Andrew Forrest’s hypocrisy in criticising the federal government’s resource tax — and claiming it could lead to a flood of Chinese buyers — has been underlined by news from China.
This was his claim a week ago.
“The federal government’s super-profits tax will result in Chinese mining companies gobbling up Australian assets, Fortescue Metals boss Andrew Forrest says.
“The mining boss’ strong new line of attack in the tax debate was immediately endorsed by the coalition today.
“Mr Forrest says Labor’s proposed resource rent tax will be good for Chinese investors.”
Not only has he willingly sold equity in Fortescue Metals Group to Chinese buyers (about17%), he did a cosy pricing deal that fitted the Chinese steel mills pricing agenda in late 2008 rather than stick it out and remain independent. He did that deal as he searched unsuccessfully for cheap Chinese bank loans to fund his development plans.
Now Bloomberg reports that Poseidon Nickel, which is chaired by Forrest, is in China looking for finance to help the company restart production in Western Australia.
“Poseidon Nickel Ltd, an Australian exploration company chaired by billionaire Andrew Forrest, is in talks with a number of potential Chinese investors to fund restart of mine production within two years.
“We are talking to investors and off-take parties in China about the investment required to get us to go to production,” said David Singleton, chief executive officer of the Perth-based company, in an interview in Shanghai.
“Chinese companies are scouring the globe to secure raw materials to feed the world’s fastest growing major economy, targeting mining companies in need of funds. Poseidon is seeking between $50 million and $100 million for its Mt Windarra project, which will supply stainless steel makers in China.”
Poseidon suspended restoration work on Mt Windarra in October 2008 because of turmoil in global financial markets. (Another example of the point that treasury secretary Dr Ken Henry made last week about the furphy that the mining industry “saved” Australia from recession).
Of course, the Chinese banks and resource buyers know the tax won’t impact them and that people such as Forrest are merely talking their book for Australian consumption. If Forrest really believed his line, he would repeat it to their faces, that’s if he’s the blunt, straight talkin’ business man he claims to be.
So on the one hand, Forrest warns of a horde of Chinese investors coming to gobble up our resources because of the resource profits tax, on the other he and his companies are busy trying to encourage the same hordes to finance HIS (my emphasis) business ambitions.
And it would seem he is supported by the federal opposition. But then after its new refugee policy last week, the opposition is willing to bang any old “red horde” line to scare voters.
It makes you wonder who is using whom in this debate.
Aren’t you being a bit disingenuous, Mr Dyer?
If the (foreign) buyers acquire minority interest (such as 17 per cent) in their suppliers, that’s a hedge against very high prices for them, which may even take some of the pressure off their negotiations and potentially benefit other shareholders including Australians.
On the other hand, if they acquire majority interests, that turns the supplier into a subsidiary of the buyer, which makes pricing power irrelevant.
Equity in a company is good for just two things: a share of profits, or a controlling interest for strategic reasons. If profits are taxed so heavily that the difference, for the supplier, of negotiating hard and negotiating easy is negligible, then investors looking for strong profits will sell out to investors with more strategic interests.
All of which is very well known to you, so why do you fudge the difference between minority interest and majority interest, waving your hand at all “interests” for the simplistically anti-business Crikey crowd?
Are you suggesting that Fortescue’s pricing deals in 2008 were in some way corrupt and not driven by purely profit and risk considerations during the crisis, as they should have been? Because if you are, you sure didn’t make it very clear. And if you are not, then what is your point?
Comment still awaiting moderation after 4 hours. Let’s try again: Mr Dyer, you try to smear the source of an opinion instead of debating it, you do so with vague innuendos of … what? Making deals with the Chinese? And you deliberately confuse the issues of Chinese minority stakes and majority stakes in Australian mining interests. A cheap attempt at a hatchet job if ever I saw one.