Xstrata CEO Slams Retrospective Mining Legislation as 'Not Fair'

---

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Focusing on a subject which is on many mining executives' minds, Mick Davis, the CEO of Xstrata plc (LSE:XTA) (Zug, Switzerland), said that there were too many governments planning new legislation or changes to their fiscal regimes that targeted the mining industry.

Announcing the company's interim results, Davis said that although it was the prerogative of governments to seek a greater share of the profits from mining resources when commodity prices were high, changes in regulations and taxes should always be prospective, rather than retrospective.

Davis said that it was not surprising that resource nationalism risks rise when commodity prices are high. These range from threats of nationalization in its most extreme form to additional charges imposed and increased legislation. He made no reference to the current South African debate about mine nationalisation. The company is currently constructing the second phase of the Lion chrome smelter in South Africa.

Davis said that financial and operational risk is taken by mining companies investing capital in projects and that it is not fair to rewrite the basis on which those investments were initially made. Billions of dollars are involved in long-term operations that may only repay the initial outlay over many years before the mine can begin to generate returns, said Davis.

The CEO was also scathing about Australia's proposed carbon-emissions tax, saying a unilateral carbon price would not reduce carbon output. He added that it was a blunt instrument designed to raise income and would only succeed in lowering Australia's competitiveness as a mining destination in exchange for no likely reduction in global emissions.

Addressing Xstrata's view of the new Peruvian administration of President Ollanta Humala, Davis said that the president had underlined the new government's intentions to maintain Peru's economic growth and stability by re-nominating the current governor of the country's central bank and re-appointing experienced cabinet ministers, including Carlos Herrera, the Minister of Mines and Energy. He added that there were other positive signals from the new administration, including commitments to respect fiscal stability agreements currently in place for all of the company's projects.

The $1.47 billion brownfield Antapaccay expansion at the Tintaya cooper operation is 26% complete and should be commissioned in the second half of 2012. The construction of the $4.2 Las Bambas greenfield project lies ahead this year, with initial planned production of 400,000 tons a year of copper concentrate, as well as gold, silver and molybdenum as byproducts.

View Project Report - 71300164 71300166 300018663

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.