The federal government recently shelved its Carbon Pollution Reduction Scheme after losing several Senate battles.
Yesterday, Opposition Leader Tony Abbott said there was no way that the Coalition could support the resources tax, a move that helped mining stocks recover in afternoon trading.
Goldman Sachs JBWere observed that it would only take the support of either Family First Senator Steve Fielding or Independent Senator Nick Xenophon to block the resources tax at least until July 2011.
The Coalition also sneaked in ahead of Labor on a two-party preferred basis in a Newspoll survey this week.
Major miners BHP and Rio Tinto gained 0.4% and 1.4% yesterday after two days of consecutive losses amid concerns about the resources tax.
“Offshore investor feedback seems to indicate that many will avoid Australia for resource exposure until there is clarity on the tax,” Goldman said of the selling which hit the mining sector this week.
Prime Minister Kevin Rudd met with mining executives in Perth yesterday and defended the resources tax.
In a presentation to analysts, BHP metallurgical coal president Hubie van Dalsen said the company’s coal projects in Queensland and New South Wales were under review since the tax proposal, according to the Australian newspaper.
BHP chief executive Marius Kloppers also told reporters “we’ve got a long job ahead of us”, according to Dow Jones Newswires.
Peabody Energy senior vice president Vic Svec told the Wall Street Journal the tax would be hotly contested and would likely undergo major change before the final bill is passed.
But he did not specify whether Peabody would change its $16 per share cash offer for Macarthur shares in the wake of the proposed tax, with analysts already lowering their net present value estimates for the Queensland coal company.
Meanwhile, accounting firm BDO said mining companies would pay an effective tax rate of nearly 60% in the first year of the resources tax.
Even though the resources tax is 40%, BDO also added the corporate tax rate into its calculations.
“In addition to the strength of the Australian dollar, such a high effective tax rate will most certainly place further pressure on our largest contributor to Australian GDP,” BDO commented.
