Gillard extends olive branch to miners over super tax

UPDATE 2.45pm: Incoming Prime Minister Julia Gillard has extended an olive branch to the mining sector, signalling she will seek consensus with the industry over the contentious resources super profits tax.

The share prices of mining companies rose on news Ms Gillard had seized control of the Federal Labor party after Prime Minister Kevin Rudd agreed to step aside ahead of a leadership spill this morning.

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At a press conference in Canberra, Ms Gillard repeated her predecessor’s call for a fairer distribution of the nation’s mineral wealth but said she would be throwing the government’s doors open for further negotiation with the mining industry and called on it, in turn, to throw open its mind.

"I believe there is a consensus emerging that Australians are entitled to a fairer share of the country's mineral wealth," she said.

However she said she recognised the need to end the uncertainty concerning the tax which she said was "not good for this nation".

Ms Gillard said she would cancel the government’s taxpayer-funded advertising campaign promoting the resources super profits tax and called on the mining industry to cease its opposing campaign.

Mining giant BHP Billiton, the Association of Mining and Exploration Companies and the WA Chamber of Minerals and Energy have since announced they would suspend their advertising campaigns opposing the tax.

Ms Gillard indicated Treasurer Wayne Swan and Resources Minister Martin Ferguson would lead negotiations with the mining industry.

"We will work through step by step, piece by piece, in a spirit of negotiation," Ms Gillard said.

Mr Rudd has been at loggerheads with the mining industry since his government announced plans to introduce a 40 per cent tax on the resource profits of major mining companies in response to the Henry tax review.

By the close of trade, mining companies that had seen a big sell-off when the resources super profits tax was announced saw their shares move higher, despite mixed leads overnight.

Rio Tinto had risen $1.19, or 1.69 per cent, to $71.73 and BHP Billiton had gained 51 cents, or 1.3 per cent, to $39.65.

The morning rise in BHP and Rio came despite both companies being down in London trading overnight.

Shares in iron ore miner Fortescue Metals Group rose 11 cents, or 2.48 per cent, to $4.54.

FMG boss Andrew 'Twiggy' Forrest has been one of the most vocal critics of the resources super profits tax and earlier this week boldly declared the tax "dead".

Junior iron ore miner Atlas Iron was up 10 cents, or 4.67 per cent, to $2.24, Mt Gibson Iron lifted 6.5 cents, or 3.96 per cent, to $1.705, Gindalbie Metals rose seven cents, or 5.93 per cent, to $1.25 and Murchison Metals gained three cents, or 1.36 per cent, to $2.24.

Wesfarmers, which is a coal miner as well as owning supermarket chain Coles, gained 46 cents, or 1.57 per cent, to $29.86.

CMC Markets analyst David Taylor said he thought there was a direct link between the election of Julia Gillard as Australia's next prime minister and the rise in resources stocks.

"There is a pretty direct correlation, and the people have spoken,” he said.

"Overnight, metals were mixed, and the basic fundamental offshore lead was mixed overnight.

"There is hope of a possible watering down of the resources tax now that the leadership change has been announced.

"With the tax factored in, company values fell, and now with the tax now looking like it might not be as intense, valuations naturally rose on the back of that, and share prices are rising."

Macquarie Private Wealth private client adviser James Rosenberg said resource stocks and associated services had led the market higher.

"The market will be watching the events in Canberra and the new Prime Minister closely in coming days," he said.

"The initial reaction from the market is the resource stocks are the ones rallying the most.

"Events in Canberra have taken place very quickly and no one knows what to really expect.

"The markets will be hoping for certainty in policies over the next few weeks."

EL&C Baillieu Stockbroking director Richard Morrow said investors initially responded positively to the new leadership, but there had been a small amount of profit taking among mining stocks mid-morning.

"The noises that are coming out of that sector and both Ms Gillard and her deputy are very encouraging for the mining companies," he said.

"It involves both parties with an act of good faith in cancelling their public slanging match - that looks to have taken place."

Wealth Within chief analyst Dale Gillham said Mr Rudd's poor handling of the tax was "the nail in the coffin" for his leadership.

"If Julia Gillard moves quickly to resolve the issues around the resource rent tax, then maybe this will work positively towards putting more confidence back into our market and we may see it finally start to gain positive momentum.

"In saying that I believe our market will continue to be volatile over the next six months regardless of who is prime minister, and they will have to deal with many unforeseen issues that could severely challenge the government in similar fashion as to what occurred with the GFC (global financial crisis)."

Julia Gillard was elected leader of the Labor Party this morning ousting incumbent Kevin Rudd in a leadership contest prior to the market's open.