Sounded Like They Made Sense in our Heads Before We Fucked the Economy Tax.

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