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Xstrata halts Aus projects over tax

Sydney - Swiss-based miner Xstrata Thursday suspended A$586m in development spending on two Australian projects, saying a controversial new tax means "neither will be viable".

Xstrata, joining a list of companies to delay or halt projects, said a review had found the proposed tax would slash the profitability of the A$6bn thermal coal project and A$600m copper mine expansion.

Xstrata chief Mick Davis said plans for the 40% Resource Super Profits Tax (RSPT), on returns on investment above 6%, had cast "significant uncertainty" over the future of mining in Australia.

"Our Australian management team's analysis demonstrates that the RSPT would significantly impact the value and cashflows of both of these projects," Davis said in a statement.

"The impact of the tax eliminates the net present value of the Wandoan [thermal] coal project almost entirely, and substantially reduces the value of the Ernest Henry [copper] underground shaft project," he said.

"Neither will be viable if the RSPT is imposed."

The tax has prompted a savage backlash from the mining sector, Australia's most valuable export industry, with global giants Rio Tinto and BHP Billiton both reviewing their Australian operations.

 - AFP

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