The Impact Of The Ammended Australian Mineral Resource Rent Tax On The Mining Industry

This dissertation includes a complete overview of the iron ore, steel and coking coal industries. It addresses the inelasticity of commodity supply/demand factors, the evolution of commodity pricing and the impact of volatile freight transport costs.

The focus of the dissertation is on the proposed Mineral Resource Rent Tax that will be applied to all coal and iron ore projects in Australia. A financial appraisal of two projects (one for iron ore and one for coking coal) using a Discounted Cash Flow Model and sensitivity analysis is used as the basis for the investigation.

It concludes that the proposed tax will have a significant negative impact on the profitability of mining projects. Marginal mines are likely to be considered unprofitable and investors will shift focus to less risky economies. The Australian iron ore industry will lose marketability and the prospect of a second tax in the form of carbon taxation (also being proposed by the Government) may even cause the coal industry to contract.