Rio boss warns of mining tax impact
Rio Tinto’s iron ore boss has warned WA Nationals leader Brendon Grylls’ mining tax plan would “severely undermine” the giant’s business and wipe out recent efforts to cut costs.
In an update sent to senior Rio managers, the miner’s iron ore chief executive Chris Salisbury said the proposal to increase the so-called production rental fee from 25¢ a tonne, the price struck when original State agreements were signed in the 1960s and 1970s, to $5 a tonne would add $1.5 billion a year to costs.
“Through all your hard work in driving improvements we have taken three years to remove $1.2 billion of cash cost from our business,” Mr Salisbury wrote. “The WA Nationals tax would undo all that effort in one hit.
“I am seeing some great team initiatives in our cost reduction and productivity pipelines, more than 1000 identified to date.
“I’m impressed by the decisions you are making and the ambitious improvement plans you are taking on, with each contributing to our required plan for 2016 and beyond.
“However all these initiatives come nowhere near combating the impact of the WA Nationals tax proposal; it is difficult to imagine what further cost and productivity improvements would be required to deal with an extra $1.5 billion in annual costs,” Mr Salisbury wrote.
Mr Grylls has framed his proposal as a new revenue source that is required to address what he describes as WA’s “structural” budget deficit, saying he believes Rio and BHP Billiton should pay more, rather than “mums and dads”.
Mr Salisbury said the suggestion miners could pay more ignored the fact that earnings, after providing a return to shareholders, were invested back into the Pilbara to sustain operations.
He cited the announcement in August of a $US338 million commitment to expand the Silvergrass mine, a project the company says will sustain 500 jobs during construction, that could be threatened if the tax plan goes ahead.