News Wrap

IN THIS morning’s News Wrap: Minerals Council arms itself against MRRT; Rio Simandou project tipped to cost $20bn; and China, private equity to drive M&A activity.

Lou Caruana

Minerals Council arms itself against MRRT

The Minerals Council of Australia will use a new report showing the resources industry spent more than $34 billion on community infrastructure and local suppliers in the 2011 financial year to spearhead its argument for the minerals resource rent tax to be repealed, according to the Australian Financial Review.

Legislation was introduced to the House of Representatives last week by Treasurer Joe Hockey, but has little prospect of being passed until the new Senate sits on July 1, 2014.

The report, commissioned by the Minerals Council and prepared by corporate social responsibility consultants Banarra, found the amount spent on local communities by resources companies was far more than projected returns of the MRRT, and the industry’s company tax and royalty payments in the 2011 fiscal year, which Deloitte Access Economics estimated at $21 billion.

The largest proportion relates to expenditure on local suppliers and contractors, followed by indigenous contracting, which includes their services in rehabilitation, catering and land management, according to the study.

Rio’s Simandou project tipped to cost $20B

An internal report has found that Rio Tinto's giant Simandou iron ore project in Guinea is expected to cost $US18.3 billion ($A19.7 billion) and be designed to produce for 35 years, according to The Australian.

Hong Kong-listed Chalco, which is selling its stake in Simandou to its Chinese parent, Chinalco, has revealed detailed cost and development plans for what could be Africa's biggest mine development – if it goes ahead.

China, private equity to drive M&A activity

Chinese investors and private equity groups may underpin the next round of merger and acquisition activity in Australia after deal activity fell 76% to $US3.4 billion ($A3.6 billion) year on year, according to the Australian Financial Review.

Accounting and advisory group EY found 136 mining and metal deals occurred in Australia from January to September, a 21% drop on the same period in 2012.

Just one “mega deal” – the merger between Glencore and Xstrata – closed during the third quarter, compared with 12 in first half, said the report.

Lower commodity prices and uncertain demand from China had resulted in investors remaining cautious on all resources companies from explorers to producers.

As a result, equity markets remained “challenging”, with junior proceeds and floats at all-time lows.