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LONDON, May 11, 2010 (Dow Jones Commodities News Select via Comtex) -- The Australian government's intention to impose a resource 'Super Profits Tax' is an assault on the mining industry and will retard development of the nation's resources, the chief executive of Anglo-Swiss miner Xstrata PLC (XTA.LN) said Tuesday.
&quot;This is the biggest assault on the mining industry I have witnessed in my now long involvement in the sector,&quot; said Mick Davis at a Bank of America Merrill Lynch Global Metals &amp; Mining conference.
About 39% of Xstrata's earnings before interest, taxes, depreciation and amortization, or Ebitda, came from its Australian operations in 2009.
&quot;I am troubled both at the magnitude of the tax impact on mining companies in Australia but also its retroactive nature and the total absence of consultation in the run-up to the announcement,&quot; he said.
Xstrata Monday said it had decided to suspend exploration activities in North Queensland until there was greater certainty on the fiscal regime for future mining developments.
Davis said the proposed tax is much more reminiscent of countries that are perennially trapped in a spiral of mercurial populist actions rather than a country like Australia.
The Australian government has proposed an additional resource tax that, if implemented, would raise the effective corporate tax rate significantly from July 1, 2012. It introduced the tax to ensure Australia benefits from the mining boom and to ensure it doesn't develop into a two-speed economy where non-resource industries struggle to attract workers and investment.
Davis said such &quot;gerrymandering&quot; of the economy is &quot;rarely successful&quot; since it would involve redirecting potential funds for further investment from a highly productive sector to less productive sectors.
He also sought to allay concerns that some miners are using the profits generated from Australia to develop resources in other countries.
Davis said that over the eight years Xstrata has operated in Australia the company has generated $44 billion in sales from the country, paid expenses of $22 billion, incurred taxes of $5 billion, and invested $18 billion over that time.
This means Xstrata injected a net $1 billion into Australia from cash generated in other countries, he said.
&quot;In other words, there has been no leakage of profits from Australia&acirc;&euro;&ldquo;-rather the other way round,&quot; he said.
Despite concerns about the proposed tax, Xstrata is still investing heavily in organic growth around the world to benefit from strong fundamentals that underpin the global commodities sector, Davis said.
The company has plans by 2014 to increase both copper and coal volumes by 50%, double nickel production and reduce unit cash costs by at least 20% in real terms, Davis said. The average internal rate of return of the company's approved and soon-to-be approved projects is forecast to exceed 20%, using conservative long term price projections, he said. 
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