Mining taxes, Anglo Platinum and Aluminium - David Hargreaves - Mining consultant WH Ireland

A look at the appointment of Cynthia Carroll as chair of Anglo Platinum, the switch from RSPT to Rent tax in Australia and a bit more about the price of aluminium

GEOFF CANDY: Welcome to this week's edition of Mineweb.com's weekly Newswrap podcast.  Joining me on the line is mining consultant for WH Ireland, David Hargreaves.  David it was another busy week in the mining world last week with Australia again dominating a lot of the headlines.  The new Prime Minister Julia Gillard seems to have struck a deal with the miners to swap the much-maligned super profits tax or the RSPT with a slightly more palatable resource rate tax and Anglo American has been in the news as well.  The chief executive officer, Cynthia Carroll is becoming the chairman of Anglo Platinum which is their biggest asset and then in the precious metal space the CPM Group had good things to say about platinum's fundamentals, but India saw a 75% drop in June golden flows.  On the base metal side aluminium continues to come under pressure.  Perhaps if we could start with the Anglo Platinum announcement that come out on Monday, questions have been raised about the structure of the arrangement and which shareholders she will now have to be loyal to I suppose, or who she will be serving if she is on the board as Chairman of Anglo Platinum as well as the chief executive officer of Anglo American.  

DAVID HARGREAVES:  Geoff let's take one thing at a time - Cynthia Carroll becoming chairman of Anglo Platinum is a positive move.  This is not in accordance with what a lot of other people think but remember what she took on, Anglo American was in quite a lot of trouble and now she's turned it around.  She has not only made sure that the company survives, she's brought into the 21^st Century and my goodness it needed it.  So I think she'll do a tolerable job also at Anglo Platinum.  Anglo American is the largest shareholder in Anglo Platinum.  Platinum is at a very interesting stage in that the world needs it, it's an industrial metal when all said and done but it has this sidekick of being a precious metal as well and all I can say is that she'll do a great job.  She's quite capable of overseeing both companies and will bring benefit to it.

GEOFF CANDY:  Are we more likely then to see a more hands on approach at Anglo Platinum from Cynthia?

DAVID HARGREAVES:  Oh yes we are indeed because there are now so many ploys in the platinum game that they are almost all in the Bushveld complex on the eastern limb and on the western limb and it needs dragging together with a lot of juniors, with several seniors.  The platinum market needs pulling together and she has shown she can do something for Anglo American, and she can do it for the platinum industry too.

GEOFF CANDY:  What would a better performance by Anglo Platinum mean for the greater Anglo Group?

DAVID HARGREAVES:  It's a big interest in there.  It can provide up to 15% of their overall assets, but more than that it's strategic.  Platinum is probably the most strategic metal in the world but it straddles the fence between being an industrial metal, which it certainly is, and an investment metal and so it could be key to Anglo Platinum.  I go beyond and maybe this is stretching things a bit too far, Anglo Platinum has fought off a bid, she's made sure that I don't think they'd be bid for again shortly, diamonds I think they will dump.  They will become more focused and therefore platinum will become very important to them and she will make sure that they are.

GEOFF CANDY:  That's great.  David if we turn our attention to the Australian scene now.  The new deal that was agreed upon by the big miners and the Australian government is already sparking political controversy with the government coming out and saying it's not going to be getting as much money from the new version of the tax - I suppose the potential for the old one.  What do you make of this resource rate tax?

DAVID HARGREAVES:  First of all the government is fighting for its life.  It could have done without this as it comes up to an election therefore it has to make do amend.  They know that mining is the cash cow but they got this one wrong and the big miners are showing them that they have more muscle.  It has been so intriguing.  It's like a jigsaw.  The effort that the big miners have put into persuade them that they got this one wrong, has been enormous, timely and is really having a big impact on it all. 

GEOFF CANDY:  Has it done anything to repair some of the political fallout that we see and the potential for people to be a little concerned about the sovereign risk aspects of investing in Australia? 

DAVID HARGREAVES:  It's going to do a lot of long-term damage.  It is going to be several years before Australia recovers from this and first of all the election that will determine whatever party comes into power determines to be the strategy.  Australia depends entirely upon its minerals and it's an exporter of minerals.  It's not a user of minerals it's an exporter.  It will have to be very strong about it and it will have to deliver a formula that people will believe will stick.  So this is big damage done here in Australia with this tax.

GEOFF CANDY:  David if we look briefly at aluminium.  It was something that you focused on a bit in that newsletter that you put out.  There have been rumblings about ETF and there has also been some good news on the automobile side of things with some of the carmakers saying that output is picking up.  What is that likely to do to the price of aluminium because is seems to still be languishing.

DAVID HARGREAVES:  Yes I don't think there is a melting pot like the aluminium melting pot - unlike most of the metals, we have three stages, we have bauxite which is a big cheap and cheerful base mineral found only in four or five countries and they control it.  Then you get the alumina stage which is more energy intensive and anybody can do it.  Once you've got your bauxite you make it into alumina then you got the most highly energy intensive metal on earth, aluminium where you have got to smelt and you need to be close to a source of cheap energy.  That's where we are all positioned, then look at the companies who control it, it's Rio Tinto, it's BHP Billiton, it's Alcoa and it's a few more.  This is really something very special.  Nobody can control this market.  It needs leadership.  You can judge it anyway you wish and what we need is somebody at the top to say what they are going to do.  Now Rio Tinto, God bless, bought Alcoa at the height of the market, regrets it but it has stuck in there now and I think Rio Tinto is going to make the aluminium market work.  I don't see any major improvements in the metal price unless some people drop out of the business and there may be some people dropping out a bit but it doesn't make the bauxite miners very happy.

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