Wednesday, May 26, 2010

FMG Battles the proposed super profit tax

on the ASX yesterday, 26.05.2010

PERTH ( - ASX-listed Fortescue Metals on Tuesday reiterated
its call on the Federal government to scrap the proposed super profits tax
(SPT), saying that the tax would harm the mining industry.

"It harms the mining industry and especially Fortescue, and we are urging
the government to drop this proposal and to open a new forum for dialogue
with all industries to discuss tax reform," Fortescue chairperson Herb
Elliott said.

In an open letter to shareholders, Elliott also called on shareholders to
raise their voices against the proposed SPT.

"Please tell them how flawed this tax is and how it will continue to harm
the Australian economy. Demand that they remove this deeply troubling impost
on Australia's position as a globally respected destination for investment,
and on Australia's ability to create jobs, to keep its people employed, and
its overall economic strength," he added.

Elliott added that while Fortescue acknowledged that Australia needed a tax
reform, the company was "bewildered" by the government's inability to
consult on this "poorly thought out" proposal.

"They introduced the tax with no consultation before they took it into their
budget and no real consultation since."

But he added that while Fortescue was pleased to be working with the
Treasury consultation panel to consider and make an input into a new and
fairer tax system, the consultative process did not allow for any
negotiations or discussions on the key parameters of the government's

Elliot added that the panel had its "hands tied" behind its back by the
government, before consultation had started.

"Hence, previously healthy projects become unfinanceable. We now have a huge
new tax on the mining industry that will ultimately decimate future
investments in new projects and have a negative impact on the value of your
investment in our company," Elliott told shareholders.

The iron-ore miner has recently placed $15-billion worth of expansion
projects in the Pilbara region on hold as a direct result of the SPT.
Elliott said on Tuesday that the affected projects, the Solomon and Western
Hub projects, were of "national significance" and if developed, would
produce as much iron-ore as the equity owned in existing iron-ore projects
in the Pilbara by Rio Tinto and BHP Billiton.

"To delay, or worse still, possibly cancel two of the world's greatest
undeveloped resource projects will impact the Australian economy for

Edited by: Mariaan Webb

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