AUSTRALIA'S leading mining companies are set for a wave of profit upgrades, with bullish analysts factoring higher iron ore prices into earnings forecasts as China's economic recovery gathers pace.
BHP Billiton, Rio Tinto and Fortescue Metals are due to report in the next two weeks. Both Commonwealth Bank and UBS analysts have highlighted the upside to earnings if iron ore prices remain above $US150 a tonne.
Iron ore has risen almost 80 per cent since hitting a low last September of $US87 a tonne. If those prices are sustained through the March quarter, CBA estimated Fortescue earnings would increase 30 per cent, Rio's 12 per cent and BHP's 7 per cent. If sustained until June, Fortescue's earnings would rise 52 per cent, Rio's 22 per cent and BHP's 12 per cent.
"We could be on the verge of the first earnings upgrade for 18 months," CBA's analysts wrote.
"We are at the end of the downgrade cycle and the market should again begin focusing on the valuation upside."
Earlier this week UBS calculated BHP and Rio earnings for the year would rise 22 per cent and 23 per cent respectively, while Fortescue's earnings would rise 54 per cent, if spot iron ore prices were sustained.
Rio is expected to report underlying earnings of $US9.1 billion for calendar 2012 on Thursday, although $US14 billion in impairments - which led to the resignation of former chief Tom Albanese last month - will tip the company to report its first ever bottom-line loss. BHP is expected to report underlying earnings of $US9.5 billion for its December half.
Higher profits should translate into higher mining tax revenues. Releasing figures on the $126 million paid in minerals resource rent tax in the first half of 2012-13, the Treasurer, Wayne Swan, said concerns last year about Chinese economic weakness were "overdone".
He said there had been a recovery in commodity prices from the lows of last year, which had contributed to significantly higher MRRT payments in the December quarter than in September, as company profits rose.
The Reserve Bank's monetary policy statement on Friday said the latest bounce in commodity prices was likely to give national income a boost this year, but it forecast falls in exports over the longer term. Recent price rises, the bank said, had "coincided with increased industrial production in China and elsewhere in the region, although expectations are that iron ore prices will not be sustained at current high levels".
None of the major mining companies that were party to the design of the MRRT - BHP, Rio or Xstrata - would confirm whether they had paid it in the first six months.
At its recent December quarterly production update, Fortescue's chief financial officer, Stephen Pearce, said: "We do not pay and don't anticipate paying any MRRT. It's structured as a super profits tax, and at the moment the industry is not making super profits."
The Reserve predicted coal demand would increase as the global economy recovered, but did not say what this meant for export prices.
The tax applies to profits on metallurgical and thermal coalmines but coal prices have not recovered as strongly as iron ore. An Xstrata spokesman said the coal industry is "badly affected by high input costs, low coal prices and the strong currency. The MRRT is a tax on above-normal profits and coal industry profitability is currently poor".