Australian Mining Digs In Against Possible Tax Hikes

Australia's mining industry has launched a pre-emptive strike against the threat of further tax increases, resurrecting the "keep mining strong" slogan used two years earlier to thwart a proposed super profits tax.

The Minerals Council of Australia began Friday running full-page advertisements in newspapers cautioning against possible new or increased levies in the Labor government's next budget. The ads are set to run in major papers over the coming days into next week.

Under a headline saying the industry is "not a bottomless pit," the council says mining already pays 500% more taxes and royalties than 10 years ago and will soon have to pay new mining and carbon taxes introduced by Prime Minister Julia Gillard's government.

The council--which represents major minerals producers including BHP Billiton Ltd. (BHP), Rio Tinto PLC (RIO) and Xstrata PLC (XTA.LN)--had agreed an advertising truce with Gillard in mid-2010 after its intensive campaign against the planned super tax rattled support for the government and led to the ouster of then Prime Minister Kevin Rudd. Gillard went on to water down the mining tax and narrowed its focus to coal and iron ore after consulting with the industry.

"We are concerned that after the new mining and the carbon taxes, two new imposts that will cost mining about A$6 billion on top of the A$23.4 billion we're paying in company tax and royalties, that we might be faced with significant new taxes," said Ben Mitchell, director of public affairs at the council.

"As we say in the ad, we would like some fiscal stability so we can get on with the job of delivering projects," Mitchell said.

The council for now is limiting the ad campaign to print, but said it isn't ruling out other measures.

As the government gears up to release its budget next month, media speculation has increased it may include measures such as cutting diesel fuel rebates and exploration concessions. The Greens party, whose support helped Gillard form a government, has called for increased taxes on some mining costs and for the new minerals resources rent tax to be broadened to cover gold and other commodities.

Analysts and investors have increasingly questioned whether mining companies can continue the pace of investment in massive projects to ramp up production of metals and minerals given costs, turmoil in European economies and slowing demand from key consumer China.

Industry executives, including BHP Chief Executive Marius Kloppers and others, have repeatedly warned companies are being hit by cost increases.

"In a number of our commodities, we've seen prices come down, particularly in processing-oriented activities like aluminum, manganese metal, nickel and so on, which combined with high costs is making life difficult for some of those operations," Kloppers said Thursday in Canberra.

-By Robb M. Stewart, Dow Jones Newswires; [phone]; [e-mail]