UPDATE: Rio Tinto Recommences Iron Ore Expansion Studies

6th Jul 2010 05:40

(Adds CEO comments, details on Xstrata coal project re-starts) By Stephen Bell Special to DOW JONES NEWSWIRES PERTH (Dow Jones)--Rio Tinto Ltd. (RTP) Iron Ore Chief Executive Sam Walsh said Tuesday that the company has recommenced studies on its multibillion dollar iron ore expansion in Western Australia after the recent mining tax deal with the Australian government. "We're in the process of re-opening studies in relation to our Pilbara expansions," Walsh told reporters on the sidelines of a function. "With the certainty that we've now got with the Minerals Resource Rent Tax, we are now reconfiguring those numbers and the impact back into our projects," he said. In May, Rio Tinto and several other big miners put new Australian projects on hold due to uncertainty relating to the proposed Resource Super Profits Tax. It was replaced on Friday with a new, more lenient Minerals Resource Rent Tax that will affect only coal and iron ore profits. Rio wants to increase iron ore production to around 330 million tons a year from around 230 million tons a year by the middle of the decade. Despite the greater certainty generated by last week's tax compromise, Walsh declined to put a timeframe on when Rio Tinto will approve the expansion, which may cost more than US$10 billion. And he defended the terms of the MRRT negotiated between global miners--Rio Tinto, BHP Billiton Ltd. (BHP.AU) and Xstrata Plc (XTA.LN)--and the Australian government, even though the 22.5% effective tax rate on profits "remains higher than most other mining regimes in countries around the world". "It is something that we're going to have to live with," he said, adding the deal was the best achievable at the time given the government's determination to tax so-called super mining profits from 2012. Walsh said he understood that several junior mining companies are concerned about the terms of the MRRT, and the fact that they were excluded from the negotiations. "The Prime Minister and Treasurer have indicated that there is some flexibility left in that to assist those people that were not directly involved in the key negotiations," he said. Atlas Iron Ltd. (AGO.AU) has said the extra tax burden will make it more difficult for smaller iron ore miners to raise finance for new projects in Western Australia state and compete with the global majors. There have also been concerns expressed about the tax impact on Australia's growing production of magnetite, a type of iron ore that requires expensive processing before it is shipped to steel mills. Earlier, Walsh said that Rio Tinto is still waiting for approvals from regulators in Europe, Japan, China and Australia over its proposed iron ore production joint venture with BHP. There is no timeframe on the discussions, "but clearly the regulatory authorities are aware that we need to resolve these issues as expeditiously as we can", Walsh said, adding that anti-trust laws have prevented Rio and BHP from doing much of the implementation planning required for the deal. Unveiled in June 2009, Rio and BHP hope to begin operating the joint venture by late this year. Separately, Xstrata Plc (XTA.LN) said Tuesday that it will restart A$186 million of investment into its major coal development projects in Australia's Queensland state. The work at Rolleston West, Sarum and Wandoan had been put on hold during the mining profits debate. The A$6 billion Wandoan coal project is one of the biggest development projects for the Swiss-based, London-listed miner, with a final investment decision due to be made in the second half of 2011. "Today's decision effectively lifts the suspension on expenditure announced by Xstrata last month," the company said in a statement. -By Stephen Bell, contributing to Dow Jones Newswires; 61-8-9244-4243; [email protected] (David Fickling in Sydney contributed to this article) (END) Dow Jones Newswires July 06, 2010 00:40 ET (04:40 GMT)