Eye of the Storm

[topcropper]

i wouldnt worry top cropper, maybe they will offer top dollar for your farm.
This whole situation reminds me of the Japanese in the 1980's. Remember the fear about the Japanese buying out the gold coast. Yeah they paid top dollar for it, and subsequently sold much of it at a loss.

At the moment its China's time in the sun. If they wont to pay top dollar let them. Asset prices will always revert to the mean as dictated by the maximum profit usage of the asset.

chilliaa, if they paid me 3 times the market price for my farm I'd probably go too, but you are missing the point a bit. This is not the same as Japan buying the Gold Coast 20 years ago. The Japanese blew billions and many Aussies cleaned up, but the Gold Coast is still there in all its glory and will be for a thousand years.

The Chinese are buying Aussie farm land to mine it. On the news this morning they said they want to buy 35,000 hectares, and have already bought 8 farms and will buy the rest.

Surely a countries food generating land is a bit of a stategic asset. An asset that will last thousands of years. The government doesn't care as they are getting huge one-off payments then royalties out of it and they are broke.



I predict this is going to turn into a big issue. Remember, there is one reason and one reason only that they are paying 3 times it's market value, and that's not to grow food on the land. This is exactly the risk of what happens when governments are broke. They get blind to what's happening and think only of the short term and profits tomorrow.


See ya's.

 

[willair]

There will be a lot more news about this shortly. Just wait and see.

See ya's.

Australians need to have a close look at companies like this,the Shenhua-Group is not some backyard startup miner,with a few high risk backup shareholders,they are a state-owed enterprise,and i don't think they have money problems only a 50 year plan..imho willair..
Shenhua Group is the most competitive unified energy company in China. Pursuing a multi-faceted strategy, we have integrated segments of coal, railway, power and ports, and have integrated our coal production, transportation and sales. We own 54 coal mines with a total capacity of 200 million tons, 1369 kilometers of dedicated railways with a total transportation capacity of 128 million tons/kilometer, power plants with a total installed capacity of 16080 MW. The CTL and coal chemicals project are progressing on schedule. http://www.shenhuagroup.com.cn/english/#

 

[lizzie]

Hi Lizzie,

A little sideways from the topic, but can I ask why you are selling from your HDT? Is it to do with the ATO and related issues to HDT?

Regards JO

i don't want to get off topic because this is a very interesting thread - but briefly - land tax, cost of running the trust, difficulty in obtaining finance, ato suspicous and treating hdt's with mistrust,

it will work out well for us because we paid a significant amount of capital costs already (architect, surveyor, council/waterboard fees, engineer etc), all if which is not tax deductable until you sell (which we have no intention of doing, except for "this" to decomplicate our portfolio) - so, because it's being sold out of the hdt into hubby's personal name, and combined with the bank's independent valuer giving a very low valuation, we'll make a capital loss but still retain the property. did have to pay stamp duty to do so, but the tax refund will more than cover this.

 

[lizzie]

as a resident and consumer, i personally am finding it very scary that the nsw government is attempting to sell off "willy nilly" our assets to unknown purchasers with unknown agenda's for a one-off budget balancing payment.

i'd rather see them forgo the $500,000 single harbour views office refit, or sell off the prime government chambers central sydney site and build a new one in a cheaper location ... preferred option tho would be to scrap the state governments altogether.

 

[Ausprop]

The Chinese are buying Aussie farm land to mine it. On the news this morning they said they want to buy 35,000 hectares, and have already bought 8 farms and will buy the rest.

I thought ownership of land gave you no claim over the mineral rights i.e. they could get the right to mine without buying the land?

 

[Aaron Sice]

true John but it gives them no headache when they ask for a mining license.

 

[HiEquity]

I thought ownership of land gave you no claim over the mineral rights i.e. they could get the right to mine without buying the land?

You are quite right but it does prevent "stakeholder issues" which they are very keen to avoid. Small price to pay for avoiding a compulsory acquisition under the provisions of the Mining Act and the kerfuffle that would entail! Edit - BC beat me to it!

And for those of you with a speculative mindset, heres the next potential dot.com: GREEN ENERGY

I cant play it because it goes against my investment doctrines (i want to see the profit first, i want to see sustainable profit first, i want to see quantifiable and realistically extrapolataple and sustainable earnings figures).

