Australia PM seeks to end mining row

CANBERRA (Reuters) - Australian Prime Minister Julia Gillard expressed confidence on Tuesday she would end a damaging mining tax row, as speculation grew she may call a quick election to capitalise on her honeymoon period as new leader.

Mining industry groups suspended a hostile advertising campaign against the tax after Gillard ousted Kevin Rudd last week and promised to negotiate with the industry over the 40 percent tax, designed to raise A$12 billion (7 billion pounds).

But the Association of Mining and Exploration Companies, one of the most vocal critics of the tax, doubted Gillard's commitment to the talks and said it wanted a quick compromise.

"I have really serious doubts about the government's commitment to finding a workable solution. They have had four days to get something to us," association chief executive Simon Bennison was quoted as saying in The Age newspaper.

The Minerals Council said the tax row needed to be resolved before an election, expected between August and year-end. Small iron ore miner Atlas Iron Ltd said it wanted clarity.

"Whilst the uncertainty is sitting out there, it makes everyone's lives uncomfortable, whether it's the industry generally, Atlas or government," Atlas chief operating office Ken Brinsden told Reuters. "It's in everyone's interests to get this resolved as quickly as possible."

INDEX UNDERPERFORMING

The proposed mining tax threatens more than $20 billion in investment, according to angry miners, but no major project has yet been scrapped and several have actually been advanced since the tax was unveiled on May 2.

The Australian mining index has underperformed the global mining sector by about 4 percent since the tax was first announced by Rudd on May 2, despite a weakening in the Australian dollar over that time.

Gillard, who has revived the ruling Labor Party's election hopes in barely a week, said negotiations with mining companies were proceeding and had her personal attention.

"I believe that, in a spirit of goodwill and showing some respect to each other, we can get this sorted out, we can see a meeting of minds," Gillard told Australian radio.

Media speculation suggests she could call an election as soon as possible once a tax compromise is reached. On Tuesday she simply restated an election was due in the second half of 2010.

An election had been expected by October but late August is now a strong possibility after the popular Gillard took over from technocrat Rudd last week.

A Nielsen opinion poll at the weekend, the first since Gillard took over, gave Labor a 55-45 lead over the conservative opposition, indicating an eight-point swing to the government.

TAX LONG-TERM NEGATIVE, FUND MANAGERS

Four out of five of Australia's leading fund managers said the tax in its current form would have a long-term negative impact on the resource sector, according to Russell Investments' latest quarterly Investment Manager Outlook.

The survey found the tax was expected to increase volatility in local mining stocks over the next 12 months.

None of the 36 fund managers saw the tax as a positive, but the majority believed its impact was "more than fully reflected" in current mining share prices.

Ernst and Young Global mining analyst Mike Elliott said the "super profits tax" was an example of the kind of resource nationalism which is growing as a global risk.

"Resource nationalism is rapidly becoming a greater strategic business risk for mining and metals companies globally as governments around the world seek to replenish their depleted treasuries in the wake of the financial crisis," Elliott said.

"The proposed resource super profits tax in Australia is the highest profile example, but it is part of a broader and concerning global trend for mining and metals companies. Quebec in Canada, as well as India and China have all increased royalty rates in recent months," he said.

Talks between Treasurer Wayne Swan, Resources Minister Martin Ferguson and senior mining executives are set for Wednesday, The Australian newspaper said, marking the first full negotiations since Gillard made her pledge to get talks going five days ago.

She has said she wants to resolve the issue as soon as possible but gave no timing and has not made clear whether she would be willing to lower the 40 percent tax rate or raise the threshold at which it applies.

($1=A$1.15)

(Additional reporting by Michael Perry in Sydney and Sonali Paul in Melbourne; Editing by Ed Davies and Paul Tait)

WhatsAppFacebookTwitterLinkedinBeloudBluesky