ANGLO-AUSTRALIAN miner Xstrata has drastically escalated the stakes in the mining industry's campaign to overturn the government's proposed resource rent tax by raising questions about the long-term future of its Mount Isa operations.
The mining and smelting operations are the lifeblood of the North West Queensland town and require a sustained exploration, development and acquisition strategy by Xstrata to ensure ore supplies last beyond 2021.
But Xstrata has now suspended its planned $30 million exploration effort over the next three years in the region. The company cited uncertainties created by the new tax as the reason.
Current life-of-mine expectations for Xstrata's north Queensland include both the Mount Isa mining and smelting operations and the Ernest Henry mine. To secure Mount Isa's future beyond 2021, Xstrata needs to secure additional copper sources in the region, either through exploration or acquisition.
Its decision to cease its regional exploration effort necessarily means it will have fewer options when it comes to decision-making time on the best way to extend the life of its operations.
Some investors had a cynical response to the Xstrata exploration cancellation, suggesting that it simply meant it was close to securing a long-term ore supply deal with CuDeco, headed by industry maverick Wayne McCrae.
CuDeco shares rose 10 per cent to $4.13. But given CuDeco has yet to disclose a stock exchange compliant resource estimate beyond that announced with much controversy in 2006. An imminent deal with Xstrata was considered by analysts to be a long shot.
Xstrata's chief operating officer for north Queensland copper, Steve de Kruijff, said that it was not possible to justify Xstrata's funding of additional exploration activities when the ''fundamental economics of the industry in Australia are being challenged''.
He said the company was ''very concerned'' that the proposed tax would ''seriously affect'' its Queensland business and deter the ''reinvestments that are necessary to sustain our existing operations, develop new projects and ensure the economic well-being of the regional areas that we currently help to support".
"Our copper mining, smelting and refining operations in north Queensland play a vital role as an economic driver in the region, last year contributing more that $1.3 billion to the Queensland economy and employing over 3500 people,'' Mr De Kruijff said
Fears for Mount Isa's long-term future surfaced as the Queensland Premier, Anna Bligh, said jobs were at risk if Canberra's proposed tax hit the state's emerging $100 billion coal seam gas and liquefied natural gas export industry.
''This is an embryonic industry … and I believe they need different arrangements than those companies that might have been well established for 30, 40 or 50 years,'' Ms Bligh told the ABC.
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