Nice post chilliaa! I see the same potential and problems. A lot of "blue sky" potential and people paying a lot of money for assets but not a lot of solid returns going around... yet!

BTW the 16000MW figure posted by Willair for Shenhua's generation capacity is roughly half of Australia's National Electricity Market average electricity demand!

 

[topcropper]

I thought ownership of land gave you no claim over the mineral rights i.e. they could get the right to mine without buying the land?

Yep, BC and HE are right. But how can you mine a farm without destroying it? I'd think a mining company could come on and mine the land but it would be common decency to buy it first.

I'd think the right to mine the land from the government would come with the obligation to buy the land but I'm just guessing. If mining companies used their true right to come on and destroy the farm with no compensation you would be looking at a civil uprising from the entire rural population. Picture tractors and trucks and loads of grain and cotton bails and beef cattle and sheep and milking cows blocking the harbour bridge.

See ya's.

 

[HiEquity]

But how can you mine a farm without destroying it? I'd think a mining company could come on and mine the land but it would be common decency to buy it first.

I'd think the right to mine the land from the government would come with the obligation to buy the land but I'm just guessing. If mining companies used their true right to come on and destroy the farm with no compensation you would be looking at a civil uprising from the entire rural population.

It would be a compulsory acquisition based on a valuation from the Valuer General - the existing land owner will always be compensated. However, most mining companies would agree with your "common decency" comment and pay well over market prices for the land they want as the cost of such is one poofteenth of the capital cost of developing a mine... that way everyone is happy!

BTW 35,000 ha is a drop in the ocean of Australia's arable rural land. Albeit some of our most productive of course! Although I accept a precedent is being set the reality is that it already has been by other miners having done the same thing. When the value of the land for mining is orders of magnitude more than it's agricultural value then there comes a point when you have to say it should be done.

My concerns go to the points made by WW in that companies owned by a single party government of another country shouldn't be permitted to buy ANY significant assets in Australia - period. There is no way that can be called a level playing field and the problems it will cause could be many and varied into the future. This should be a strategic decision made for Australia's long term national interest as well as to draw a line in the sand about the differences between democratic values and China's values.

And when the China political juggernaut does come crashing down due to its obvious failings the more we hitch our ride to that carriage the more we will get dragged down with it.

BTW - Ever tried buying large chunks of land in China by yourself and mining them?

 

[Aaron Sice]

BTW 35,000 ha is a drop in the ocean of Australia's arable rural land. Albeit some of our most productive of course! Although I accept a precedent is being set the reality is that it already has been by other miners having done the same thing. When the value of the land for mining is orders of magnitude more than it's agricultural value then there comes a point when you have to say it should be done.

but 8 farms at 35000ha ea? or 18 farms at 35000ha ea? or 88 farms at 35000ha ea....

 

[josko]

Land tax I think. Any form of trust ownership means the $400K cap before land tax kicks in is ignored and you're taxed on the whole lot. I pay $8K per annum land tax on my single IP because its held by an HDT instead of in my personal name. If it were in my name it would be land tax exempt...

Cheers,
Michael

Thanks Michael,

I forgot about property in HDT in NSW. My IP's in HDT are QLD and we still have a threshold.

Regards JO

 

[topcropper]

When the value of the land for mining is orders of magnitude more than it's agricultural value then there comes a point when you have to say it should be done.
:

How do you set that difference in value..??

For example, a hectare of dirt in my area worth $5,000 could produce enough grain per year worth $1,000 gross, [5t/h x $200/t], and a profit of $500 per hectare.

That same hectare if mined for coal might produce 2 million dollars per hectare gross worth of coal, [20,000 tonnes x $100] and a profit of a million dollars per hectare.


So we have a $1000 gross worth of grain compared to 2 million dollars gross worth of coal.

However that is over one year. If we work out the figure over 2 thousand years they end up equal, as the coal is gone but the land is still producing food.?? Over ten thousand years food wins by a mile.

See ya's.

 

[HiEquity]

However that is over one year. If we work out the figure over 2 thousand years they end up equal, as the coal is gone but the land is still producing food.?? Over ten thousand years food wins by a mile.

Nice one TC! It's a bit like building a hydro dam - the asset can be there producing electricity for centuries so the power is essentially free innit? It's all in the upfront capex. Unfortunately discounted cash flow modelling at a reasonable discount rate will see the value of any revenue past the 15/20 year point discounted to effectively zero.

