Strategic Advisory Team - MRRT Awareness and Preparation
The Mineral Resources Rent Tax (MRRT) to be implemented on 1 July 2012 will apply a starting base value as at 1 May 2010.
SRK’s Strategic Advisory team provides accurate and robust valuations of resource projects at the taxing point. We also provide ongoing value-based strategic planning and executive level decision making tools.
MRRT Complexities
The Australian Tax Office (ATO) accepts the “net-back” method to establish the resource revenue at the taxing point. High net-back amounts reduce MRRT revenues, but pushing project value into downstream assets reduces the market value starting base of depreciating assets at the taxing point.
SRK understands the techniques, benefits and challenges of adopting the net-back method for MRRT purposes.
Valuation Methods
There are four main mine project phases which have varying levels of information and risk / uncertainty.
- Exploration Properties
- Mineral Resource Properties
- Development Properties
- Production Properties
They require different approaches when assessing the market value starting base. SRK is experienced in undertaking valuations within each of these project phases.
Defensible Valuations
The ATO is likely to review “high risk” valuations to ensure that they comply with best practice valuation methods, and that
input parameters are transparent and defensible.
SRK’s Strategic Advisory Group is expert in assessing the market value of projects, and has a deep understanding of the valuation requirements for MRRT purposes.
What to Time Capsule NOW
- Mineral Resource and Ore Reserve statement as at 1 May 2010 and all supporting information
- Base-case life of mine plan with reference to price and cost parameters at 1 May 2010
- Base-case LOM schedule including all assumptions and supporting information.
- Asset register including all upstream and downstream assets as at 30 April 2010
- Three years of management reports up to 30 April 2010 that break down costs by activity and cost code
- The closing accounting balance sheet (including inventory physicals), and the tax base of depreciating assets as at 30 April 2010
- Relevant Executive and Board reports that discuss development options under consideration as at 30 April 2010
3 Phase Valuation Approach
SRK has developed a three phased approach for undertaking valuations for MRRT purposes, including:
- Preparation phase: collate source data, assess the completeness and adequacy of data provided
- Primary analysis phase: undertake financial analysis and valuation tasks required to assess the market value starting base amount of depreciating assets
- Documentation and completion phase: comprehensive valuation report and time capsule all of the source data and analysis relied upon during the engagement
Beyond MRRT
Meeting MRRT obligations is the springboard for an on-going, value‑based strategic planning process.
Your executive leadership team and Board can work with us to develop and implement a value-based, life‑of‑business strategic plan. We’ll consider cash flow implications and analysis of the technical and market risks inherent in your operations to unlock value.
SRK’s Strategic Advisory Group provides MRRT compliance expertise
For coal and iron ore mining companies we will ensure you have complete documentation of an accurate, defensible,and robust valuation of your operations.
Our in-depth understanding of valuation requirements for MRRT allows us to adopt appropriate valuation techniques and to provide a valuation report that will meet the ATO’s criteria for best practice. In addition to satisfying your compliance requirements, your valuations will be sufficiently robust as to avoid possible penalty taxes and reporting issues (particularly important for publicly listed entities).
Initiating the documentation process now will help ensure the best MRRT strategy. Our on-going support enables you to continue to make informed decisions in light of ever changing market conditions.
Contact us
For more information please either email us or complete the contact form below:
Sydney: Mike Warren, Corporate Consultant (Strategic Advisory) – mwarren@srk.com.au
Melbourne: Marvin Schneider, Principal Consultant (Strategic Advisory) – mschneider@srk.com.au
Perth: Peter Williams, Corporate Consultant (Strategic Advisory) – pwilliams@srk.com.au