But the night’s slick operation could have been streamlined even further by posing all the presenters with the one question that investors wanted answered:

How will the proposed Resource Super Profit Tax (RSPT) affect operations?

I couldn’t have framed the question better than one particular audience member who asked:

“Great presentation! But what about the rape and pillage tax?”

This ‘rape and pillage tax’, if the resource industry is correct, is the proposed disembowelling of the resource sector for the good of the country. The 40% ’super-tax’ to be levied sounds bad enough. But this 40% figure sugar-coats the truth that the effective tax rate that the industry would be burdened with will be closer to 57%.

This was summed up perfectly by US commentator Dennis Gartman who described it as being more typical of a South American autocrat such as Hugo Chavez. He said “Never did we expect such nonsense from Australia. Shame on Rudd, he really should know better”.

Now don’t get me wrong. I’m not Labor-bashing, I’m policy bashing.

Bad policies are bad policies, regardless of who cobbles them together. I have a federal politician for a neighbour and that’s closer than I prefer to get to politics. For the record I don’t reckon the opposition party is any more appealing. And quite frankly, choosing my favourite political party right now is a bit like choosing my favourite dental procedure.

At the investment level, the company with the most telling observation about the tax was Rex Minerals (ASX:RXM). It’s response to the question of what the tax could mean was that it’s just too early to run the numbers. Fair enough. The project is in its early stages, and the tax is still far from clear.

That is the main problem with the tax and its current status: it has introduced an enormous cloud of uncertainty and doubt over hundreds of billions of dollars in Australian resource projects both large and small.

Still, life goes on in the mining world. The discussion of the shares below should not be interpreted as a recommendation to buy or sell them. I’m just reporting to you what the companies said. I’m reserving my investment judgement on resource stocks for the pages of my newsletter Diggers and Drillers.

That said, Rex is developing a copper project on the Yorke Peninsula just a few hours from Adelaide. It should have a resource figure for the project within a few months. The company says that drilling results look great. It also says there are reassuringly large, known deposits in the area.

Most of Rex’s copper is close to the surface, which should make for a cheaper surface mining operation if the company gets to that stage. Being so close to Adelaide makes it easy to access rail, road, ports, power, water, as well as well as people to run the whole show, which keeps costs lower then for many far more remote projects.

The company also has a precious metals project in New South Wales with what it hopes is ten million ounces of silver, and quarter a million ounces of gold. The managing director, Steve Olsen, said precious metals prices are looking stronger than ever, now that the major currencies of the world are “attempting to hit parity with the Zimbabwe dollar“.

The second company to speak was Iron Clad Mining (ASX:IFE). It has an iron ore project also in South Australia. It is early stage as well but looks like it could become similar in scale to Atlas Iron’s projects if the company does what it plans. The ore is already 62% iron, so needs no processing, and is very low in impurities. The company is just a few months from a feasibility study (which you can think of as a mine’s business plan).

Patrick Clifford, the company’s General Manager, answered the tax question on everyone’s lips by saying that he thinks there is “zero chance” the tax will go through in its current form, and hinted that he thought Labor wouldn’t make it through the next election.

I’m thinking along similar lines, and below is what I wrote on the matter in Diggers and Drillers two weeks ago:

“The quickest way to lose a few million voters is to make them poorer.”

At the last count (Dec 2008), 41% of voting-age Australians were invested in shares off their own back. As of December 2009 the resource sector made up 33.4% of the $1400 billion total market cap for the entire Australian market. Ripping down the value of such a big chunk of the market is going to be felt in a big way by a very large chunk of voters.

As for superannuation funds, nearly ALL voters will be affected. Currently around $120 billion, or 11%, of the $1.1 trillion super-fund pool is invested in our resource sector. Crippling the present and future value of the resource sector is going to make a big difference to the total value of these funds, and everyone will feel it.

With an election round the corner, the tax is not a great political move. Although he technically has until mid-April next year to hold an election, because of Victoria and NSW state elections and the Christmas break, he realistically has to hold the election before the end of October. So his campaign would need to start in September, just four months away.’

