Xstrata resumes work on A$6bn mine

[miningmx.com] — Sydney – Xstrata, the biggest exporter of power-station coal, resumed work on a A$6bn ($5bn) mine and Rio Tinto Group revived a study for an iron ore expansion after Australia reduced a planned resource profits tax, says Bloomberg News, citing the companies.

Work and exploration will restart at three coal projects in Queensland state Zug, totaling A$186m says the Switzerland-based company. The CEO of Rio also said it is reopening studies for expansion of its iron ore operations in the Pilbara region.

Xstrata also said a development decision for the Wandoan project is expected in 2011. This comes after said Prime Minister Julia Gillard earlier agreed to cut the tax to by 10% to 30%, a week after ousting Kevin Rudd as the nation’s leader to defuse a row with mining companies.

“Today’s decision effectively lifts the suspension on expenditure announced by Xstrata last month and allows the next stage of planning for this internationally significant Wandoan project to proceed,” Xstrata Coal CEO Peter Freyberg said in the statement.

Shares in London-based Rio fell 0.2% to A$65.10 at the 16:10 close on the Australian stock exchange.

An expansion of Rio’s iron ore mines in Western Australia’s Pilbara region will boost capacity to 330 million tonnes by 2015 and final approval is due later in 2010, according to Citigroup’s Clarke Wilkins. The broker last year estimated the expansion may cost A$12bn. Their capital spending this year may be between A$5bn and A$6bn, Rio said in March.

“With the certainty we’ve now got with the minerals resource rent tax, we are now configuring those numbers and impact back into our projects,” Walsh said. “There is still an amount of work to be done in relation to tying up the valued engineering work.” He didn’t give a time for when the project may be approved.

Gillard’s compromise means the minerals tax will now only apply to coal and iron ore mines and affect 320 companies instead of the 2 500 under Rudd’s proposal. Projects will also be entitled to a 25% extraction allowance that reduces taxable profits.