Alcoa, Peabody, Cliffs: Mining Losers

Metals and mining shares lose ground Monday as Australia's government proposes a mining tax, combined with possible further credit tightening by Chinese banking authorites.
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(Mining stock winners and losers article updated to provide further detail on Australia's natural resources tax and to account for closing stock prices.)



) -- Shares of mining companies and metals producers ignored a broad market rally Monday and sunk into red ink as moves made half a world away caused a ripple effect, reaching U.S. shores.

The moves: Australia's government pushed forward a measure that would charge a levy on the profits of mines Down Under, and the People's Bank of China lifted by 50 basis points the capital that banks are required to hold in reserve -- in effect, tightening credit -- another peremptory move meant to stave off the growth of an asset bubble.

In Canberra, the Aussie capital, the ruling government introduced the plan Monday as part of broader tax reform legislation that would partly use the mining levy to reduce corporate taxes overall. Starting in 2012, the new tax would take 40% of all profits derived from extracting natural resources -- including both minerals and energy -- in Australia.

According to some reports, that 40% would be reduced by the lower overall corporate tax rate as well by rebated royalties, which natural resources companies are currently mandated to pay out to state governments.


BHP Billiton

(BHP) - Get Report

issued a statement Monday disagreeing with that assesment. The company said its "total effective tax rate" would rise to 57% from 43%.

BHP's CEO, Marius Kloppers, played a political card as well. "If implemented," he said in a written statement, "these proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact the future wealth and standard of living of all Australians."

American depositary receipts of BHP Billiton and

Rio Tinto


declined 1.9% and 5.8%, respectively, in New York trading Monday. Rio Tinto has more exposure to its home country relative to its size than the larger BHP.

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The news comes amid a period of exploding profits for the world's biggest miners, buoyed by the insatiable hunger of China for raw materials to fuel its booming economy. BHP and Rio, along with Brazil's Vale -- the largest iron ore miner in the world -- have essentially declared victory in their battle to convince steelmakers, especially in China, to price iron-ore on a quarterly basis, rather than annually.

Still, it's that very boom that has officials in China nervous about a bubble. Despite all the talk about tightening credit in a bid to ease back the economy's growth, China continues to import raw materials at a vigorous pace, with new records set just in March.

U.S.-based miners with operations in Australia also felt selling pressure during Monday's session, though some observers thought the declines were overdone, since American miners' expsoure to Australia is for the most part modest.

Aluminum giant


(AA) - Get Report

, whose Aussie mining assets amount to a 60% stake in the Darling Range bauxite mines, saw its shares drop 2% to close at $13.15, on volume of about 45.4 million shares, eclipsing the daily average turnover of 36 million.

Shares of

Peabody Energy

(BTU) - Get Report

, the St. Louis-based coal miner attempting to acquire Australia's

Macarthur Coal

in a hostile bid, slid 1.8% to end trading at $45.88. Peabody already owns a handful of Australian mines, representing about 12% of the company's total proven and provable coal reserves.

Cliffs Natural Resources

(CLF) - Get Report

, of Cleveland, owns two iron ore mines and a coal mine in Australia, though a

vast majority of its iron ore comes from Minnesota's Iron Range.

Shares of Cliffs were shedding 5.3% to $59.23 in recent trading.

Several gold majors also have Australian operations. Denver-based

Newmont Mining

(NEM) - Get Report

, which reported

better-than-expected results

last week, is ramping up its Boddington mine, which it has said could churn out 1 million ounces of gold a year once it reaches full capacity. That would represent a little less than a fifth of the company's total projected output for 2010.

Newmont shares lost 2% Monday to close at $54.93.

Toronto's Barrick Gold, the largest gold mining company in the world, which also

surpassed quarterly estimates last week

, saw its U.S.-listed issues lose 1.7% to $42.82. The company's Australian mines contributed about 19% of its total 2009 gold output.

-- Written by Scott Eden in New York


>>Barrick Gold Shows Its True Colors

>>Newmont Mining Tops Street Views

>>Iron Ore Upheaval Reaches U.S.

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.