bhp, rio slide on concern pm will stick to tax

BHP, Rio Slide on Concern Gillard Will Stick to Tax

June 24 (Bloomberg) -- BHP Billiton Ltd. and Rio Tinto Group slid in London trading on speculation Australias incoming Prime Minister Julia Gillard will pursue a new mining tax, even after she pledged to consult companies on the plan.

BHP, the worlds biggest mining company, dropped 1.6 percent to 1,920 pence and Rio declined 3.2 percent to 3,282 pence. The stocks earlier rose in Sydney after Gillard agreed to talks on the proposed levy.

It remains highly likely that a mining tax will be introduced, Olivia Ker, a London-based mining analyst at UBS AG, said today in a report. Given the proposed new negotiation, the resolution of details may now be further in the future, opening up a longer period of uncertainty.

Gillard today ousted Kevin Rudd as Labor Party leader after his plans to boost taxes on the mining industry deepened a slump in opinion polls. The levy, which would raise A$12 billion ($10.5 billion) in its first two years, sparked a storm of protests from the worlds largest mineral producers, who threatened to scrap projects and curtail investment.

We still dont have absolute clarity on what the Labor government position is going to be, Richard Knights, an analyst at Liberum Capital Ltd. in London, said today by phone. The market was hoping that she might come out and say, Look, we oppose the tax, or maybe something more concrete.

Cautiously Encouraged

BHP, based in Melbourne, said its encouraged by Gillards appointment and has asked publicity agencies to suspend all of its advertisements against the proposed tax, according to a statement. Rio, the worlds third-largest mining company, said its cautiously encouraged by Gillards comments on the tax.

Rudd had faced criticism from mining companies including BHP, London-based Rio and Xstrata Plc over the plan to impose a 40 percent levy on mining profits from 2012.

Xstrata welcomed Gillards willingness to engage in talks, and said they must be concluded as rapidly as possible to avoid further damage to the mining industry in Australia, according to a company spokesperson who declined to be identified.

Xstrata fell 3.2 percent to 985.3 pence in London, sliding for a third day.

BHP climbed 1.3 percent to A$39.65 at the close of trade in Sydney. Rio gained 1.7 percent, Fortescue Metals Group Ltd. rose 2.5 percent and Macarthur Coal Ltd. advanced 6.4 percent.

Yanzhou Coal Mining Co., which bought Australias Felix Resources Ltd. last year, closed up 0.9 percent at HK$17.34 in Hong Kong. Citic Pacific Ltd., a Chinese steelmaker that owns an iron-ore project in Australia, advanced 0.7 percent to HK$15.28.