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Xstrata Says Mine-Tax 'Tinkering' Won't Curb Damage (Update2) 

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Metallica Says May Scrap Nickel Mine on Planned Tax 

June 11 (Bloomberg) -- Xstrata Plc, which halted investment in A$6.6 billion ($5.6 billion) of Australian mining projects after the government proposed a new tax, said &quot;tinkering&quot; with the levy won't be sufficient to prevent damage to the industry.
Prime Minister Kevin Rudd told Seven Network Ltd.'s &quot;Sunrise&quot; program there will be &quot;weeks, months&quot; of talks on the tax after the Herald Sun newspaper said &quot;major changes&quot; would be announced today or tomorrow. The government may lift the threshold at which the 40 percent profit tax kicks in to more than 10 percent from about 6 percent, the newspaper said.
&quot;The government still has not allowed consultation to take place on the key issues with this tax, namely its application to existing investments and the 40 percent rate,&quot; Xstrata Chief Executive Officer Mick Davis said in an e-mailed response to questions. &quot;Tinkering at the margins will not avoid the significant long-term damage this tax could do to mining investment in Australia.&quot;
Xstrata has joined BHP Billiton Ltd., Rio Tinto Group and Peabody Energy Corp. in reviewing, suspending or slowing Australian projects because of the tax. The decisions have heightened pressure on the government to wind back its proposal. Rudd, battling a slump in approval ratings ahead of an election likely to be held this year, said the move was just the &quot;argy- bargy of a very tense debate.&quot;
Xstrata on June 3 said A$586 million of work on the expansion of the Ernest Henry copper mine, approved in December, and the A$6 billion Wandoan coal project weren't viable under the new tax. The company said today in an e-mailed statement that it continues to seek &quot;meaningful consultation&quot; with the Australian government.
Shares Advance
BHP, the world's largest mining company, and Rio, the third-biggest, climbed 2 percent and 1.4 percent at 12:05 p.m. in Sydney today to A$38.38 and A$68.82 respectively. Xstrata rose 4.3 percent in London yesterday.
&quot;Unfortunately there has been no acknowledgement by the government of the major flaws of the proposed tax and the significant impact on the industry,&quot; BHP Chairman Jac Nasser said today in a letter to shareholders.
Rio isn't able to comment on speculated changes, said Faeth Birch, a spokeswoman for the company. Ruban Yogarajah, a BHP spokesman in London, declined to comment.
Changes to the tax plans include bringing coal-seam gas projects under the Petroleum Resource Rent Tax and removing a 40 percent underwriting of losses, according to the newspaper report. The government will also remove quarries and gravel from the tax to ease concern that building costs would rise, it said.
Resources Minister Martin Ferguson has said the government is open to &quot;refinements&quot; to the tax. The levy would be imposed on resource companies' returns that exceed the rate on long-term Australian government bonds, currently about 6 percent, and be offset by a credit for royalties paid to state governments, according to government documents. 
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Xstrata Says Mine-Tax 'Tinkering' Won't Curb Damage (Update2)  | Shanghai Non ferrous Metals

Xstrata Says Mine-Tax 'Tinkering' Won't Curb Damage (Update2)

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