Australian miner Fortescue in tax plan threat
- 19 May 2010
- From the section Business
Australian iron ore miner Fortescue Metals has threatened to abandon $15bn (£10.5bn) of new projects unless plans for a mining tax are watered down or axed.
The Australian government has proposed a 40% tax on the profits of mining firms.
But Fortescue said this would make it financing two major investments impossible.
The government says miners are running a scare campaign against the tax.
However, the prospect of the mining tax was this week blamed for the end of a takeover bid for Macarthur Coal.
Macarthur's US suitor Peabody Energy had submitted a lower bid than previously made - after it said the tax plan reduced the gains it would get from the deal.
Fortescue has plans for two mining projects in the Pilbara region of west Australia, one costing $9bn and the other $6bn.
It has described one of them, the Solomon Hub, as "the most valuable undeveloped mining project in the world".
But Fortescue, which is part-owned by Chinese state mining firms, said the tax would hit profits before financing costs, leaving it less room to repay debts.
The proposal has hit share prices of mining firms and led to an angry reaction from the industry, which is widely seen as having driven Australia's growth and kept it out of recession.
The government said it was part of a wider review of its tax policy, with treasurer Wayne Swan saying miners were overstating the impact of the tax.
He added that Fortescue may have other reasons for shelving projects.
"We need to have a bit of perspective here. The government is talking to the industry in a constructive way," Mr Swan said.
Coal prices have doubled since the beginning of 2009 - largely thanks to strong demand from China and India, mainly for use in the steel industry.