Rio May Lead Gains for Miners Should Australia Change Government

Rio Tinto Group may benefit the most of the major coal and iron ore mining companies in Australia should the government change at the Sept. 7 election, according to JPMorgan Chase & Co.

Rio Tinto’s net present value would climb by 6 percent should the Liberal-National coalition, which leads opinion polls, scrap a tax on carbon emissions and a levy on iron-ore and coal profits, Lyndon Fagan, Mark Busuttil, Joseph Kim, Luke Nelson and Fraser Jamieson wrote in a note to clients dated Aug. 15. BHP Billiton Ltd.’s valuation would climb by 3 percent.

The “removal of these taxes would be positive for cash flow,” the JPMorgan analysts wrote. “The coalition has more of a pro-mining stance,” and it winning office may lead to quicker project approvals, according to the report.

The mining tax, introduced under former Labor Prime Minister Julia Gillard, will raise A$700 million ($642 million) in the current fiscal year, according to Treasury forecasts. Australia’s 2014 fixed carbon price of A$25.40 per metric ton is the highest in the world.

If the Labor party is re-elected, it may seek to change the mining profit tax to generate more revenue, “which if commodity prices do rally could penalize the sector even more in the medium to longer term,” Citigroup Inc. analysts led by Paul Brennan wrote in an Aug. 15 note.

The aviation sector, rather than mining, “may be the main beneficiary of the repeal of the carbon tax,” Brennan wrote.

Fortescue Metals Group Ltd., Australia’s third-biggest iron ore exporter, would see its value lifted by 1 percent as a result of the decision to eliminate the carbon tax, the JPMorgan report said.

The coalition maintained its 52 percent to 48 percent lead over Labor in the two-party preferred measure, according to a Newspoll published in The Australian newspaper Aug. 12.

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