WRAPUP 2-Rio Tinto to boost iron ore despite mine-tax fears

* Rio maps out $3.1 bln plan to lift output by 28 pct

* BHP Sept qtr iron ore production up 6 pct

* Iron ore expansion undermines arguments against mine tax

* Rio shares fall 3 pct, BHP off 1 pct on China rate move
(Adds detail)

By James Regan

SYDNEY, Oct 20 (BestGrowthStock) – Global miner Rio Tinto (RIO.AX: )
(RIO.L: ) approved a $3.1 billion iron ore expansion on
Wednesday, staking a claim to become the world’s top producer
and defying industry concerns over a new Australian mining tax.

Iron ore miners are ramping up production to meet booming
demand from Asia, with most of the growth in output set to come
from Australia where two of the world’s biggest producers, Rio
Tinto and BHP Billiton (BHP.AX: ), dominate.

Rio Tinto’s move to boost output by 28 percent follows this
week’s demise of a planned joint venture with BHP Billiton in
northwest Australia’s Pilbara region aimed at saving the
companies $10 billion in costs. [ID:nSGE69G02M]

“Rio and BHP are obviously not taking much notice of the
mining tax if they are planning all these investments in iron
ore,” said an analyst in Perth, who asked not to be named
because he is not authorised to speak to media.

BHP Billiton unveiled a 6 percent rise in quarterly iron
ore output on Wednesday and is also planning to expand its
Australian iron ore operations to meet booming Asian demand.
[ID:nSGE69I0L9]

Rio Tinto’s announcement, combined with BHP Billiton’s
production surge, eclipsed news reports on Wednesday that
suggested they and other miners risked being double-taxed under
Australia’s proposed 30 percent tax on iron ore and coal.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Q+A on Australia mining tax: [ID:nSGE69J02X]

Graphics on BHP production: http://link.reuters.com/geh39p

Graphic on global ore production:
http://link.reuters.com/bas98p

Graphic on iron ore trade: http://link.reuters.com/vyh88p

BREAKINGVIEWS on big mining asset deals [ID:nLDE69I21T]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

DOUBLE-TAX THREAT

Rio Tinto, BHP Billiton and London-listed Xstrata (XTA.L: )
— the big three of Australian iron ore and coal — accuse
Canberra of reneging on a guarantee to refund all of the money
the miners pay state governments in the form of royalties,
newspapers said. Without that guarantee, they could effectively
be double-taxed.

But neither industry analysts nor political experts believe
the issue will reignite the tax issue and hurt mining
investment, and pointed to Rio Tinto’s expansion plan as
evidence.

“They see the benefits of selling more iron ore outweighing
the extra tax they will have to pay,” the Perth analyst said.

Iron ore prices tracked by Thomson Reuters are near 5-month
highs (.IO62-CNI=SI: ), suggesting producers will see higher
sales margins. Most ore is sold on a quarterly system based on
the previous quarter’s average price.

Rio Tinto’s $3.1 billion plan would take its annual
Australian production to 283 million tonnes a year in 2013 from
220 million tonnes. It plans to boost it further to 333 million
tonnes, which could bring it alongside Brazil’s Vale
(VALE5.SA: ), now the world’s top producer.

BHP Billiton is running at around 125 million tonnes a
year, with near-term plans to take that to 155 million tonnes.

BHP Billiton, the world’s biggest miner said on Wednesday
it was now running most of its assets at full capacity as
suppliers struggle to keep pace with the global appetite for
industrial raw materials.

“Despite ongoing uncertainty in the developed world, BHP
Billiton remains positive on the prospects for many of its core
commodities and the underlying performance of its business due
to strength in the emerging economies and the ongoing delay in
the supply side response,” the company said.

Mining shares fell on Wednesday, but attention was focused
on the possibility of a slowdown in Chinese demand after
Beijing raised interest rates for the first time since 2007.
[ID:nN19266020]

Commodities prices fell across the board and pushed Rio
Tinto shares down 1.7 percent to A$81.18 at 0450 GMT, outpacing
narrower losses in the wider market (.AXJO: ). BHP Billiton
shares were 0.75 percent lower at A$40.86. [MKTS/GLOB]

STILL TALKING

Rio Tinto said last week it produced a record 47.6 million
tonnes of iron ore in the quarter and was similarly driving all
its divisions near or above capacity to take advantage of an
upsurge in mineral prices. [ID:nSGE69D07I]

Both Rio Tinto and BHP Billiton had threatened to pull
investments in Australia when Canberra first announced its
mining tax proposal in May, but struck a truce with the
government in July when it agreed to cut the tax to 30 percent
from an original 40 percent and narrowed its scope to iron ore
and coal mines.

Prime Minister Julia Gillard’s minority government is
currently negotiating with miners over final details of the tax
which is due to come in from 2012 and raise about A$10.5
billion.

“We’ve said all along we’ll credit existing royalties and
scheduled increases, and the policy transition group is going
to advise government on the best way to provide certainty to
the industry given that policy setting,” Gillard told
reporters.

Rio Tinto and BHP declined to comment on the media reports.
During the initial fight over the tax, fears over mining
investment hurt the local dollar (AUD=: ).
(Additional reporting by Rob Taylor in Canberra; Editing by
Mark Bendeich, Ed Davies and Lincoln Feast)

WRAPUP 2-Rio Tinto to boost iron ore despite mine-tax fears