Big miners happy with deal on tax

SYDNEY: Swiss-based miner Xstrata says it is resuming project activities at its Ernest Henry underground coal mine and coal exploration in Queensland, in an initial response to the revised minerals tax regime announced by the Australian Government yesterday.

With Australia's biggest miners BHP Billiton and Rio Tinto, Xstrata welcomed the Government's decision to replace its 40 per cent resource super profits tax with a 30 per cent minerals resource rent tax.

But smaller miners, including Queensland collier Clive Palmer, say the deal comes at their expense.

In a joint statement coinciding with the Government's announcement, the big three miners said they were encouraged by the new regime, which represented significant progress towards a regime that satisfied the industry's core principles.

The miners say the changes meet a core principle that any new tax not be applied retrospectively so existing projects where investment decisions had already been made were not adversely affected.

Under the revised proposal, the Government will tax existing projects at a written-down value.

Xstrata said its Ernest Henry project was an extension of the existing mine.

Association of Mining and Exploration Companies chief Simon Bennison said his group had been left out of the negotiations and small miners would be disadvantaged by the new arrangements.

Smaller miners with resource profits below A$50 million ($61 million) a year will not be liable for the new tax.

The group plans to continue campaigning against the 30 per cent tax, now limited to just 320 companies mining iron ore, coal, oil and gas.

Rio Tinto Australia managing director David Peever said recognition of market value of existing mines and a reduction in the headline tax rate represented significant progress.

"We all want a minerals taxation system that grows the mining industry in Australia.

"A strong mining sector keeps the Australian economy strong, spreading prosperity to all Australians," Peever said.

BHP Billiton chief executive Marius Kloppers said "tax reform that is prospective, competitive, differentiated and resource-based will ensure that the Australian mining sector continues to grow through investment in the industry which benefits all Australians.

"We are encouraged that the MRRT design is closer to our frequently stated principles of sound tax reform, in that the proposed tax will be prospective in its treatment of profits from our iron ore and coal businesses, and not apply to the other commodities in our portfolio."

Kloppers described the new regime as representing "a material improvement from the original tax proposal".

Speaking from Germany on Sky News yesterday, Palmer, who chairs miner Mineralogy, said the deal sold out smaller mining companies, which had not been involved in discussions about them. Western Australia Premier Colin Barnett told ABC Radio he thought the revised tax was still flawed and discriminated against coal, iron ore and energy miners.

"It will be interesting when they draft legislation, if they are returned to government, what happens in terms of passage of this through the commonwealth Parliament," Barnett said. "If it is a tax on the resource, they may have constitutional issues."

- AAP, BLOOMBERG