Not that I agree with using DCF modelling for these purposes but everybody does. Hence 1 million years of revenue from food will look pretty much the same as twenty years in any financial model used by business. Shows a bit of a failure in the system? A very big problem for renewable energy projects or anything else that is capital intensive like insulation / energy efficiency.

 

[The Fence]

However that is over one year. If we work out the figure over 2 thousand years they end up equal, as the coal is gone but the land is still producing food.?? Over ten thousand years food wins by a mile.

See ya's.

You're gonna have some serious wrinkles in 10k yrs TC...lol lol

 

[Reality Cheque]

It would be a compulsory acquisition based on a valuation from the Valuer General - the existing land owner will always be compensated. However, most mining companies would agree with your "common decency" comment and pay well over market prices for the land they want as the cost of such is one poofteenth of the capital cost of developing a mine... that way everyone is happy!
QUOTE]

It'd be interesting to know what sort of money they are offering for the land.
I know of a couple of cases, not that far from where TC is talking about although probably a different mining company. Property owner was approached by mining co wanting to drill several core holes for exploration. He was paid $10,000 for each of the 6 cores drilled on his place. This was to be paid regardless of the outcome. The mining co then presented with a valuation from the valuer general offering to purchase the property. The property owner declined and got his own appraisal from a REA. He made a counter offer which was double the REA's already generous valuation. It was initially declined but then accepted about a month later.

Still doesn't make it right though.


RC

 

[HiEquity]

Still doesn't make it right though.

Awww, I dunno... If someone offered me 2x market value for my properties I would take the money and then spend it all again on twice as many properties on the open market as I had before!

Farmers in general may be attached to their particular pieces of dirt but that only goes so far if there is the prospect of buying twice as much dirt as they currently have at no cost! I don't think there would be too many who would call that "unfair" - I suspect most wall fall over themselves!

Seems eminently fair to me anyway...

 

[HomePage]

"The Landlord is a gentleman who does not earn his wealth. He has a host of agents and clerks that receive for him. He does not even take the trouble to spend his wealth. He has a host of people around him to do the actual spending. He never sees it until he comes to enjoy it. His sole function, his chief pride, is the stately consumption of wealth produced by others." David Lloyd George, British PM, 1909

What a tagline - just oozing with greed!

 

[HiEquity]

What a tagline - just oozing with greed!

Really? Depends which way you look at it I suppose.

I suggest you Google it and check the context of the quote - it was actually an all out attack on landowners at the time...

Everything has different ways you can look at it and in this case much is revealed by how you interpret it. The different interpretations that can be taken from the quote is one of the reasons I like it.

I guess the perception of the greedy landlord hasn't changed much in a hundred years!

 

[Player]

Really? Depends which way you look at it I suppose.

I suggest you Google it and check the context of the quote - it was actually an all out attack on landowners at the time...

Everything has different ways you can look at it and in this case much is revealed by how you interpret it. The different interpretations that can be taken from the quote is one of the reasons I like it.

I guess the perception of the greedy landlord hasn't changed much in a hundred years!

That's right. That is why we still have this impost called "land tax." So the state govt can also punish those fiscally responsible who aim to get ahead.

This punishment is mostly exponential (cumulative). Wouldn't suit the states to dish it on out on a single holding basis. That's why many have diversified into other staes and use varying entities to reduce the impost.

Perception is projection. I am delighted and proud to be a landlord. I see it as a business of accumulating properties (workers) that will aid in my financial independance. It is an ideal business with multiple streams of income/employees working for me, my family and the greater good that money can do.

Oh, and landlords also provide accommodation to those who choose to rent and on average that is approximately 30 % of the population.

I do not consider it greedy to want to improve one's financial situation and have less (read NO) reliance on the govt's fiscal resources for income.

 

[devo76]

With success comes hatred and jealousy from many who dont have a bit of the same. This can be said in many areas of life, Career,sporting ability,brain power,looks. The fact that landlords can be so hated by many kinda means they are doing something right in my eyes.

How many times have you seen a celebrity with beautiful women hanging off his arm, and then get an overwhelming desire to punch this lights out for no other reason than the fact they have something you dont. That green eyed monster can be a busy little fella