Australian iron ore mine magnate leads fight against tax

Thu Nov 3, 2011

* Small Australian miners plea for mine tax changes
* Small miners say global miners will pay nothing
* Treasurer says big miners pay the most

CANBERRA, Nov 3 (Reuters) - A delegation of small- and mid-sized Australian mining company executives on Thursday called on Prime Minister Julia Gillard to abandon a proposed mining profits tax, saying the biggest firms would pay nothing and leave smaller ones to shoulder the burden.

The claim was immediately rejected by Treasurer Wayne Swan before the Australian Parliament.

Gillard earlier this year vowed to introduce a 30 percent tax on profits from iron ore and coal mining after holding closed-door negotiations with the nation's three biggest mining houses, BHP Billiton , Rio Tinto and Xstrata .

At the time, Gillard estimated the three companies would account for upwards of 90 percent of the estimated A$11 billion in revenue in the first three years.

Fortescue Metals Group founder Andrew Forrest, one of Australia's richest individuals, who made his fortune in iron ore mining, led the delegation, which also warned the tax threatened Australia's economic competitiveness and would stifle exploration.

"The government hasn't thought this through," Forrest told reporters.

Swan rejected the delegation's claim that big mining companies would not pay the new tax, and said companies reaping big profits from the mining boom would be legally required to pay their fair share.

"This tax does not discriminate against small miners. It will be paid predominantly by large miners," Swan told parliament, adding the comments by Forrest were "complete rubbish."

The government on Wednesday introduced legislation for the tax to apply to iron ore and coal miners making A$50 million or more in annual profits. It is scheduled to start July 1, 2012, though it is still uncertain if the government has the support it needs from three independent lawmakers to pass the bills.

Forrest, BC Iron managing director Mike Young, and Atlas Iron chief Dave Flanagan lobbied independent parliament members on Thursday to push their case for the government to rethink supporting the tax.

The executives released projections from accounting firm DBO claiming the tax would see small- and mid-tier miners pay an effective rate of 46 percent, while BHP Billiton and Rio Tinto would pay no tax due to the large deductions they would be afforded.

Forrest said the bigger mining houses would pay no tax under the plans for up to 25 years.

Young also criticised the A$50 million profit threshold for the tax as too low because it would apply to miners after they produce only about 800,000 tonnes of iron ore, a relatively small tonnage.

"We are going to be well above this threshold," Young told reporters.

BC Iron mined about 600,000 tonnes of iron ore last year, and is aiming for around 3 million tonnes this year.

By comparison, Rio Tinto mined more than 200 million tonnes of ore, BHP Billiton 15 million tonnes and Fortescue around 40 million tonnes.

(sourced Reuters)