UPDATE: BHP Billiton Chief Says Resource Tax May Curb Plans

May 09, 2010, SYDNEY -(Dow Jones)- BHP Billiton Ltd. (BHP.AU) Chief Executive Marius Kloppers said Sunday that an expansion of its Olympic Dam uranium and copper mine in South Australia state could be impacted by the country's proposed resource "super profits" tax.

Kloppers, however, said that he doesn't expect the proposed tax of 40% of resource companies' profits to have any immediate impact on the miner's proposed iron joint venture with Rio Tinto Ltd. (RIO.AU).

Leaders in Australia's mining sector are concerned that the tax will slow growth and deter investment. Their objections have ranged from airing warnings of possible project delays to open displays of hostility.

Rio Tinto said last week that it's reviewing the tax's potential impact on its business but continuing a feasibility study into an expansion of its iron ore operations as planned. Origin Energy Ltd. (ORG.AU) and Santos Ltd. (STO.AU) said uncertainty surrounding the tax's passage into law could delay big gas export projects they want to develop in Queensland state.

An environmental impact statement for an expansion of Olympic Dam will be finished in about 18 months, Kloppers said."This new tax proposal does upset the apple cart there a little bit," he told the Australian Broadcasting Corp. in a televised interview. 

Kloppers was reluctant to forecast exactly how the project's timetable could be affected, saying that the company has only had five days to assess the tax's possible impact. "What I can say though is that if you move the tax rate from about 44% to 57%, or possibly more, that doesn't make it any easier."

Other projects, including an expansion of BHP's Australian coal operations in Queensland state, could also be affected, he said. "The uncertainty is in place - it would be very difficult to approve any of those projects," Kloppers said, although he acknowledged that BHP has no projects due for a final investment decision imminently.

Australian Treasurer Wayne Swan on Sunday rebuffed suggestions that the tax will damage the mining industry, noting that a number of mining executives, led by businessman Clive Palmer, have said "the sky would fall in" while others are "quietly and confidently engaged in the consultation process".

"Threats and abuse will not alter the government's resolve," Swan said in a statement.

"I can assure all shareholders that the government is genuine about consultation, and working through the transitional arrangements and detailed design of this important new tax reform for Australia," he said.

The new tax, if passed into law in its current form, would mean Australian resources projects could be taxed almost twice as much as projects in other major mining countries like Canada and Brazil, Kloppers said.

"However, at a base line, what I hope is that the stable investment regime that we've had (in Australia) for decades continues and that we can continue to invest here," he added.

Kloppers said BHP and Rio Tinto both remain committed to the proposed merger of their iron ore operations in the Pilbara region of Western Australia state. "I don't think that there's any immediate impact," on from the proposed new tax, Kloppers said. "Obviously more uncertainty is not a good thing in general, but I think the two parties are very committed and have made public statements to that effect."

Kloppers wouldn't comment on whether any changes could be made to the joint venture proposal following a recovery in commodity markets, other than saying that BHP and Rio Tinto want to make it a "win-win outcome for both of us".

Located 560 kilometres north of Adelaide, Olympic Damhas the world's fourth largest remaining copper deposit, fifth largest gold deposit and largest uranium deposit, according to BHP Billiton's website.