Global miner Xstrata threatened on Thursday to scrap $5.4 billion in coal and copper projects in Australia, blaming Canberra's new mining tax and bringing to more than $20 billion the value of shelved new developments.
Xstrata's move, which targets Prime Minister Kevin Rudd's home state of Queensland, will further pile pressure on the government to water down the proposed 40 percent tax and give powerful new ammunition to the tax's political opponents.
Xstrata, which last month halted some copper exploration in Queensland, said it was now also immediately suspending A$586 million of expenditure on its Wandoan thermal coal project and also a A$600 million expansion of its Ernest Henry copper mine.
The shelved expenditure forms part of a total planned capital investment of more than A$6.4 billion ($5.4 billion) to complete both of the Queensland developments, with the coal project accounting for the vast majority of this, it added.
Neither will be viable if the (tax) is imposed, Xstrata Chief Executive Mick Davis said in a statement.
The government plans to introduce the 40 percent tax on mining profits from 2012, arguing that it is not getting its fair share of the commodities-export boom, but its proposal has outraged the mining industry, Australia's biggest export-earner.
Last month, Fortescue Metals Group suspended iron ore projects in Western Australia state worth around $15 billion, though these were in an earlier stage of planning, compared with the Xstrata projects where spending had already been approved.
The (tax) has created significant uncertainty for the future of mining investment into Australia and would impair the value of previously approved projects and exploration to the point that continued investment can no longer be justified, he added.
The impact of the tax eliminates the net present value of the Wandoan coal project almost entirely and substantially reduces the value of the Ernest Henry underground shaft project.
Xstrata had planned to extend the open-cut Ernest Henry mine by mining deeper through vertical shafts, extending its life by 11 years to at least 2024. The mine can produce annually 115,000 tonnes of copper in concentrate and 120,000 ounces of gold in concentrate, according to Xstrata's Web site.
(Reporting by Mark Bendeich and Bruce Hextall; Editing by Ed Davies) ($1=1.188 Australian Dollar)