SYDNEY, May 25 -- Andrew Forrest, whose Fortescue Metals Group Ltd stake has fallen by about $700 million since Australia proposed a mining profits tax three weeks ago, said the government was unwilling to compromise on the plan.
Forrest, Fortescue's chief executive officer and biggest shareholder, criticized a proposal to tax as "super profits" returns that exceed the rate on long-term Australian government bonds. "They've said to us the 6 percent threshold is non-negotiable," he said in an interview yesterday on the Australian Broadcasting Corp's Inside Business program.
Australian Resources Minister Martin Ferguson said the government was open to "refinements" of the plan, due to start in 2012 and raise A$12 billion ($10 billion) in the first two years. It will wait until talks with companies are completed before any changes, he told Channel Ten's Meet the Press yesterday.
Fortescue shares have dropped about 19 percent to A$3.72 since the proposal was announced three weeks ago, compared with a loss of 10 percent for the S&P/ASX 200 Index. Fortescue joined BHP Billiton Ltd, the world's largest mining company, and Rio Tinto Group in putting projects under review because of the plan.
Forrest owns about 31 percent of Fortescue Metals, which has a market value of A$11.6 billion, according to data compiled by Bloomberg. That puts his Fortescue stake at about A$3.6 billion, compared with A$4.5 billion on April 30.
The plan calls for a 40 percent levy on resource profits. Asked whether the government may alter the bond rate threshold at which the tax applies, Ferguson said he was "not prepared to suggest there will be any movement. We'll await the outcome of those discussions" with the mining companies.
"There will be a profit-based tax in Australia," Ferguson said. "The headline rate is going to be 40 percent, but there are refinements that can be made to make the tax more appropriate and balanced from a mining industry point of view."
Fortescue, Australia's third-largest iron-ore producer, put the $9 billion Solomon Hub and $6 billion Western Hub projects on hold, while the Chichester venture is proceeding, the company said on May 19. The tax threatens the company's ability to fund future projects and puts Australia at a competitive disadvantage to other countries, Forrest said in the interview.
Santos Ltd., Australia's third-largest oil and gas company, said on May 19 it needed a better understanding of the tax measure before it could proceed this year with a project in Queensland state. The company, based in Adelaide, said this month it now aimed to make a development decision on its liquefied natural gas venture later this year, as opposed to its prior mid-year target.
Ross Garnaut, a government adviser and chairman of Lihir Gold Ltd, has called for changes to the tax plan to maintain the industry's growth. Even so, Garnaut said in an interview with Inside Business that "it's dangerous" to have the industry trying to dictate policy to the government.
A panel consulting with the resources industry on the tax has met with eight large companies and is scheduled to talk with another 10 companies "over the coming weeks", Treasurer Wayne Swan said in an e-mailed statement.
The government "will not be deterred by this scare campaign", Swan said. "Nobody should doubt the government's resolve to make sure the community gets a fair share of the mineral resources that belong to the Australian people."