SYDNEY, June 9 -- Aluminum Corp of China (Chalco) may be forced to call off its $2.5 billion Australian bauxite development project as a proposed mining tax would further erode its financial viability, the Australian Financial Review said.

Chalco (2600.HK: Quote) (601600.SS: Quote), the world's third largest alumina maker, had already struggled to make the project feasible due to rising costs, an oversupplied market and a requirement to build an expensive refinery in Queensland state, and the mining tax would add a further blow, the paper said on Wednesday citing industry sources.

Chalco, China's biggest aluminium producer, has three weeks left to submit a feasibility study for the project, including a 10 million tonne a year bauxite mine and a 2.3 million tonne a year alumina refinery.

If canned, Chalco's project will join eight developments worth A$55 billion that have been put on hold following the government's announcement of the 40 percent mining super profits tax, the paper said.

The proposed 40 percent tax has triggered a slump in the mining sector's confidence with the National Australia Bank sentiment readership on the industry falling from 34 points to 4 in just one month, it said.