Xstrata restarts suspended projects

Mining giant Xstrata says it will resume a key project that it suspended after the announcement of the resources super profits tax.

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Xstrata said the decision to resume the Ernest Henry mine expansion in Queensland followed the revised resources tax regime announced by Prime Minister Julia Gillard on Friday.

The Anglo-Swiss miner previously had said it would suspend $400 million in works to expand the Ernest Henry copper mine.

Xstrata also suspended $186 million worth of work including the planned expansion of its Wandoan thermal coal project in Queensland, and an exploration program around Cloncurry and Mt Isa.

Xstrata said on Friday, however, that full activities would resume at the Ernest Henry expansion, and the exploration spending would be reinstated.

The move came after Ms Gillard announced a breakthrough in talks with miners over the controversial resources super profits tax, which includes a decision that the new tax regime on miners would apply only to iron ore and coal. Xstrata is yet to announce its plans for the Wandoan coal project.

Xstrata Copper chief executive Charlie Sartain said the decision to retain existing taxation and royalty structures for copper had given the company “sufficient confidence to recommence with immediate effect these significant projects that form an important part of our business strategy in north west Queensland.

“Our copper operations in north Queensland play a vital role as an economic driver in the region,” Mr Sartain said in a statement. Under the new tax arrangements, the federal government would limit the new regime iron ore, coal, oil and gas, affecting just 320 companies.

The government is to replace the proposed resource super profits tax with a minerals resource rent tax, similar to that applying already to offshore oil and gas production.

It will extend the oil and gas elements of the regime to both onshore and offshore projects.

The new tax will apply to iron ore and coal projects at a headline rate of 30 per cent, down from the previously planned 40 per cent.

The cut-in rate of the new regime has been adjusted to the long-term bond rate plus seven per cent.

Other commodities will not be included in the tax regime. A spokesman for Xstrata’s coal division later said no decision had been made on whether to lift the suspension of works at the $186 million Wandoan project.

“We are reviewing the situation, however, we are yet to announce any decision on the recommencement of capital expenditure for the early works,” he said.

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