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23
IBIS World ‘B0801 Iron Ore Mining in Australia industry report’, May 2013, page 18.
24
Ibid page 10.
25
Ibid page 9.
17
4
iron ore falls, FMG must increase production to maintain profitability (as in 2012);26 however workforce shortages may provide an obstacle to increasing production capacity.
(e) Minerals Resource Rent Tax (MRRT) – An additional tax expense will decrease FMG’s profits.
Deloitte notes that ‘the combined effect of the mineral resources rent tax (MRRT) and the carbon tax has the potential to push down corporate profits and interfere with project feasibility assessments’.27
FMG’s June quarter 2013 update indicates that no MRRT was paid in 2013.
1.2 Industry analysis – level of competition in the iron ore production industry.
1.2.1 ‘Porter five forces analysis’
An analysis of the five competitive forces suggests that the level of competition in the industry is moderate, as opposed to intense, meaning that there is an opportunity to earn above average profits in the medium term. The strongest competitive force is ‘competitive rivalry among …show more content…
Larger mining operations also
‘possess both cost and negotiating benefits’. 51 For example, the additional units of production will contribute towards covering the fixed costs associated with port and rail facilities, and will then contribute towards profit.52 As detailed in the director’s report in the annual financial report for the year ended 30 June 2012, FMG’s strategy is to expand its current iron ore production capacity to
155m mt pa and to continue to develop its mining tenements in the Pilbara region. 53 In its update for the June quarter 2013, FMG confirmed that it will achieve ‘production at the 155m mt pa run rate across the supply chain by the end of December 2013 and sustainable production at 155m mt pa as we exit the 2014 wet season’.54 Assuming a forecast price of USD120 per mt, and that the 155m mt
IBIS World ‘B0801 Iron Ore Mining in Australia industry report’, May 2013, page 18.
24
Ibid page 10.
25
Ibid page 9.
17
4
iron ore falls, FMG must increase production to maintain profitability (as in 2012);26 however workforce shortages may provide an obstacle to increasing production capacity.
(e) Minerals Resource Rent Tax (MRRT) – An additional tax expense will decrease FMG’s profits.
Deloitte notes that ‘the combined effect of the mineral resources rent tax (MRRT) and the carbon tax has the potential to push down corporate profits and interfere with project feasibility assessments’.27
FMG’s June quarter 2013 update indicates that no MRRT was paid in 2013.
1.2 Industry analysis – level of competition in the iron ore production industry.
1.2.1 ‘Porter five forces analysis’
An analysis of the five competitive forces suggests that the level of competition in the industry is moderate, as opposed to intense, meaning that there is an opportunity to earn above average profits in the medium term. The strongest competitive force is ‘competitive rivalry among …show more content…
Larger mining operations also
‘possess both cost and negotiating benefits’. 51 For example, the additional units of production will contribute towards covering the fixed costs associated with port and rail facilities, and will then contribute towards profit.52 As detailed in the director’s report in the annual financial report for the year ended 30 June 2012, FMG’s strategy is to expand its current iron ore production capacity to
155m mt pa and to continue to develop its mining tenements in the Pilbara region. 53 In its update for the June quarter 2013, FMG confirmed that it will achieve ‘production at the 155m mt pa run rate across the supply chain by the end of December 2013 and sustainable production at 155m mt pa as we exit the 2014 wet season’.54 Assuming a forecast price of USD120 per mt, and that the 155m mt