Mine boss Oleg Sheiko says Ghana may be better

From: The Australian

UNTIL a couple of weeks ago, Oleg Sheiko says he always felt welcome as a foreign investor in Australia. But the Russian-born, London-based executive says his faith in the Rudd government is now being tested as it pushes ahead with a massive new tax on the resources sector.

The chief executive of Metals Solutions — which is owned by, and advises, Ukrainian billionaire Gennadiy Bogolyubov — says the government’s plan to slug the Australian resources sector with a new 40 per cent super profits tax means the foreign company will reassess where it directs capital.

Bogolyubov’s Palmary Enterprises took over Australia’s Consolidated Minerals in 2008 in a $1.3 billion deal to secure its Woodie Woodie manganese operation in the Pilbara region in Western Australia. Since then, Palmary has also secured a 12 per cent stake in fellow manganese producer OM Holdings. ConsMin and OM are involved in talks that could lead to an alliance of their projects — one reason for Sheiko’s visit to Australia this month.

He told The Weekend Australian yesterday the uncertainty surrounding the new tax meant the company’s operations in the West African nation of Ghana could now be viewed as more stable.

Sheiko says the government’s plan to hit the resources sector with the new tax will force foreign owners with Australian assets, including Metals Solutions, to review alternative options overseas.

“Initially, we were surprised at how welcome we were as a foreign investor (in Australia) — from the very beginning to the very end, we were treated very fair,” he says, adding that that is why the proposed new tax is a surprise.

Despite the manganese deposit in Ghana being of a lower grade than the Australian project, the uncertainty around Kevin Rudd’s resource tax plans could make the African country a more attractive country to invest in.

“In mining you take a long view on tax regimes . . . so you double think whether you should deliver your capital in Australia, Ghana or somewhere else,” Sheiko says. “I’m sure all multinational companies will be doing the same. Australia is a great mining country but not the only one in the world.”

In Ghana, the company pays a 25 per cent company tax rate (temporarily increased to 30 per cent) and a royalty rate of 5 per cent — the same as in Australia. What surprises Sheiko about the Australian government’s proposal is the low profit threshold, which is set at about 6 per cent, before the 40 per cent “super profits” tax kicks in.

Global majors BHP Billiton, Rio Tinto and Xstrata have led the widespread industry backlash to the proposal, warning future projects in Australia are now at risk.

Sheiko says Metals Solutions will now “do its homework” on the new tax but that Ghana is looking favourable.