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Sovereign Risk plus New Resource Tax, Where to invest?
kelpie
post Posted: May 16 2010, 11:09 PM
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In Reply To: flower's post @ May 16 2010, 08:24 PM

Hi All,
Not wishing to be too pedantic but another perspective could mean that thinking long term
the following "the uncertainty will delay projects and may even result in cancellations," ought really to be "may delay projects" because the mineral resources that are there will remain until such time as they are dug up, so the digging up of them will only ever be delayed, never cancelled and perhaps delayed until such time that supply and demand ensures they are far more valuable than they are now!....... Could be a plus!


Said 'Thanks' for this post: flower  
 
watchmaker
post Posted: May 16 2010, 08:48 PM
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In Reply To: flower's post @ May 16 2010, 08:36 PM

It may have some truth Flower, nevertheless there's some evidence to suggest Rudds band of brothers in Canberra want to reduce Australia's reliance on mining. Thus their stance.

 
flower
post Posted: May 16 2010, 08:36 PM
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In Reply To: watchmaker's post @ May 16 2010, 08:26 PM

W: Ive got a horrible feeling this tax proposal has far more to do with politics--the politics of getting K.Rudd re elected than any wellbeing for the greater public--or is that far too cynical?

Why was the actual announcement delayed from Christmas time till now--could it have been that "they" knew nobody would pay any attention till after Easter?---a few months nearer the election and after all the policy failures?

It a high risk strategy if it's just pure election politics!



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Combining Fundamental comments with Fundamental charts.
 
watchmaker
post Posted: May 16 2010, 08:26 PM
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In Reply To: triage's post @ May 16 2010, 02:47 PM

triage you have nailed quite a few points, indeed, these highly profitable miners don't give a hoot about the benefits to low income prospectors and explorers who will benefit from the changes, rather, its more a case of protecting their own profits. Also, they never mention a few of the little things. Like miners pay 38c per litre for fuel excise tax, then they get it back as a credit from the Feds. Which means average Australians are forsaking an income to prop up highly profitable mining companies. That is, think of taking 38c per litre off your own fuel bill, because that's one of the hidden benefits if you choose to be a miner.

There's a lot of rubbish and scare mongering being peddled about at the moment, not unlike what the tobacco lobby did years ago.

 
flower
post Posted: May 16 2010, 08:24 PM
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In Reply To: mpl's post @ May 16 2010, 03:05 PM

mpl: Sorry--there is very little more I can usefully add.

Triage: IMO the tax wont go to the vote in it's present form. the uncertainty will delay projects and may even result in cancellations, but far too early to judge whether the miners insinuations come to anything major--may even take the Federal Election to clear the air one way or the other.

I think you misjudge the ability for juniors to raise capital in todays climate without the tax threat hanging over the whole industry.

Thanks for the chart--that's the sort of info I had hoped might be forthcoming.

Hopefully more specific names will be forthcoming of companies who might benefit ultimately.



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Combining Fundamental comments with Fundamental charts.
 
mpl
post Posted: May 16 2010, 03:05 PM
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In Reply To: flower's post @ May 16 2010, 02:29 PM

Flower
Do members still consider that trading/investing in resource stocks that have their actual operations within Australia ONLY as the safest option--or do members think that the sovereign risks that are obvious when investing "abroad" outweigh any negativity being placed on Australian based operations occasioned by the proposed new resource tax?

You can do better than that response cant you ?.

Too Hard ?.

Mabye time poeple learn to CHANGE the way they trade/invest to suit the current climite dont you think?.

What is hard about that?. Short term trading HAS always been the method in times of volitile markets or situations.

 

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triage
post Posted: May 16 2010, 02:47 PM
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In Reply To: flower's post @ May 16 2010, 11:38 AM

A bit of perspective here would be handy.

So, flower, you reckon that Argentina's sovereign risk is okay but Australia's sv is not?

Errh - as of Friday, 14 May that is not what the bond traders are betting.

