This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

BHP, Rio Tinto Nicked by New Taxes

BHP Billiton (BHP) and Rio Tinto (RTP) are likely to underperform the Brazilian mining giant Vale (VALE) on concerns related to Australian taxes and a China rate hike.

Rio and BHP fell 4.3% and 3.0%, respectively, on the Australian Stock Exchange Monday, following the imposition of a new mining tax by Australia.

The mining giants extended the losses registered during trading on Friday which saw Rio Tinto, BHP Billiton and Vale decline by 5.76%, 4.46% and 2.55%, respectively.

Spreads on credit-default swaps on Rio Tinto jumped 7 basis points to 83 basis points and on BHP were up 4 basis points at 64 basis points, according to data provided by Bloomberg.

A new Australian tax regime, aimed at restructuring the tax system and for ensuring government revenue, will impose a 40% tax on the mining profits of companies to pay for infrastructure, retirement and company levy changes.

Several miners have expressed their disappointment with the government's plan. BHP expects the total effective tax rate on Australian operations to increase to 57% beginning 2013 from the current 43%, according to a press release issued Sunday.

"The stability and competitiveness of the tax system have been central to investment in resources in Australia. If implemented, these proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact the future wealth and standard of living of all Australians." said BHP CEO Marius Kloppers.

BHP has about 51% of its assets in Australia.

Analysts at UBS estimate this "super tax" to reduce BHP's earnings by 17% and Rio's earnings by 21% in 2013. Mining companies will be taxed about 58% of their earnings, compared with 35% before this new tax regime.

The Australian Treasury Secretary Ken Henry anticipates the tax to be implemented in 2012 which is expected to raise A$12 billion within the first two years. Prime Minister Kevin Rudd told reporters, "This will use super profits on resources owned by all Australians. This will help convert Australia's strong economic position today into enduring prosperity."

In the past three years, the resources sector has contributed to around 18% of Australia's gross domestic product and 42% of export revenue, and has been the largest contributor to corporate tax revenue, according to BHP.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs