May 4, 2010

Dear Friend,

We assign a < 5% likelihood of the Super Resource Profits Tax of becoming a law.  Howard Rudd's Labor Party has no majority in the Senate.  Mining companies have not yet launched any media or public education campaign of the industry's leading role in Australia sidestepping the 2008-2009 global recession.  Its indirect benefits extend well beyond its 5+% direct contribution to GDP and 50+% share of export revenues.  Most important, mining companies will particularly lobby the 8 Labor Representatives, 4 Labor Senators and 2 Green Senators from Western Australia whose constituents would bear the largest harm from the proposal.
 

We are not revising earnings estimates for 2012 or 2013, raising discount rates, cutting price targets nor our investment ratings based on the possible 40% Australian mining tax.  We view the recent share price selloffs as an attractive buying opportunity.

 

Faithfully,

 

John C. Tumazos, CFA