Wednesday, June 9, 2010

Australia fin min says mine tax talks constructive

SYDNEY: Australian Finance Minister Lindsay Tanner said on Wednesday the government would not be diverted from its controversial mining tax, but added talks with miners were proceeding constructively.

Global miners warn the 40% "super profits" tax threatens investment, with Aluminum Corp of China (Chalco), the world's third-largest alumina maker, possibly forced to call off its $2.5 billion Australian bauxite project, the Australian Financial Review reported.

"We are not going to be diverted from our core objective, to get a good deal for the Australian people for the extraction of resources that can only be extracted and used once," Tanner said at a Reuters newsmaker event in Sydney.

The Australian government's planned 40% "super profit" resource tax aims to boost retirement savings and guarantee a surplus budget by 2012-13. The tax, not due until 2012, is the government's re-election platform for polls later this year.

But the proposal has been controversial and angered mining firms, such as BHP Billiton Ltd, Rio Tinto Ltd and Xstrata, who say the tax puts new investment at risk and have put some expansion plans on hold.

"There are a range of things that we see as legitimate grounds for negotiations," added Tanner at the event to mark the Australian launch of Reuters Insider financial video service.

"The negotiations are very important and we believe they are proceeding in a constructive and sensible manner but they are very complex," added Tanner.

The 40% headline rate appears set in stone, but the government has sounded more flexible on the definition of a super profit, and may compromise by increasing the threshold for the new tax rate, currently set at around 6%.

Mining shares have seen billions of dollars wiped off their value and the government faces heavy opposition from the resource sector in the lead up to elections.

The debate over the mining tax has also depressed consumer sentiment, with a key measure of Australian confidence showing its third monthly fall in June, due in part to uncertainty around the proposed mining tax.

"The government's position is...the existing (resource tax) arrangements are both economically inefficient and they also deliver an inadequate return to the Australian people," Tanner said.

Australian Prime Minister Kevin Rudd held a secret meeting with BHP Billiton Chief Executive Marius Kloppers in Sydney on Tuesday night and where Kloppers is reported to have called on the prime minister to water down the levy or risk damaging Australia's mining-dependent economy.

Rudd said on radio on Wednesday that talks with miners had been "productive... but these will be very difficult negotiations."

Mining executives led by iron ore billionaire Andrew "Twiggy" Forrest will also urge Rudd to abandon plans for the tax in meetings in Perth on Wednesday.

Forrest, who made a fortune developing mines in the Pilbara iron ore district of west Australia, has threatened to pull up to US$15 billion in future projects planed by his company, Fortescue Metals Group if the tax goes ahead. ' Reuters


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