The whole iron resource sector must be hoping for the same outcome. The latest casualty is Fortescue Metals (ASX:FMG) which said it was moth-balling A$18 billion worth of expansion projects until the future of the tax is clearer. In his own words Andrew ‘Twiggy’ Forrest “can’t get a banker to step up to the plate” for his new projects. If the tax goes ahead, they just won’t be profitable enough. The projects go on ice until there is some clarity on what is going to happen. Forrest said “until that time, I am hoping sanity will prevail”.

Add Fortescue to a long list of others shelving big projects. All up, The Minerals Council of Australia reckons about $100 billion of potential mining projects will be put on ice, although this figure is already starting to look too conservative.

About the only part of the resource sector having a good time at the moment are gold companies. My return flight from Sydney was delayed so I only caught the last few minutes of the presentation from Castlemaine Goldfields (ASX:CGT), a developing gold company in Victoria.

The price of gold is rising fast on the back of the proposed ‘money-printing’ by the European Central Bank.

The investment banks are already raising their gold price forecasts for this year. Goldman Sachs has just increased the upper range of its forecast band for the rest of this year from US$1200 to US$1300.

James Turk, the founder of Gold Money, told investors at the 2010 World Mining Investment Conference yesterday that he is forecasting gold to hit US$2000 by the end of this year (currently US$1197), and silver to hit US$30 (currently US$18.22).

Turk’s five year forecast is what stood out for me though. He is expecting gold to get closer to US$8,000 by 2015.

More than half of the current Diggers and Drillers portfolio is in precious metals (gold, silver and platinum) stocks, all of which are mining overseas thereby avoiding any potential exposure to the Rudd tax proposal. I plan to recommend another good gold stock soon, and I will be applying my usual analysis to select the best out of the five precious metals stocks that are currently ticking my boxes. Time will tell which it’ll be.

But I can tell you one thing for sure right now.

I will be recommending a company that operates in an overseas country far from the government’s clutches.

Regards,

Alex Cowie

FMG – 4.030 -0.140 ( Look Up)

The good News on FMG

– > Last week, the company said it was in talks to sell to Japanese and Korean mills for the first time as it tries to take market share

–> In August, Fortescue reported an annual net profit for the year ended June 30 of $US508.04m, compared to a loss of $US771.77m previously.

– > On an annualised basis, production was 38Mt per annum, compared to the 35Mt a year forecast.

The Bad News on FMG

–>

FORTESCUE Metals Group has reported a net loss of $US18million ($19.56m) for the September quarter after adjustments for foreign exchange and a note liability.

The iron ore miner, which switched to reporting in US from Australian dollars this year, said the result compared to a restated profit of $US99m ($107.59m) for the previous September quarter.
Fortescue said the net result was partly due to a $US68m increase in the value of its Leucadia Note liability and a $US25m foreign exchange adjustment

——————————————————————————————————-

The iron ore miner, which has switched to reporting in US dollars from Australian dollars in 2009, said in a special purpose financial report that the result compared to a restated profit of $US99 million for the prior September quarter.

This stock has potential  as a long term investment is GOLD and one or 2 new deals could see a surge in the stock price from current levels. Grab it Now !!

Headline Pages PDF

16/10/2009
September Quarter Special Purpose Financial Report
19
PDF

16/10/2009
Lodgement of 2009 AGM Notice of Meeting and Proxy Form
26
PDF

The media is awash with reports that the Chinese are playing ball  again  with signing up new contracts worth billions of dollars.  The question is are they really ? The Chinese businessmen and bearuecats are very smart and this was evident by making a move in detaining a rio tinto official  for spying  right when negotiations were on for iron or pricing between top Australian and Chinese bearuecats and officials

This is also evident on how they got twiggy ( fortescue Metals group ) to give them a  much sweeter deal when spot prices for iron ore are increasingly going up.

