BHP Billiton, Rio Tinto to quiz WA government after tax furore

BHP Billiton and Rio Tinto have begun to seek clarification on Western Australia's proposed up-front iron ore tax with which regional premier Mark McGowan hopes to raise "billions of dollars" for the cash-strapped state.

The state is understood to be planning to ask the miners to pay a lump sum in lieu of the current lease rental fee of 25 cents per tonne of iron ore produced.

Estimates for the 15-year up-front tax bill ranged between around A$4bn, according to the Sydney Morning Herald, up to A$4.9b on an undiscounted basis, mentioned by Bloomberg.

Newly elected McGowan had said he aimed to extract "billions of dollars" from the mining groups up front in order to help the state's financial problems.

Although mineral-rich, WA has run up debts of more than A$30bn as the mining boom ran out of steam.

On Monday McGowan told ABC radio that his plan would only go ahead if the two companies agreed and if the federal government would allow exclusions to prevent the money raised being distributed to other states.

"The mining companies may well say in light of the furore that has been generated in the last couple of days they are not interested and if that is the case they will continue to pay the 25¢ per tonne forever more and we will get ongoing revenue," he said.

Analysts at Investec agreed with the view that it will be difficult to see the companies “surrender a whole lot of present cash flow with no apparent incentive other than it would be a public-spirited thing to do”.