Xstrata bails out over Aussie mining tax

ANGLO-SWISS mining company Xstrata has raised the stakes in a protest over Australia's plans to glean more taxes from the sector, announcing it will halt investments in two projects in the country and put the creation of 3,250 jobs at risk.

Xstrata's decision to axe investments worth A$586 million heaps pressure on Australian prime minister Kevin Rudd's government over the proposed 40 per cent tax on profits.

Rudd wants a bigger slice of the pie from big mining companies that have benefited from burgeoning Chinese and Indian demand for minerals and energy, but the industry argues that is unfair because it fails to consider the risks taken by mining groups.

Xstrata's move appeared to confirm critic's fears that pushing ahead with the tax, proposed to come into force in 2012, will deter big miners from making new investments.

Rudd, who faces a general election later this year, expects the tax to raise A$9 billion a year.

Australian iron ore producer Fortescue Metals has already threatened to abandon $15 billion of new projects unless the plans for the so-called "Resource Super Profits Tax" are watered down.

"This is now having tragic effects in the real economy," said Tony Abbott, the leader of the opposition Liberal Party.