Resources tax a minefield for the wealthy

Last week Australia’s second richest person, Gina Rinehart, became the latest billionaire to slam the Government’s decision to introduce a Resources Super Profits Tax on Australia’s mining industry, delivering an emotional defence of her sector.

“Mr Rudd, you should not want to do this to your own country,” Rinehart told The Australian.

“You should not want to go down in history as the prime minister who caused mines to be opened in Africa and elsewhere to compete against Australian interests for many decades to come.”

Rinehart, like other noted critics of the RSPT including Andrew Forrest and Clive Palmer, obviously have plenty to lose from the introduction of the tax.

Given their mines and development projects are all based in Australia, they will be hit much harder than multinational companies such as BHP Billiton and Rio Tinto, who can switch their focus to mines in other, lower-taxing countries.

The tax, or rather the uncertainty surrounding it, is already having an impact on the fortunes of these miners. Andrew Forrest’s stake in Fortescue Metals group has lost 8% of its value since the announcement of the tax, falling about $340 million to $3.9 billion.

But it’s not just Rinehart, Palmer and Forrest who stand to lose out. Analysis of BRW’s Rich 200 list, released last week, show 27 entrepreneurs are likely to see a direct impact on their business as a result of the introduction of the RSPT.

The total wealth held by these entrepreneurs is $30.9 billion, according to the valuations provided in the Rich 200, which means they account for just over 22% of the total wealth held by the members of the rich list.

It is difficult to say how the fortunes of these entrepreneurs would be affected under the RSPT – that will depend on their individual resources sector holdings, the size of their investment in the mining sector and other assets in their portfolio.

The empire of Andrew Forrest, for example, is totally focused on the Australian sector, with all his investments concentrated around the Pilbara region. Ken Talbot, on the other hand, has investments in mining operations around the world, so may be able to switch focus to foreign operations.

However, it is worth noting that the impact will be felt outside of the resources sector. Mining services businesses, engineering and firms and heavy equipment suppliers will all feel some impact if projects are cancelled or postponed.

Here is a list of those likely to be affected (values for the top 10 have been taken from the BRW Rich 200):

Gina Rinehart – $4.75 billion

Rinehart earns a generous royalty from iron ore mined by Rio Tinto in the Pilbara, and is also in the process of developing a new iron ore project, Hope Downs 4. Rinehart is also building a coal mine in Queensland.

Andrew Forrest – $4.24 billion

One of the most strident critics of the RSPT, Forrest has already shelved two expansion projects in response to the introduction of the tax and says another is in doubt.

Clive Palmer – $3.92 billion

Palmer has a number of projects under development in Queensland and Western Australia, and has been rumoured to be set to float his company Resourcehouse on the Hong Kong Stock Exchange. The uncertainty surrounding the tax may delay those plans further.

Chris Wallin – $2.59 billion

Shot up the Rich 200 list this year after selling a stake in his Byerwen coal project in Queensland for about $624 million to Japanese interests. The mine remains under development, but would be subject to the new tax.

Kerry Stokes – $2.29 billion

Stokes, who recently merged his WesTrac construction equipment business with his media company Seven Group, could be hit hard if a drop in mining investment leads to a drop in demand for the Catepillar heavy machinery that WesTrac sells. WesTrac has already run print advertising criticising the tax.

Angela Bennett and Michael Wright – $2.09 billion

Like Hancock, the wealth of brother and sister Michel Wright and Angela Bennet depends on mining royalties inherited from their father, Peter Wright.

Stan Perron – $1.55 billion

The empire of Perth billionaire Stan Perron is heavily leveraged to the strength of the West Australian economy. Perron also has a share in Iron Ore Holdings, majority owned by Kerry Stokes.

John Grill – $971 million

As the chief executive of engineering firm WorleyParsons, John Grill has ridden the resources boom over the last 10 years. A drop in mining investment would hurt demand for the firm’s services.

Ken Talbot – $965 million

Talbot, the founder and former chief executive of Macarthur Coal, now holds investments in a range of mining companies in Australia and Canada and recently said he planned to move back into direct mine development. He does have investments in companies focused on overseas mining projects, so he may have some insulation from the impacts of the tax.

Tony Poli – $787 million

Poli is the executive chairman and biggest shareholder of coal miner Aquila Resources, which he founded with Charles Bass. The company’s shares are down over 11% since the announcement of the tax.

Paul Fudge

Reclusive investor who concentrates on the coal seam gas sector.

Brian Flannery

Sold Felix Coal to Chinese interests in 2009, but is now chief executive of White Energy.

Travers Duncan

Business partner of Brian Flanner and co-investor in Felix Coal. Will become chairman of White Energy in August.

Kerry Harmanis

Sold Jubilee Mines in 2008, but has since invested in copper and gold explorer Talisman Mining.

Mick Power

Owner of Queensland construction company BMD, which has won several big contracts building mining infrastructure projects in the last few years.

Dale Elphinstone

Owns the Tasmanian and Victorian distribution rights for Caterpillar heavy equipment and also owns stakes in mining equipment companies Gekko Systems and Haulmax.

Tony Haggarty

Chief executive of Whitehaven Coal.

Charles Bass

Director and major shareholder of Aquila Resources.

Nathan Tinkler

Youngest member of the Rich 200, set to float coal company Aston Resources later this year.

Chris Ellison

Founding shareholder of mining services and processing company Mineral Resources.

Joseph Gutnick

Owns a number of mining sector investments, although several are based overseas.

Bill Paterson

Former executive and large shareholder of WorleyParsons.

Mark Creasy

Veteran mining industry investor who hold stakes in several explorers and miners.

Peter Bond

Chief executive and major shareholder of Linc Energy.

Andy Plummer

Director and major shareholder of Whitehaven Coal.

David Knappick

Major shareholder in White Energy.

Russell Staley

Owns a large stake in WorleyParsons.