Rio Tinto BHP Rejects Proposed A$7.2 Billion Mining Tax Hike

The world’s two largest mining companies rejected a proposed A$7.2 billion ($5.5 billion) tax increase on their Western Australian iron ore operations, saying it’s likely to put jobs and competitiveness at risk.

The plan to raise the production rental cost on Rio Tinto Group and rival BHP Billiton Ltd. to A$5 a metric ton from 25 Australian cents would be a pillar of the Nationals campaign for the 2017 state election, according to astatement.

Grylls said in the statement. “These two miners have made almost $140 billion since 2010, and Western Australia has facilitated that.”

The hike would add A$7.2 billion to the state’s budget across its forward estimates and bring it back into surplus, the party said.

Royalty income, Western Australia’s third-largest source of revenue after taxes and federal government grants, is forecast to decline 8 percent to about A$3.8 billion this fiscal year, mainly as a result of lower iron ore prices, the state government said in May.

Rio and BHP, together the second- and third-largest iron ore exporters in the world, have expanded aggressively in Western Australia, spending billions on new mines, ports and rail operations to tap surging demand from China. After climbing to a record of almost $200 a ton in 2011, the price of the steelmaking raw material plunged to near $60 a ton thanks to a deepening glut as producers expanded.

Rio produced a total of 310 million tons of iron ore in the state last year and paid about $3.3 billion in taxes and royalties in Australia, including $1.2 billion to Western Australia’s state government, according to filings.

BHP, with mining operations, two port facilities and about 1,000 kilometers of railroad in the Pilbara, had output of 257 million tons, including products for joint-venture partners, from the state in the 12 months to June 30. The producer has paid about A$65 billion in taxes and royalties in Australia over the past 10 years, including A$10.6 billion in royalties to the Western Australian government, BHP said in the statement.