Pool, Getty Images
A pour at the Rio Tinto Hlsmelt plant in Kwinana in Perth Australia

Rio Tinto Rejects Proposed Iron Ore Mining Tax Hike

Aug. 9, 2016
The smaller political party in the Australian ruling coalition pitches the increase because "the state and taxpayers have facilitated a huge expansion of the iron ore industry at a great cost," while Rio Tinto says the tax would be detrimental to growth.

Rio Tinto Group, the world’s second-biggest mining company, said a proposed A$7.2 billion ($5.51 billion) tax increase in Western Australia is “ill conceived” and would be detrimental to the growth of its iron ore business in the state.

Brendon Grylls announced the tax proposal after being appointed the new leader of the state’s Nationals party on Tuesday. The plan to raise the production rental cost on Rio and rival BHP Billiton Ltd. to A$5 ($3.83) a metric ton from 25 Australian cents (19 cents) would be a pillar of the Nationals campaign for the 2017 state election, according to a statement.

“The Nationals WA believe that the state and taxpayers have facilitated a huge expansion of the iron ore industry at great cost to our state budget and the big miners are not paying their fair share,” Grylls said in the statement. “These two miners have made almost $140 billion since 2010, and Western Australia has facilitated that.”

The Nationals are the smaller party in the ruling coalition in the state under Premier Colin Barnett of the larger Liberal party. Grylls has met with Barnett to discuss the policy, according to the statement. The hike would add A$7.2 billion to the state’s budget across its forward estimates and bring it back into surplus, it said.

“There are no grounds for a new mining tax in Western Australia and it should not be adopted as Nationals policy,” London-based Rio said in an e-mailed statement. “An ill-conceived tax grab will place these local jobs and the growth of Rio Tinto’s iron ore business at risk.”

Rio and BHP, together the second- and third-largest iron ore exporters in the world, have expanded aggressively in Western Australia, spending billions on new mines, ports and rail operations to tap surging demand from China. After climbing to a record of almost $200 a ton in 2011, the price of the steelmaking raw material plunged to near $60 a ton thanks to a deepening glut as producers expanded.

Rio produced about 250 million tons of iron ore in the state last year. It employs about 12,000 people in Western Australia with the majority at its giant mining complex in the Pilbara region in the state’s north-west. Rio said those jobs rely on a “stable and competitive taxation environment.”

A spokesman for BHP couldn’t immediately be reached for comment.

By Jesse Riseborough

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Licensed content from Bloomberg, copyright 2016.

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