By Barry FitzGerald
IVANHOE Australia is no fan of the Rudd government's proposed 40 per cent resource rent tax. But it is the first of the shell-shocked resource companies to commit to a ''new'' mine, despite the uncertainties surrounding implementation and the eventual form of the controversial tax.
Thanks to a deal with Canada's Barrick, Ivanhoe can fast-track the development of its super-high-grade Little Wizard and Merlin molybdenum/rhenium mines in north Queensland, with first production in 2011 and 2012 respectively - beating the planned start to the tax of July 1, 2012.
Ivanhoe's deal with Barrick is to acquire the Osborne copper/gold mining operation for a knockdown price of $17.4 million, plus a 2 per cent net smelter return, and the assumption of $18.4 million in environmental bonds.
The plant and equipment that comes with the acquisition will be used for Little Wizard/Merlin, reducing development costs by $100 million.
Ivanhoe chief executive Peter Reeve said yesterday the question had been asked why the company was not deterred by the proposed tax, given the mining industry had been saying it would cause investment in new operations to dry up.
''Our response is that this is a seriously strategic deal on which we have been working for more than a year,'' he said. ''It's a strategic deal because we don't have to spend all that money on a stand-alone development and we remove all that delivery risk.
''So we weren't going to be deterred at the last moment by the proposed tax which, by the way, is still completely vague in terms of what form it will take or whether it will be implemented at all. Next week we could hear that it has been modified, repealed, or what have you.''
Osborne is 50 kilometres south of the Little Wizard/Merlin projects. The copper/gold operation at Osborne will finish in three months as the ore body is exhausted. But Ivanhoe plans to revive copper/gold operations from the partly developed Kulthor ore body near Osborne in 2012. Ivanhoe closed 17¢ higher at $3.35 in an otherwise bad day for mining equities.
Ivanhoe is the listed subsidiary of Canada's Ivanhoe Mines, which is controlled by billionaire mining entrepreneur Robert Friedland and Rio Tinto. The Ivanhoe/Rio alliance is developing what will be the world's newest big copper/gold mine in southern Mongolia, the Oyu Tolgoi project. First production is forecast for 2013, with the first-stage development costs estimated at $US4.6 billion ($A5.5 billion).