Chinese officials hailed the deal as a welcome compromise that might help break the deadlock in annual talks with Rio Tinto , BHP Billiton and Brazil’s Vale , hoping to prevent a complete breakdown in a four-decade-old negotiated pricing ritual that is rapidly fracturing, and became further complicated this year by a corporate spying scandal.

The reason why china would rather do deals with australia is also while importing  iron ore from  australia  taking into  account he shipping  rates and  everything else it is much economical for them  to choose our companies  to trade with rather than brazil and Canada. so if they are getting a good price  for ore why wouldnt they ?

Infact they have managed to secure a very good deal when the Ironore spot market is on the rise.

HSBC’s latest research, which shows that the chart of the value of the Australian dollar is a mirror image of Chinese electricity production. which means the Chinese can invest in Australia and Australians in China without a currency risk.

The HSBC research comes at a time of deteriorating relations between Australia and China. The Fairfax press reports that Chinese state-owned media ignored the Gorgon deal and called for sanctions against Australian tourism, education and iron ore.

While china  states that  the rio tinto official was spying  for ages in china. chinese secrets are sometimes  available on the internet.The web is awash with the sites of state secrets bureaux, I discovered after a colleague dug up a report posted on one of them about the commercially and diplomatically sensitive detention of executives from mining giant Rio Tinto.

Links:

• China launches more probes into U.S. steel subsidies 20 Aug 2009 08:58
• China to trim US treasury holdings, diversify Forex reserves 20 Aug 2009 08:58
• Fortescue in negotiations with Chinese companies 20 Aug 2009 08:58
• Waigaoqiao revenue down 13.5% in H1 20 Aug 2009 08:58
• BRIEF-ReneSola signs deal for $700 mln project 20 Aug 2009 08:58
• CNOOC Group links with China Communications Construction 20 Aug 2009 08:58
• DEALTALK-Beijing puts giant media marriage on the rocks 20 Aug 2009 08:58
• ReneSola Signs Letter of Intent with Wuzhong Government to Develop 150 MW On- grid Solar Power Project 20 Aug 2009 08:58
• RIO TINTO: COMMITTED TO BUILDING TIES WITH CHINA 20 Aug 2009 08:58
• UPDATE 1-Bharti and MTN extend exclusive talks to Sept 30 20 Aug 2009 08:58

It was on www.baomi.org (which roughly translates as www.protectsecrets.org), the succinctly named Website of the apparently not-as secretive-as-its-name-suggests National Administration for the Protection of State Secrets.

Vast modern cities like Guangzhou, Shanghai and Tianjin are teeming business and political hubs that might well have important government and commercial information to worry about.

But Puyang city? I had to do a quick map check to pin down where it is (northern Henan province, if you were curious). There are secrets to protect everywhere, it seems, and you can read about the efforts in Puyang at www.pybm.cn

Highlights include “Products that can protect secrets”, “The hidden danger of blogs and measures to counteract them” and “Build a firm line of defence to protect military secrets”.

I took a punt on FMG ( Fortescue metals group) this Thursday on 13/08/2009 at $4.42 @ 1000 Units

That  totals too $4439.95 ($4.42 x 1000 Units = $4420 + $19.95 = $4439.95 ) ( the 19.95 being my broker fees at www.comsec.com.au . Luckily for me  Fmg got busy and had a announcement to make soon  which they declared on friday which  i was hoping was good news from fortescue  and so they went into a trading halt.

Keeping my fingers crossed .. and expecting good news given that they already had some good news a few days earlier with their profit  numbers already out.

FMG  Day trading

I had my eyes keenly on the  pc screen this morning only to see it jump  up to $4.75 and reach a new high. I grabbed it and put a sell on my FMG stock.

4.75x 1000=4750 –19.95(broker fees)=$4730.05

Therefore  after all broker fees Sold at $4730.05 – Bought at $4439.95 = Profit of  $290  already today.

Not a bad start at all  to start the day.

Thank You  Andrew ‘Twiggy’ Forrest