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Aus tax scarier than nationalisation

06 July 2012   (0 Comments)
Posted by: SAIT Technical
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By Reuters (Business Report)

Australia’s tax policies are more of a worry to major gold producer AngloGold Ashanti than calls within South Africa’s ruling party to nationalise mines and impose more duties, CEO Mark Cutifani said on Thursday.

Cutifani, who runs the South African firm which is the world’s third largest gold miner, told Reuters AngloGold saw construction and mining costs, which have risen by as much as 15 percent so far this year compared to 2011, as more of a threat than policy changes by the African National Congress (ANC).

"It’s clear at the senior levels of the ANC there is no appetite for nationalisation,” Cutifani, an Australian, said in an interview.

"On the other hand, taxation policies towards South Africa’s miners will be central to the ANC, but it certainly won’t be as draconian as the Australian legislation.”

The ANC’s Youth League is pushing for nationalisation of South Africa’s mines to provide government revenue to fight poverty, a call which resonates among the black majority who see it as a way to spread the wealth from a sector that grew powerful in step with white-minority apartheid rule.

But South African President Jacob Zuma has said he opposes nationalisation, although the ANC is now weighing additional taxes on the mining sector as a way to raise revenue.

Cutifani said any ANC tax was unlikely to hit companies as hard as the raft of duties Australia’s Labor government imposed this month.

As of July 1, iron ore and coal companies in Australia making more than A$75 million ($77 million) in annual profits must pay an additional 30 percent "Minerals Resource Rent Tax”.

An A$23 per tonne carbon tax on emissions also took effect the same day and applies to all businesses.

The taxes have led to earnings downgrades for some of Australia’s biggest mining companies, including multi nationals BHP Billiton and Rio Tinto


Cutifani said development and expansion plans in place in South Africa and the 10 other countries where AngloGold operates mines should lift the company’s gold output to 5.5 million ounces in 2014 from 4.3 million in 2011.

Over the next few years, the proportion of gold AngloGold mines in South Africa will drop by 10 percent to 25 percent as more mines open in other countries, he said.

"We’re simply going where the gold is now,” he said. "South Africa is a mature mining district where we have been for more than 100 years.”

Cutifani said AngloGold’s production costs were running about $100 per ounce under the industry average of $1,250, and these costs had eroded profit margins to only "modest” levels based on current bullion prices of around $1,600 an ounce.

"Margins are very, very tight- mines are getting deeper, new discoveries are dropping and cost structures keep going up,” he said.


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