More than 2,000 mining executives and financiers spent the last three days in this gritty Outback mining hub attacking the nation's prime minister for proposing a new tax on iron ore and coal mines.

Politics dominated the annual Diggers and Dealers gathering, better known for all-night drinking parties in bars staffed by women dressed only in underwear known as skimpies than political debate.

But this year, one after another, delegates voiced disbelief at the idea of a 30 percent tax on profits, even though it will not take effect until mid-2012 and hinges on Prime Minister Julia Gillard, who has held the job for less than two months, winning an election on August 21.

What are they thinking in Canberra?, said David Flanagan, managing director of Atlas Iron Ltd , Australia's fourth biggest iron ore producer.

Mining is the top export earning industry for Australia and a large part of the population credit the sector for keeping Australia out of recession in 2009.

Tax proponents complain miners pay too little on big profits.

I see a taxation policy which is regressive, which is discriminatory, which works against infrastructure, said iron ore magnate Andrew Twiggy Forrest, Australia's fourth richest person and chief executive of Fortescue Metals Group .

Forrest offered 5,000 Fortescue shares -- worth A$21,600 at Fortescue's closing price on Wednesday -- to the person coming up with the best anti-tax slogan for a TV and newspaper campaign.

An army of gold, copper and zinc miners, exempt from the tax, also joined the anti-Gillard bandwagon, fearing they will be hit next with higher tax bills.

AngloGold Ashanti Chief Executive Mark Cutifani warned that Australia was slipping.

Gillard was also criticized for not sending a cabinet member to address the conference, though the office of Resources Minister Martin Ferguson reportedly said no one was invited.

Outside of politics, Kalgoorlie -- where the young American metallurgist Herbert Hoover came during Australia's first gold rush years before returning to the United States and eventually becoming the 31st U.S. president -- had an air of good feeling.

You can tell when the good times roll, all the pubs are packed and everyone's a big tipper, said Sheri Mannion, a staff member at the Exchange Hotel, a Western-style wooden hotel in the center of town.

Residents of Kalgoorlie need little reminder of where the money comes from.

Prices of most minerals are rising as China -- top consumer of industrial raw materials -- continues to grow, albeit at a slower pace. About a quarter of Australia's industrial mining output is consumed by China.

The giant Super Pit gold mine, a 3.8 kilometer-long moon crater owned 50-50 by Barrick Gold and Newmont Mining looms over the town of 30,000, while a hour's drive away Kambalda churns out thousands of tonnes of nickel ore daily to feed a BHP Billiton smelting plant.

Things are looking good, said Peter Harold, managing director of Panoramic Resources
, which is looking to buy more nickel mines in Kambalda, possibly from Russia's Norilsk. .

There will be bumps in the road, but longer term, the Chinese story for Australia is solid.

CHINA IMPACT

Still over the next three months, Fortescue's Forrest warned iron ore miners need to brace for a 20 percent or so drop in iron ore prices to around $100 a tonne.

We have significant reliance on the Chinese economy, so any kind of slowing will affect us, but to what end is uncertain, said James Wilson, a mining analyst for DJ Carmichael & Co.

China, which consumes about half the world's iron ore output, was dealt a blow earlier this year when top three miners -- Brazil's Vale SA , Australia's Rio Tinto and BHP Billiton -- ditched an age-old annual benchmark pricing system and adopted a quarterly pricing scheme to take advantage of soaring spot prices.

China stepped up output of domestic iron ore, triggering a noticeable drop in the top three miners' share of the Chinese market in June, a senior CISA official said on Tuesday.

Iron ore prices <.IO62-CNI=SI> soared to a two-year peak near $185 a tonne in April, but fell as much as 36 percent from this high to levels in July last seen in December 2009.

Ivanhoe Mines Executive Chairman Robert Friedland said copper miners may have the least to worry about as his company moves to start construction of the Oyu Tolgoi mine in Mongolia, potentially one of the world's largest.

Copper has consistently outperformed gold in percentage terms, he said. They are both great metals because the United States dollar is a very sick puppy long term. But the fact that the puppy is going to puke on the carpet is also good for copper, not just for gold.

With overhangs in metal stocks and questions over how fast China can keep growing, miners trying to drum up funds for new projects received a lukewarm reception from lenders.

London Metal Exchange stocks of copper, lead, zinc and other metals have eased in the last month, but remain above year-ago levels, suggesting a recovery in global demand is yet to be seen.

There is a large degree of cautious optimism, said Niall Ferguson, a professor from Harvard Business School, speaking at the conference.

(Editing by Himani Sarkar and Ed Lane)

(Additional reporting by Michael Smith)