JP Morgan To Reinvest In Australia Mining After Tax Changes

2nd Jul 2010 16:56

By Rhiannon Hoyle Of DOW JONES NEWSWIRES LONDON (Dow Jones)--JP Morgan Chase & Co. (JPM) will look to increase its holdings in Australian mining assets after the government announced sweeping changes to its proposed new resources tax Friday. Ian Henderson, who manages several onshore and offshore funds for JP Morgan Asset Management, totaling $7 billion in natural-resource assets, said early June he had reduced his exposure to mining assets in the country, including Rio Tinto PLC (RTP) and BHP Billiton Ltd. (BHP), due to concerns about the planned Resources Super Profits Tax. "Obviously my stance has changed in light of today's announcement," he told Dow Jones Newswires Friday. "The new tax plan is nothing like as onerous as the RSPT, which is obvious on every metric." Henderson had reduced his holdings in Australian mining assets by $150 million and cut his investment in his largest shareholding, Rio Tinto, by a quarter, or $60 million to $70 million, as a result of the proposed tax, announced in May. Australian mining assets now account for 13% of his total $7 billion in assets under management compared with 15% previously. He said he would now look to reinvest, potentially building up the ratio held to levels prior to the RSPT being announced. "We are not going to increase our exposure overnight, but over time, yes we will," Henderson said. "I very seldom pull triggers all that fast and while Australia does have some very interesting resource assets, unfortunately a lot of them are in the iron ore and coal industries--so you still need to look at what you pay and what kind of return you can get." The reworked tax regime--known as the Minerals Resource Rent Tax--includes a reduction in the headline rate of the tax to 30% from 40% and will only apply to iron ore and coal mines instead of all mined commodities. The original proposal would have seen the tax kick in when a project's rate of return reached the long-term bond rate, currently about 5%. Under the revamped MRRT, the threshold rises to the bond rate plus 7%, for a total of about 12%. The government will also allow companies to use the market value of a mining project rather than its book value to calculate depreciation against the MRRT. "Clearly the previous regime had suggested that heavy exposure in Australia was not a good thing," Henderson said. "That has now changed." It is planned that the revamped mining tax will apply from July 1, 2012. -By Rhiannon Hoyle, Dow Jones Newswires; +44 (0)20 7842 9405; [email protected] (END) Dow Jones Newswires July 02, 2010 11:56 ET (15:56 GMT)