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Fortescue Metals confirms MRRT High Court challenge
20/04/2012 - Fortescue Metals Group has confirmed it will challenge the federal government's new mining tax in the High Court. Rebecca Le May
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The iron ore producer also on Thursday said it would lose up to $US150 million ($A145.30 million) a year if the commonwealth scrapped the diesel fuel rebate for miners.
The comments came after Fortescue stuck to its full year production guidance despite missing its third quarter iron ore output target as a result of cyclones in Western Australia.
Fortescue has flagged it may challenge the mining tax on constitutional grounds since mid-2010, shortly after the Resources Super Profits Tax (RSPT) was unveiled.
The miner held firm even after the RSPT was replaced with the watered-down Minerals Resource Rent Tax (MRRT) and has since been seeking legal advice.
Chief executive Nev Power on Thursday said the company would go ahead with the action.
"We are instructing counsel as we speak and briefing them in terms of the challenge to the MRRT and we would expect to be launching that challenge in the next few weeks," Power told a teleconference.
"So that's looking solid."
WA Premier Colin Barnett last week said he believed any High Court challenge to the tax would be unlikely to succeed.
Only weeks before, Barnett pledged state government support for the challenge and encouraged the involvement of Queensland Premier Campbell Newman.
Fortescue chief financial officer Stephen Pearce on Thursday said the company would be "extremely disappointed" if the federal government removed the diesel fuel rebate, worth 38 cents per litre.
The rebate will be reduced by six cents a litre once the carbon tax starts on July 1, but the opposition says it will be axed entirely for miners as the Labor government pushes for a budget surplus.
The Australian Greens support scrapping the subsidy, which costs the federal government $5 billion a year.
About 40 per cent of this amount, or $2 billion, goes to mining companies.
"At the moment, we're using around 350 million litres of diesel," Pearce told the teleconference.
"That equates to about $US140 million to $US150 million per annum.
"That will increase as our fuel usage increases with the expansion."
Fortescue maintained its full year production guidance of 55 million tonnes (Mt) and said its expansion to 155 Mt per annum by June 2013 remained on budget and schedule.
Fortescue mined 13.6 Mt of iron ore in the March quarter, down 15 per cent on the December quarter.
It was up 41 per cent against the previous corresponding period, reflecting the company's ongoing expansion in WA's Pilbara region.
Costs rose to $US52.56 ($A50.91) per tonne in the March quarter, up from $US46.43 ($A44.98) per tonne in prior period.
Power said the rise in costs reflected the effect of cyclones, a high currency and a slightly higher strip ratio at its mines.
However, Fortescue's costs remained under $US50 ($A48.43) per tonne for the year-to-date.
He said strong demand from China continued and the iron ore price had recently improved.
Power also said some of the volumes to be added via the company's expansion would be marketed on a Beijing-based trading platform, but the majority would continue to be sold under long-term contracts.
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