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Mining giant pulls Australian projects over resources tax

Swiss mining group Xstrata has shelved investment in two Australian mining projects after the government proposed a controversial 40 per cent super tax on resources. But Canberra is remaining firm, with Australian Prime Minister Kevin Rudd saying he refuses to be intimidated.

Des défenseurs de l'environnement réclame l'interdiction  d'un projet de mine à ciel ouvert gigantesque, exploitée par le groupe suisse Xstrata.
Des défenseurs de l'environnement réclame l'interdiction d'un projet de mine à ciel ouvert gigantesque, exploitée par le groupe suisse Xstrata. Reuters/
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Australia’s proposed Resource Super Profits Tax is designed to claim a fairer share of the spoils of the mining boom.

But it’s prompted a savage backlash from the mining sector - the country's most valuable export industry.

Xstrata immediately suspended investment worth 403 million euros in two mines in Queensland, which it says would have created 3,250 new jobs.

It says the 40 per cent tax, to be introduced from 2012, would slash profits to the point that neither project would be commercially viable.

Chief executive Mick Davis warned Prime Minister Kevin Rudd that the tax ultimately compromises Australia's ability to continue to benefit from future commodity price rises.

Xstrata is also reviewing other Australian projects worth a combined 15 billion euros.

Adding to the sting, Global giants Rio Tinto and BHP Billiton are also reviewing their Australian operations.

Rio chief Tom Albanese said the tax reform was "bad policy" and "takes away the incentive to invest".

But the government refuses to be bullied, with Rudd dismissing Xstrata’s suspension of the two mines as part of what he calls “the normal argy-bargy" of a tense debate between the mining industry and the Australian government.

Surging commodity prices are expected to drive Australia's terms of trade for 2010 to their highest level in 60 years, according to the May budget outlook, injecting 20 billion euros into the economy.

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