UPDATE: Rio Tinto CEO: Keen To Restart Australia Projects

9th Jul 2010 01:29

(Adds CEO comments on junior miners and the revised tax) LONDON (Dow Jones)--Anglo-Australian diversified miner Rio Tinto PLC (RTP) is keen to restart its Australian projects and will now review them with the new, revised tax proposal in mind, the company's chief executive said Thursday. "Recent events remove the great uncertainty which had been holding us back. And I am keen to get projects moving again," said Tom Albanese at a Melbourne Mining Club dinner in London. "I have now asked my team to review projects against this more positive [tax] backdrop," he added. "This is clearly an improvement on the Super Tax, through we remain somewhat cautious," he noted. Rio Tinto and many other mining companies slowed down or suspended the implementation of their projects after Australia's government proposed a 40% Resource Super Profits Tax on miners in May. The tax proposal, which would have slapped miners with "by far" the highest mining tax rate in the world, has been subsequently diluted after the previous Australian prime minister Kevin Rudd was ousted by the current prime minister Julia Gillard. Gillard's government last Friday announced that the super profits tax would be replaced by a Minerals Resource Rent Tax which would reduce the proposed tax rate on miners to 30% and limit it to only iron ore and coal operations. "Compared with the Super Tax, the MRRT goes a long way towards addressing concerns about international competitiveness but it is important to note that the government's new proposal, as it stands, still would leave Australia at the high end of the global taxation scale for the commodities of coal and iron ore," Albanese said. In a major concession to what the mining sector had described as the retrospectivity of the tax, the government will allow companies to use the market value of a mining project rather than its book value to calculate depreciation against the MRRT. This will make a significant difference to the MRRT paid by the giant iron ore mines operated by BHP Billiton (BHP) and Rio, which have had their book values written down over decades to well below the current market values, which have soared on booming iron ore demand. When asked whether the new tax proposal would be punitive for junior miners who want to develop projects in Australia, Albanese said he doesn't think so. "I have seen some junior [miners here tonight at dinner] that have had big smiles on their face," he said, speaking in reference to the more favorable tax proposal announced last week. Albanese also sought in his speech to answer why mining companies can't be taxed at similar rates to the oil industry. "Based on international benchmarks, a headline tax rate of 40% is competitive for oil in Australia, but not for the mining industry." He noted that the oil and gas industry have lower investment hurdle rates than the mining industry and have a cost and demand structure better suited for profitability. Furthermore, the oil and gas industry have ownership and marketing arrangements that tend to "de-risk" oil and gas investments, he added. Company website: http://www.riotinto.com -By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; [email protected] (END) Dow Jones Newswires July 08, 2010 20:29 ET (00:29 GMT)