Rio Tinto CEO: More comfortable with mine tax

MELBOURNE (MarketWatch) -- Global mining giant Rio Tinto (RTP, RIO.AU) has enough comfort from the recently negotiated tax on mining companies by the Australian government to push ahead with investments in the country, chief executive Tom Albanese said in comments broadcast Sunday.

"It's not perfect, but I would say it's something that allows Rio Tinto to make the investments that we want to make in Australia," Albanese told the Sky Business channel's "Sunday Business" television program.

"That's all we can expect, and that's all we're concerned with. We want to have the ability to continue to invest in Australia," Albanese said.

Rio Tinto said earlier this week that it will invest a further US$790 million to expand iron ore capacity at its Pilbara operations in the West Australia state. The Anglo-Australian miner has approved a total of US$1 billion in recent weeks to fund the last phase of a multi-tier expansion project which centers around boosting Rio Tinto's Cape Lambert port handling capacity to 180 million metric tons by 2016 from the current 80 million tons.

Rio Tinto along with its large rivals BHP Billiton (BHP, BHP.AU) and Xstrata Plc (XTA.LN) were involved with negotiating the so-called minerals resource rent tax with the government and new Prime Minister Julia Gillard, after the government dumped a previous Resource Super Profits Tax. The new tax was struck at a lower rate, and applies to fewer commodities than the controversial and unpopular RSPT, which played a part in the June 24 downfall of the nation's former prime minister Kevin Rudd.

Rudd's proposed tax drew the ire of the industry, which launched an aggressive advertising campaign against the plan, with mining companies also threatening to put billions of dollars worth of expansion projects on hold.

The new tax proposal is still expected to add billions more to government coffers when it commences in 2013. The tax has become an election issue as Australians head to the polls on Aug. 21, with opposition leader Tony Abbott, who has a narrow lead over Gillard's Labor government in opinion polls, vowing to scrap the tax if his conservative Liberal-National coalition is voted in.

Labor argues that Australians should get a "fairer share" of the profits generated by coal and iron ore miners from Australia's finite natural resources.

Earlier this week, Rio Tinto posted a first half net profit of US$5.85 billion for the six months to June 30, putting it on track for a record annual result.

Releasing the result, the company outlined plans to spend up to US$13 billion in capital spending over the next 18 months.

"A large portion of that's going to be driven by what we see as a strong, long-term positive trend for Asian demand, Chinese demand of products that we produce," Albanese told Sunday Business.

Albanese said the group has a strong profile of growth across its businesses, beyond iron ore, over coming years.

"If we look at the ability to ramp up the Pilbara, if we look at our other iron ore operations, whether they're in Canada, our future operations we'd expect to see in Simandou, possibly in India, I think we have a very strong profile of growth, not just the next five years, but well beyond that in iron ore," he said.

"We want to modernise our aluminium smelters, particularly in Canada. We want to finish the Yarwun facility in Gladstone, which will give us more alumina for those markets," Albanese said.

London-based Rio Tinto will also look to boost its coal capacity in Australia.

"As we see the supply chain constraints in Eastern Australia continue to unwind in New South Wales [state] and Queensland [state], we want to be there ramping up our coal production for those future coal markets," he said.