Rio Tinto in P1.5 billion Australia investment after tax deal

| Thursday July 15, 2010 00:00

Rio said the money would be used for works at its Cape Lambert port to boost output in the Pilbara region.It had threatened to trim investment if a 40% mining tax was imposed.

But after Julia Gillard replaced Kevin Rudd as Australian prime minister, a fresh deal was thrashed out.

The announcement came as Rio reported a 2% fall in iron ore production between April and June, compared with a year earlier.

The firm also expressed concern about the impact on its business of a possible double-dip recession in many developed nations and a slowdown in Chinese growth.

The compromise tax agreement has reduced the rate to 30% for coal and iron ore miners from 40%.

Several of the mining giants had threatened to halt or cancel projects because of Rudd's proposal, which they said seriously risked Australia's international competitiveness.

The deal was struck just a week after  Gillard had swept to office and the mining tax had become highly political.

When Rudd announced the tax plans earlier this year, he said he expected to raise 9bn Australian dollars (£5.2bn) a year. The revised plan would raise A$1.5bn less, the government said, but cuts to company tax rates that were to be paid for by the mining tax would still go ahead - (BBC)