Rio Tinto Iron-Ore Chief Attacks Australian Lawmaker's Proposed Tax Increase
August 12 2016 - 3:43AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--The head of Rio Tinto PLC's (RIO.LN) iron-ore business
has railed against a proposal from a Western Australia lawmaker to
increase taxes on its operations in the state, saying such a move
would result in further cuts to jobs and investment.
Brendon Grylls, the new leader of the Nationals party in Western
Australia, says he will seek to raise a state tax on iron-ore
mining paid by Rio Tinto and BHP Billiton Ltd. (BHP.AU) to 5
Australian dollars (US$3.80) a metric ton from 25 cents. The
Nationals party is the smaller party in a ruling alliance with the
state's Liberal party.
"This new discriminatory mining tax would have a devastating
impact on our business at the worst possible time in the commodity
cycle," Rio Tinto iron-ore chief executive Chris Salisbury said in
a memo to staff on Friday.
The price of iron ore, used to make steel, slumped to a decade
low around US$37 a ton in December from as high as US$190 a ton in
early 2011, weighed by rising mine supplies. It has since recovered
to about US$60 a ton, although some analysts say the price could
fall back to decade-low territory in the next year or two as global
mining output increases further and China's massive steel industry
cools.
Previous efforts to overhaul the resource-rich country's
century-old system for taxing miners have been controversial. In
2010, then-Prime Minister Kevin Rudd proposed a new 40% tax on
miners' profits. The plan sparked a bitter war with Australia's
biggest firms, who argued the plan would hobble the country's
economy, and contributed to Mr. Rudd's ouster by his own party
colleagues. Days after being named leader of the then-ruling Labor
party, Julia Gillard lowered the proposed tax on big miners,
prompting new cries of favoritism from smaller miners. Labor lost
power in 2013 and the federal tax was later repealed.
Mr. Salisbury said the latest tax proposal has "severe knock-on
effects" for investment and could result in further cuts to jobs in
Australia's resource-rich Pilbara region, which supplies more than
half of all the world's iron ore traded by sea. "There are no
grounds for a new mining tax in Western Australia, and we will do
everything in our power to secure the future of our business, and
your jobs, by opposing it," he said in the memo.
Australia's iron-ore miners have already pared back investment
and jobs in the region because of the price downturn.
BHP also raised concerns over what it labeled a damaging
proposal. "We do not understand why a proposal that is so
discriminatory and uneconomic would be targeted at two companies,"
it said in an emailed statement.
Mr. Grylls said the tax increase could raise billions of
Australian dollars in the coming years for the state as its
government looks for ways to plug a budget deficit.
Rio Tinto and BHP are the world's No. 2 and 3 iron-ore
suppliers, after Brazil's Vale SA.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
August 12, 2016 03:28 ET (07:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Rio Tinto (NYSE:RIO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Rio Tinto (NYSE:RIO)
Historical Stock Chart
From Apr 2023 to Apr 2024