Saturday, June 19, 2010

Mining is unprofitable, in an important sense

In How profitable is mining – Part 2 possum makes a surprising discovery:

"Only 51.2% of all mining firms were actually profitable in 2008/9 – the lowest of all industry classifications – even though the industry wide aggregate profit margin for mining was the highest for any industry classification in Australia:

Average mining profitably came in at a whopping 37.1%, but the aggregate profit margin for the large mining firms was an even bigger 46.1%

And yes, and a very large number of firms – 46.9% – made a loss. So...

"It would be accurate to say here that a majority of firms – and probably a very large majority of firms at that – would actually be better off under the proposed RSPT than the existing regime."

The design of the RSPT is such that it won’t make any currently profitable firm unprofitable  – but what it will do as part of its design is make some currently unprofitable firms profitable as a result of not charging firms for exploiting Australian minerals until they are profitable on the one hand, and the way the new Resource Exploration Rebate operates on the other.

"Unless the collective management of the entire mining industry were dropped on their head when they were babies and its causing them to operate on the basis of something other than economic self interest in this debate... the hysteria coming from those purporting to represent the mining industry would appear to only be representative of a very, very small collection of mostly large and extraordinarily profitable firms, even though an astonishing 46.9% of all mining firms were actually unprofitable at the time!

When Mitch Hooke, Twiggy Forrest, Clive Palmer and the gaggle of usual suspects start whinging about the RSPT – remember exactly who they are representing, because it certainly isn’t the economic interests of the majority of mining firms in Australia.

How profitable is mining - Part 1

How profitable is mining – Part 2

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. Wednesday column: No way back, no way out - the miners don't want a deal

. Who wins? Who loses? This is worth reading