Forrest Says Australia Won’t Compromise on Tax Plan

May 23 (Bloomberg) -- Andrew Forrest, chief executive officer of Fortescue Metals Group Ltd., said the Australian government is unwilling to compromise on when a proposed 40 percent tax on mining profits will apply.

Forrest criticized the plan to tax as “super” profits returns from resource projects exceeding the rate on long-term Australian government bonds. “They’ve said to us the 6 percent threshold is non-negotiable,” he said in an interview today on ABC television’s Inside Business program.

Resources Minister Martin Ferguson said the government is open to making “refinements” to the proposal, due to start in 2012. It will wait until talks with companies are completed before any changes, he told Channel Ten’s Meet the Press today.

Fortescue shares have dropped about 19 percent to A$3.72 since the plan was announced May 2, compared with a loss of 10 percent for the benchmark S&P/ASX 200 Index. Fortescue joined BHP Billiton Ltd., the world’s largest mining company, and Rio Tinto Group in putting projects under review because of the plan.

Forrest owns about 31 percent of Fortescue Metals, which has a market value of A$11.6 billion, according to data compiled by Bloomberg. That puts his stake at about A$3.6 billion.

Possible Changes

Asked whether the government may alter the long-term bond rate threshold, Ferguson said today that he’s “not prepared to suggest there will be any movement. We’ll await the outcome of those discussions” with the mining companies.

“There will be a profit-based tax in Australia,” Ferguson said. “The headline rate is going to be 40 percent, but there are refinements that can be made to make the tax more appropriate and balanced from a mining industry point of view.”

Fortescue, Australia’s third-largest iron-ore producer, put the $9 billion Solomon Hub and $6 billion Western Hub projects on hold, while the Chichester venture is proceeding, the company said May 19. The tax threatens the company’s ability to fund future projects, Forrest said in the interview.

Ross Garnaut, a government adviser and chairman of Lihir Gold Ltd., has called for changes to the tax plan to maintain the industry’s growth. Even so, Garnaut said in an interview with Inside Business today that “it’s dangerous” to have the industry trying to dictate policy to the government.

A panel consulting with the resources industry on the tax has met with eight large companies and is scheduled to talk with another 10 companies “over the coming weeks,” Treasurer Wayne Swan said in an e-mailed statement today.

The government “will not be deterred by this scare campaign,” Swan said. “Nobody should doubt the government’s resolve to make sure the community gets a fair share of the mineral resources that belong to the Australian people.”