RPT-Xstrata: Australia tax will not impede $3 bln in new coal mines

SYDNEY, Dec 13 (Reuters) - Xstrata Plc is confident disagreement over future exposure to a proposed mining tax in Australia would not jeopardise around $3 billion in new coal mine investments, a senior company executive said on Monday.

'We remain confident that the government has the intention of implementing a heads of agreement the way it is signed,' Xstrata's coal division chief Peter Freyberg told Reuters after testifying before an Australian senate inquiry into the tax.

Xstrata has been at loggerheads with Prime Minister Julia Gillard's government, claiming the government agreed in closed door negotiations in July that the tax would credit all future rises in state mining royalties.

Freyberg told the inquiry he believed the agreement, which reduced the tax on profits to 30 percent from an earlier proposal of 40 percent and limited it to coal and iron ore miners making profits of A$50 million or more a year, was 'all encompassing' for current and future royalties.

In October, BHP Billiton and Rio Tinto , also part of the closed door talks, were reportedly close to walking away from the agreement due to the dispute over who paid if state governments increase royalties.

BHP Billiton and Rio Tinto mine iron ore and coal in three Australian states. Xstrata mines coal in two.

Australian Resources Minister Martin Ferguson has said that unlimited credits for future royalty payments to states could expose the government to open-ended cost increases.

The tax is scheduled to be introduced in mid 2012 and aims to raise around $7 billion in revenue to help fund social programmes and retirement funds. It has led to concerns that Australia, whose economy relies heavily on mining, would become a less attractive investment option for companies looking to explore for new deposits.

Freyberg told the inquiry the implications of the tax would have to be included in any future investment decisions on Xstrata's part to expand in Australia.

Xstrata is the world's largest exporter of thermal coal and a significant producer of hard coking coal and semi-soft coal. Headquartered in Sydney, it holds interests in more than 30 operating coal mines in Australia, South Africa and Colombia and an exploration project in Nova Scotia, Canada.

Xstrata, BHP Billiton and Rio Tinto are expected to shoulder 85 percent of the new tax, with a further 320 or so smaller iron ore and coal miners making up the rest.

Xstrata Coal wants to develop the Ravensworth North open cut mine in New South Wales at a cost of $1.36 billion. It estimates the mine can produce 8 million tonnes thermal and semi-soft coking coal at year for 26 years at full production levels

It is also looking at spending about the same amount to develop the Wandoan coal mine project in neighbouring Queensland state to produce 30 million tonnes of thermal coal a year.



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