Rio Tinto Group, the world’s third-largest mining company, is “hopeful” the dispute over Australia’s proposed mining tax will be resolved before the next federal election.
“I’m very hopeful that with the recent changes in the structure of the government we can actually get in and engage and negotiate an arrangement,” Sam Walsh, the head of Rio’s iron-ore operations, told reporters today in Perth. “We will support a proper tax reform.”
The ruling Labor party yesterday dumped Kevin Rudd, the architect of the tax, for new Prime Minister Julia Gillard, who opened the door to talks on the proposed 40 percent tax. Gillard, who said she will call an election “within months,” yesterday offered an olive branch to mining companies including Rio, which has had its Australian expansion program on hold since May 2.
“We recognize tax regimes will be modified over time,” Walsh said. “We’re willing to take part in that process. What we will see is something that will enable projects to go ahead.”
Treasurer Wayne Swan and Resources Minister Martin Ferguson will lead “genuine” talks with mining companies, Gillard said. Morgan Stanley estimates the tax, proposed to be levied all profits above a 6 percent return on investment on mining projects in Australia, would have taken A$85 billion ($74 billion) from the industry in the next decade.
Rio fell as much as 2.8 percent to A$69.71 and traded at that price on the Australian stock exchange as of 1:53 p.m. in Sydney today.
Rio has yet to engage with or organize a meeting with the federal government under Gillard’s leadership, Walsh said. Rio believes the original tax proposal is “dead,” he said.
“The super tax was something that was clearly concerning the industry,” Walsh said. “We were very frustrated, we couldn’t engage with the government. There was talk about consultation but when we physically sat down and met with people we found that the process was dysfunctional.”
Walsh was speaking at the opening of Rio’s operations center in Perth, where more than 400 employees operate the company’s network of 12 mines, three ports, rail and power infrastructure in the Pilbara, about 1,200 kilometers (746 miles) to the north.
Western Australia Premier Colin Barnett, speaking at the same event, said the new federal government team under Gillard needs to go back to “square one” over its proposed resource super profit tax and is hopeful the proposal will be abandoned.