BHP Says Australian Mining Tax May Risk Major Iron Ore Project

  • South Flank operation jeopardized by planed tax increase
  • Project planned to replace expiring deposits in country

BHP Billiton Ltd., the world’s largest mining company, said a proposed tax on producing iron ore in Australia would risk the development of a new project in the Pilbara region that may account for about a quarter of its iron output from the country.

Brendon Grylls, the leader of Western Australia’s Nationals party, has proposed a production-rental cost on BHP and rival Rio Tinto Group of A$5 ($3.74) a metric ton, up from 25 cents currently. Both companies have rejected the A$7.2 billion levy increase, saying it would put jobs and competitiveness at risk.

BHP’s South Flank operation could produce as much as 80 million tons a year if approved, said Andrew Buckley, a mine manager at the company’s Jimblebar project in Western Australia. BHP is targeting output of 290 million tons a year from the Pilbara region and South Flank’s output would replace the aging Yandi mine, once it’s depleted.

"There is no doubt that the commitment required for that is huge and it would be based on a 50-year life,” Buckley said Wednesday at the Jimblebar mine in Newman. “I have no doubt it would put that operation or that project at risk.”

Rio and BHP, the world’s second- and third-largest iron ore exporters, have expanded aggressively in Western Australia, spending billions on new mines, ports and rail operations to tap surging demand from China. The South Flank mine is currently being considered for environmental impacts.

The Nationals are the smaller party in the state’s ruling coalition under Premier Colin Barnett of the larger Liberal party. The tax increase would add A$7.2 billion to the state’s budget across its forward estimates and bring it back into surplus, the party has said.

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