FORTESCUE METALS says it is more convinced than ever that it will not have to pay any mining tax, despite the price of iron ore continuing its strong run.
Announcing a first-half net profit of $US478 million ($463 million), the chief financial officer, Stephen Pearce, said the design of the government's Minerals Resource Rent Tax allowed the build-up of "capital shelters" or tax credits, which meant the miner was unlikely to pay any mining tax.
"Under a general considered view of where iron ore prices are heading over the next few years - no, we don't anticipate we will be paying any MRRT," Mr Pearce said.
Fortescue painted a bullish picture of iron ore demand, especially from its biggest customer, China. This is despite a steep fall in iron ore prices to as low as $US86 a tonne in September, contributing to a 40 per cent fall in Fortescue's reported profit, which was down from $US801 million, despite record levels of production. Revenue was $US3.3 billion, from $US3.35 billion in the previous corresponding period.
Fortescue also scrapped its interim dividend, blaming its capital commitments. The miner said it would look to establish a fixed dividend payout ratio to guarantee investors a share in profits but disappointed investors dragged the shares down 26¢, or 5 per cent, to $4.92 on Wednesday.
The fall in commodity prices last year pushed Fortescue's shares as low as $2.81. Iron ore prices, at the mercy of China's steel mills, have rebounded strongly in recent months, buoyed by a relatively smooth leadership transition in Beijing. The benchmark iron ore price has risen 37 per cent in the past three months and last traded at $US158 a tonne.
The chief executive of Fortescue, Nev Power, said he expected iron ore prices to settle at about $US120 or $US130 per tonne in the next year or so, providing a comfortable profit margin as the miner expands production to 155 million tonnes per year.