Fortescue Metals Group Limited said that the Australian government's proposed mining levy threatens to stop its AUD 17 billion expansion in Western Australia as an industry body resumes an anti tax advertising campaign.

Mr Andrew Forrest CEO of Fortescue said that "It could potentially derail a massive investment into the economy. It will have a very, very severe impact on that decision, to expand output to 95 million tonnes a year from 55 million tonnes a year."

Fortescue said in June 2010 that it may seek financing for the AUD 9 billion Solomon project once there is more clarity on how the compromise minerals tax will be implemented. It put the Solomon project and the AUD 6 billion Western Hub projects on hold when the original tax was announced in May 2010.

Mr Forrest said that "All we know is that there are fundamental issues which are still in secret, we can’t get answers for and therefore we can't really model it."

The Association of Mining and Exploration Companies Inc said last week that smaller Australian mining companies will restart an advertising campaign against the government's compromise mine tax. Gillard negotiated the compromise deal with BHP Billiton Limited, Rio Tinto Group and Xstrata Plc.

The tax will cost jobs and deter investment and should be withdrawn to allow consultation with the industry, said the association, which represents small and mid size mining companies including Fortescue.

It may be noted that Ms Julia Gillard Prime Minister of Australia scaled back a proposed 40% tax on mining super profits to a 30% levy on iron ore and coal profits after ousting Mr Kevin Rudd in June 2010.

(Sourced from www.bloomberg.net)