UPDATE: Australian PM Stands Firm On New Resource Tax

Australian Prime Minister Kevin Rudd said Thursday he was determined to introduce a tax on mining "super profits", despite growing opposition from the industry.

Critics say the 40% tax could jeopardise investments worth billions of dollars in Australia's booming resources sector but Rudd has labelled such claims as scaremongering.

As Rio Tinto Ltd. (RIO.AU) and Santos Ltd.(STO.AU) said they were reviewing the tax's potential impact on upcoming projects, Rudd said he expected the industry to "cry wolf" on the issue.

"We do strongly believe that this is the right direction for Australia's future," he said.

The prime minister added that he was prepared to weather a political storm over the tax and shrugged off reports resources companies could campaign against him in an election year.

"It will be a rough political period ahead on it, I know, but we do not intend to be deterred," he said.

The center-left Labor Party leader found an ally in former Reserve Bank of Australia governor Bernie Fraser, who said the tax was "long overdue".

"I'm amazed that there's such vocal opposition, not from the miners--one has to expect that kind of reaction--but it's very disappointing to hear the (main opposition) coalition expressing its views so strongly too, because I think it's very much in the national interest," Fraser told Australian Broadcasting Corp. radio.

Tony Abbott, leader of Australia's Liberal-National opposition, said Wednesday he saw no way his coalition could support the tax, which he said punished one of the most productive sectors of the economy.

Rio Tinto scrambled to clarify its position after its head of iron ore Sam Walsh said the mining giant had put expansion plans worth more than A$10 billion for its Pilbara iron ore projects on hold due to the tax.

The company said while it was examining the tax's impact on all of its operations, a feasibility study into the Pilbara expansion continued and no decision had been made to shelve it.

Santos also said it was assessing the tax's implications, although Chairman Peter Coates said it was difficult to see it as anything other than bad news for the resources sector.

"It is risky and unnecessary to introduce new taxes at a time when the Australian resources industry is set to underpin Australia's prosperity for decades to come," he told the company's annual general meeting.

Nickel miner Western Areas NL (WSA.AU) also weighed in, telling shareholders in a letter that it was considering whether to proceed with its third mine, Diggers South, as a result of the new tax.

Rudd said he had engaged in some "exceptionally robust" debate with mining executives in recent days.

But he said the principle behind the tax was sound and the 40% rate on super profits was "about right".

He said rating agencies Fitch and Moody's had issued "pretty calm assessments" about the tax's impact on individual mining companies.

"The government believes this is the right tax for Australia's future because the Australian community deserves a fair share from the resources...which the Australian people themselves own," Rudd said.

-By Neil Sands, Dow Jones Newswires; 61-3-9292-2095; neil.sands@dowjones.com

Western Areas (ASX:WSA)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024