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Xstrata suspends Aussie developments

Xstrata suspends Aussie developments

Xstrata has suspended US$478 million of expenditure to develop both the US$5 billion Wandoan thermal coal project and a US$490 million project to extend the life of the Ernest Henry copper mine, with immediate effect.

The decisions represent the initial findings from Xstrata’s ongoing review of planned investment into its Australian operations and growth projects as a result of the Australian Government’s proposed Resource Super Profits Tax (RSPT). The review includes growth projects comprising

total investment of US$17.9 billion with the potential to create 14,725 new jobs.

Key Queensland growth initiatives to be suspended are: the Ernest Henry Mining (EHM) shaft underground mine project, already approved by Xstrata for development near Cloncurry in north-west Queensland; early works and detailed design for the first stage of the 30Mt/yWandoan Coal project and related infrastructure; additional exploration and sampling for Wandoan and the Surat basin; and drilling on additional coal expansion projects in Queensland including Rolleston West and Sarum.

Mick Davis, Xstrata’s CEO commented: “The RSPT has created significant uncertainty for the future of mining investment into Australia and would impair the value of previously approved projects and exploration to the point that continued investment can no longer be justified.

“Our Australian management teams’ analysis demonstrates that the RSPT would significantly impact the value and cash flows of both of these projects. The impact of the tax eliminates the net present value of the Wandoan coal project almost entirely and substantially reduces the value of the Ernest Henry underground shaft project. Neither project will be viable if the RSPT is imposed.

 “We will continue to seek meaningful consultation with the Federal Government to engage on the industry’s key concerns in respect of the RSPT. In the meantime, we have an obligation to make business decisions in response to changing circumstances and we continue to develop business opportunities and develop growth projects in countries which promote competitive and predictable fiscal regimes.”

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