Rio Tinto Continues to Campaign against RSPT

Submitted by Jim Thesiger on 31 May, 2010 - 06:23

Tom Albanese, the chief executive of Rio Tinto (RIO) has stated that the Australian Government will turn into a risky “silent partner” of the Australia based miners through its proposed resource super-profits tax (RSPT) which has created a huge debate throughout the mining industry and believed to have negative impact over the mining sector of the country. Rio Tinto is currently doing as much as it can to prevent the RSPT which it believes will enhance the sovereign risk of Australia. It is to be mentioned that the Aussie Government is currently looking forward to impose a new 40 percent tax over the mining sector which may weaken the balance sheet of the third largest miner of the world.

According to Mr. Albanese, the tax rate is exceptionally high and may pose enormous threat to the company. The tax has pushed the mining sector to such a level of uncertainty that the international investors are now hesitating to make investments in one of the most potential industrial sectors of Australia. The Rio chief executive also added that countries like the United States, China, Canada and the European region is also very much concerned about the current developments in the Australian mining sector. Rio Tinto took its time to react regarding the proposed tax but started to boost up its campaign after BHP Billiton initiated a campaign against RSPT.

The market reacted quickly after the announcement came on May 2nd regarding the super profit tax with shares of Rio Tinto going down by 5.5 percent while BHP Billiton losing as much as 4.8 percent. Fortescue Metals, another Australia based miner saw a 9.17 percent drop to its stock price after the declaration came about the RSPT. Clive Palmer, the Australian mining magnet stated that the miners of Australia have played a significant role in enriching the national economy by investing in resources exploration- something that will be at risk by super profit tax.