Magnetite producers should be exempt from paying the Australian government's Minerals Resource Rent Tax, Gindalbie Metals Ltd. (GBG.AU) Chief Executive Garret Dixon said Friday.

The industry was the only part of Australia's mining sector affected by the tax that was not represented at the talks, Dixon said.

"We see this as a tax negotiated by the big companies for the big companies," he said. "We hope this has been an oversight and we look forward to being exempted."

Magnetite is a lower-grade form of iron ore that needs to be processed to reach marketable form, as opposed to the more common hematite which accounts for the overwhelming majority of the Australian iron ore industry.

BHP Billiton Ltd. (BHP.AU), Rio Tinto Ltd. (RIO.AU) and Xstrata Plc (XTA.LN), which led negotiations with the government over the tax, do not have significant magnetite operations in Australia.

"The big iron ore miners just dig up the product, crush it and sell it, but we start with something that's less valuable than gravel and then have to concentrate it to end up with a high-grade product," said Dixon.

Other magnetite miners likely to be affected by the tax include Grange Resources Ltd. (GRR.AU) and steel producer OneSteel Ltd. (OST.AU).

The government is yet to produce a firm definition of the mine gate point at which the tax will be applied.

A decision on that issue would help determine the profitability of magnetite miners after the tax.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;

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