Xstrata puts mines on hold in tax fight

Xstrata today began playing hardball with the Australian government over its proposed supertax on miners' profits, suspending investment worth A$586 million (£339.28) in two Queensland mines which it claimed would "not be viable" under the levy.

The investment was part of a planned A$6.6 billion mining development, and Xstrata said 3,250 new jobs are now at risk.

It aimed to heap pressure on Canberra to reconsider the tax, following other mining giants including Rio Tinto and BHP Billiton either shelving or reviewing new developments worth $20 billion.

Xstrata's chief executive Mick Davis said the planned supertax had created "uncertainty for the future of mining investment into Australia".

But the country's prime minister, Kevin Rudd, batted away the impact of Xstrata's move.

He responded: "I said at the very beginning of this debate on the super profits tax there'd be threats of project closures."

Australian government officials are currently consulting with the country's massive mining industry about the proposed 40% tax on profits, which is intended to become law in 2012.

The miners hope it will be watered down or eliminated after the country's upcoming general election, which is expected later this year.

The opposition Conservative party fiercely opposes the tax.