Highest Default Probabilities
Entity Name_____Mid Spread______CPD (%)
Venezuela_______ 1037.87 ____ 50.48
Argentina________ 927.81 _____ 45.52
Greece__________ 608.20 ______ 39.80
Pakistan_________ 681.90 ______ 36.91
Ukraine _________ 587.30 _______ 33.40
Dubai/Emirate of__ 440.15 ________ 26.16
Latvia, Republic of 340.12 ________ 20.96
California/State of 265.42 ________ 20.86
Sicily/Region of __ 263.40 ________ 20.38
Iraq __________ 315.70 _________ 19.92

http://www.cmavision.com/market-data


edit: sorry had a formatting melt-down - hopefully the table reads a tad better.

Moreover I cannot believe that so many investors in the speculative end of the resources sector are falling for the big miners' rant about the super tax. Besides the great big new tax angle - which is not much different from Tony's gbnt to allow female corporate lawyers to stay at home on full pay - the combination of the 40% exploration rebate and the 40% super tax is likely to be a net benefit to emerging mining houses, in a number of ways:

1. the rebate is intended to have a similar effect to Canada's flow through tax arrangements, the purpose is to assist smaller resource companies to attract capital for them to pursue mineable resources.

2. the combination of rebate and tax has the effect of improving the nearer cash flows and dropping the cash flows further out. In today's money (as in discounted cash flows) that balance is more attractive than the status quo.

3. if the big miners delay new projects or discard tenaments because the projects no longer meet the return on investment rates required by the big miners then numerous smaller resource companies will benefit. If projects are delayed by the big miners then that means that the smaller players are not having to compete so hard for capital and labour. If potential projects are sold off by the big miners then smaller outfits will benefit. As BHP keeps saying they only take on high grade, low cost, long life material (for them) projects that offer premium returns on investment. Most smaller companies would kill to get a piece of the reject projects of the big miners.

I am not saying that the proposed deal is perfect but let's not carry on about it as if we are at a Justin Berbier concert. I think it would be far more informative to identify those smaller miners that are likely to benefit from the proposed rebate and tax set-up, the ones that are best positioned to move into the middle tier of local resouce companies.

One stock that is already trying to fill the void of mid-tier operators in the gold sector is Avoca (AVO). From all reports Silver Lake is another producer that could be ready to grow. I don't follow either. One that I do, and is well cashed up and has a high grade but likely short term mine operating is Ramelius (RMS).

Here is an interesting read about the RSPT and rebate by one of Australia's more considered journos imo, George Megalogenis:

http://blogs.theaustralian.news.com.au/meg...soul_of_reform/



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"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
flower
post Posted: May 16 2010, 02:29 PM
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In Reply To: mpl's post @ May 16 2010, 12:41 PM

Mind you these comments are from a Trader who if 3 day's on stock considers it to be long holding with the current market action.
most of my Es, YM & NQ futures trades are over inside 5 Mins
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Hi mpl: In that case I regret we have no common ground to begin defining Trading or Investing, can't therefore comment further on your reply.



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Combining Fundamental comments with Fundamental charts.
 
mpl
post Posted: May 16 2010, 12:41 PM
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In Reply To: flower's post @ May 16 2010, 11:38 AM

Flower

Define trading/investing. Personaly I dont care what sector or what direction I trade. the ones that will have a problem are the longer term investors which are totaly subject to the market moves regardless of what is the cause of any particular move for any reason.

As with any time Volitile markets exist it is the nimble trader that has to potential to make the money.

One thing I do know though is that only following the Fundamentals in isolation to chartage will only lead to BIAS towards one direction which quite likely will cause a few a lot of pain.

Mind you these comments are from a Trader who if 3 day's on stock considers it to be long holding with the current market action.
most of my Es, YM & NQ futures trades are over inside 5 Mins.

 
Duster
post Posted: May 16 2010, 12:19 PM
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In Reply To: flower's post @ May 16 2010, 11:38 AM

Someone was on the ball........... OCT '08

http://www.minerals.org.au/__data/assets/p...inion_piece.pdf



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