The tax isn't a bad idea, what is a bad idea is making it applicable to current projects, federalising a resource that belongs to the states, not convincing the states to drop the royalty payment scheme, and doing a shithouse job of implementing it.
Actually it's a horrific idea, there have been many attempts to justify it based on the situations in other countries and in other industries and just about every comparison is irrelevant. For starters the RSPT isn't a tax on Super Profits, it's a tax on profits over 6%, find me a company that thinks making a $6k profit from $100k turnover is super! Coal mines do get a lot of their infrastructure provided, Metaliferrous and Iron Ore mines often don't. We supply our own power, water, built our own airstrip and roads, we haul our concentrate to our own facility and then pay contract rates for it to be railed to our own port. Subsidised my arse, and considering QR is on the market where is the new money coming from. In the Pilbara ore mines BHP and Rio had to build everything from scratch. We lived in company towns and went to the company built school and played T-ball for about 6 different teams all sponsored by the company that incidently also supplied the oval. Then every few years 10km of rail line gets washed away by a cyclone and they rebuild it again, in the mean time the Government didn't fly the food in because we were cut off (no flood relief), the company did that too.
Royalties. They are not
paid by the tonne. The fact that it is continually stated by Politicians and in the media just goes to prove this argument is being made by people who shouldn't be having the argument. Royalties in quarryies (etc) are per tonne, the mines Rudd is going after pay royalties Ad Valorem, they pay a percentage of what they earn. This is were the utter tripe of the 'everyone deserves a share' argument comes in. Currently every mine pays a percentage of its turnover in royalties, profitable or not, whatever it digs and sells the Government takes a cut.
Hence every mine pays for what it takes. The RSPT means only profitable mines pay, the small shows can just keep chipping away for free. Hence this isn't really about everyone getting a share of the resources we all own and sustainability and investment, it's about getting a bigger share of the money being made and to hell with anything else. It's the big operations that train most of the graduates, that trial new safety systems and gear while it is still ferociously expensive. We buy systems like collision avoidance to stop machines and people getting too close, trial it, get it to work, then the smaller shows come on when its affordable. It's the same with equipment, cheap second hand gear doesn't appear, someone buys it new and then sells it when they want something shinier and new.
If you take money from the big end of town you will kick the small end even harder. There are a few operations around today only because of the cash they made during the boom kept them afloat during the crisis. Plenty closed, but not as many as could have needed to. We are currently investing $100mil on extending mine life because as the mineral grade drops you need to process more ore to produce the same amount of concentrate. Profits fall because cost increases in expanding and running a bigger mine, yet sales will remain the same because the amount of final product doesn't change. With royalties the Governement gets it's cut because it's based on what we sell, with the RSPT the cut reduces every year because it's based on what we have left.
Our expansion is going ahead, though its only 4 years till the next cross road when Corporate run the next feasibility on us, Xstrata's Ernest Henry is not, that project was line ball, the Board didn't want it, local management did. In the end the local management won, until the RSPT moved the goal post. Paul Howes has been stating that another operator will come along and take it up, it represents a fundamental lack of knowledge as to how the industry works. You don't just start an old mine, you need to find something profitable and worth restarting it for to justify the huge cost of reopening old workings. A new operator won't be able to process enough ore without the rest of Xstrata's operation to be profitable, the only way it will reopen is on a small scale were they can cherry pick, but that won't create 300 jobs, that will create 50.
The industry will survive, it will not shrivel, we have some incredible ore depsoits here and something like 40% of the world's uranium. QLD can keep mining coal at its current rate for something like 400 years, WA has enough Iron Ore to keep going for another 200years. The problem is there are plenty of other countries in a similar boat. BHP are investing $5bill in Liberia, they have to build everything but they generally do anyway. A year ago it wouldn't have been worth the effort, now it is. Rudd uses the example the Sovereign Risk is when Rio Tinto had half the Simondou lease rescinded to award to a pet company of the Government. Yet our Government is retrospectively taking 57% of a companies profits, that is the sort of cost return that makes more marginal countries look worth the risk. The investors that pay for these operations might just stop putting money into BHP and Rio and start investing in Vale, Brazil has more Iron Ore than Australia and cheaper labour. They have to ship it further to get it to Asia but it's cheaper to start with and with more investment and bigger mines with better technology they will only get cheaper.
Another RSPT issue, when the economy falls over again and all these Mining companies start to lose money, who really believes Rudd will come forward with 40% cheques? He was spending big with stimulus and 'going hard with working families', is he really going to go and reimburse 40% of the 3$bil BHPB tanked at Ravensthorpe? Rudd will do the same thing Keating did when money was tight and he had legislated expenses, he'll change the legislation. If Keating can cancel WW2 pensions and get away with it Rudd will have no issues convincing the community that the Government can't afford to underwrite the losses of the major miners. Hence the reason banks won't finance Fortescue and Tom Albanese calls Australia his 'greatest sovereign risk'. If the 40% underwrite is useless to the industry then what? Henry himself said without it the RSPT is not viable, and here we are at that point.