Australia yesterday refused to be “intimidated” by powerful mining companies after Swiss giant Xstrata became the latest firm to suspend projects over to a controversial new 40 percent resources tax.
Xstrata suspended A$586 million (US$489 million) in development spending on two Australian projects, saying a review had found the proposed tax would mean “neither would be viable.”
Head Mick Davis said the Resource Super Profits Tax (RSPT) on returns on investment above 6 percent would slash the profitability of its A$6 billion thermal coal project and A$600 million copper mine expansion.
“Our Australian management teams’ analysis demonstrates that the RSPT would significantly impact the value and cashflows of both of these projects,” he said in a statement.
“The impact of the tax eliminates the net present value of the Wandoan [thermal] coal project almost entirely and substantially reduces the value of the Ernest Henry [copper] underground shaft project,” he said.
“Neither will be viable if the RSPT is imposed,” he said.
Australian Prime Minister Kevin Rudd dismissed the move as “part and parcel, I believe, of what will be the normal argy-bargy of a very tense debate between parts of the mining industry and the Australian government.”
“This government will not be intimidated by the statements of any mining company, foreign or domestic,” Rudd said.
“This government does not stand here as the puppet of parts of the mining industry. This government stands here to act in the national interest on behalf of all Australians,” he said.
Rudd said he understood that there were a “number of other existing issues impacting on this particular development,” including rail access, port infrastructure and power supply.
Xstrata coal chief Peter Freyberg said the RSPT jeopardized the “globally significant” Wandoan thermal coal development “together with the development of the Surat Basin as an internationally competitive export coal region.”
Xstrata said it was reviewing A$22 billion worth of Australian projects, and suspension of investment “ultimately compromises Australia’s ability to continue to benefit from future commodity price rises.”
The tax has prompted a savage backlash from the mining sector, with global giants Rio Tinto and BHP Billiton reviewing their Australian operations.
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