Global miner Rio Tinto is reviewing its Australian operations after Canberra proposed a hefty new mining tax, but denied comments by its own iron ore chief that a $10 billion expansion is on hold, according to Reuters. The world's second-largest iron ore producer issued the statement on Thursday after the executive told reporters that the expansion was on hold, which led to a front-page newspaper report headlined "Rio shelves billions in projects". "We've got our projects on hold while we try to understand the ramifications of a 40 percent increase in taxes," iron ore chief Sam Walsh was quoted as saying in The Australian. Rio Tinto, which aims to boost annual Australian iron ore production to 330 million tonnes within five years from 200 million now, later confirmed Walsh had made the comments but distanced itself from them in a statement of clarification. "No decision has been made to shelve any projects in Australia," Rio Tinto said in the stock exchange statement. "The feasibility study into the proposed 330 million tonnes per annum expansion of Rio iron ore operations in Western Australia is continuing as previously advised," it added. But Rio also said it was so far unable to determine the potential impact of the tax on its expansion plans. Rio and other Australian miners producing everything from natural gas to copper and zinc have been forced to rethink new projects in the face of the tax -- the world's stiffest on mining companies -- starting in 2012. Andrew Forrest, chief executive of Fortescue Metals Group, Australia's third-largest iron ore miner, described the tax as a "40 percent nationalisation" of the mining industry. "The wisest thing the prime minister can do is immediately take this off the table," Forrest said, adding all Australian mining projects, including Fortescue, will now be under review. GOVT, MINERS DRAW BATTLE LINES The mining sector is fighting to overturn the proposed tax ahead of elections expected late this year, which the incumbent centre-left Labor Party led by Prime Minister Kevin Rudd is favoured to win. Santos Ltd, Australia's second-largest oil and gas producer, warned on Thursday that the tax would tarnish Australia's reputation as a place to invest in mining. Australia is the world's top exporter of coal and iron ore and the world No. 2 miner of gold. It also holds extensive reserves of copper, bauxite and other raw materials. The likes of Santos, Origin Energy, Arrow Energy, Eastern Star Gas and even oil majors Royal Dutch Shell and Malaysia's Petronas could be big losers under the tax and are now re-calculating the economics of multi-billion plans to produce gas from Australian coal. Outside of Australia, Rio has identified large deposits of iron ore in Simandou, Guinea and in Orissa, India, which it controls under joint ventures. Analysts say they could provide tonnage in lieu of Australia if they proved cheaper to exploit. The government has defended its tax plans and Finance Minister Lindsay Tanner, in a newspaper column on Thursday, said Australians should gain more from the mining boom. "We should be benefiting a lot more. And the boom has adverse side-effects for other sectors of the economy which we need to offset," Tanner wrote in the column in Fairfax newspapers. Rudd told miners on Wednesday he would not reverse his planned tax, which battered resource stocks this week. The S&P/ASX 300 Metals and Mining index has fallen 4.3 percent since the tax was announced on May 2.
