Since the Government’s announcement of the Resources Super Profits Tax (RSPT), many statements regarding its implications for resources projects in Australia have been expressed in the media. Concerns have been raised that the RSPT will reduce Australia’s competitiveness and jeopardise future investment in the Australian mining industry. However, only a small number of miners have, so far, made detailed announcements to ASX on the potential impact of the RSPT on their individual plans and future forecast profits.

Continuous disclosure

All listed companies must disclose to the ASX matters that may be expected to have a material effect on the price or value of their shares.

If information would, or would be likely to, influence investors in deciding whether to acquire or dispose of a company’s shares, it is material and must be disclosed unless an exception applies. A change in an entity’s financial forecast or expectations is specifically identified by the ASX Listing Rules as requiring disclosure.

To decide if the proposed RSPT triggers a company’s disclosure obligations, the directors should consider each of the following factors.

Materiality

What effect will the RSPT have on the company’s operations, forecasts and expectations?

Many respected commentators suggest that the new tax would result in an increase in the total effective tax rate on Australian operations from around 43% at present to 57% by 2013 [1]. For exploration companies and projects, the proposed RSPT includes a proposed new resource exploration rebate [2].

The individual impact on the company needs to be considered including the impact on the feasibility of proposed projects and funding arrangements for those projects.

Is the information generally available?

Disclosure is not required if the information is ‘generally available’.

There is no doubt that given the amount of press coverage, a great deal of information is available in the marketplace with respect to the RSPT. However, the particular effect of the RSPT on a company may not be available to investors with sufficient certainty to quantify the impact on that company’s potential or expected profits. The majority of announcements made to the ASX to date have been generic in nature and have not provided specifics as to the anticipated effect on the relevant company’s profits or planned projects.

Incomplete proposal

The legislation is still to be drafted and much of the detail of the RSPT is subject to further consultation.

Companies may, however, be able to disclose the effect on their Australian operations and investment plans by, for instance, identifying operations that may no longer be viable or which may now be delayed, given the additional cost of the RSPT and its impact on expected profits. Where the effect on the company cannot be gauged without the company undertaking modelling of the RSPT’s effects on its projects, the continuous disclosure regime is unlikely to require the company to undertake that modelling at this stage.

Summary

Directors must be vigilant regarding their continuous disclosure obligations with respect to the possible introduction of the RSPT.

While the continuous disclosure regime may not require a company to undertake any specific modelling on the potential effect of the RSPT on its operations, when information regarding the tax and its effects is available to directors or the company, companies must ensure that information is announced to the market in a timely fashion where required to do so under the continuous disclosure regime. This will be particularly important where the company, as a consequence of modelling undertaken by it, is aware (or ought to be) that previously disclosed information may no longer be accurate.

For further assistance or enquiries please contact:

Jim Peterson on 07 3233 8559
Kristen Grover on 07 3233 8757.

[1] For example, the Australian Financial Review
[2] See the Government’s paper: ‘The Resource Super Profits Tax: a fair return to the nation’