Fortescue convinced it will not have to pay mining tax
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.