New taxes make Rusal rethink investments

THE deputy chief executive of Russian aluminium giant Rusal says the company will refrain from making further investments in Australia until the carbon tax and mining tax uncertainties are resolved, amid concerns that the new imposts could significantly drive up production costs in Australia.

Vladislav Soloviev, the first deputy chief executive of Rusal and one of the most senior executives behind the company's billionaire oligarch, Oleg Deripaska, said the current fiscal and regulatory environment made investing further money into Australia a difficult proposition.

"The problem with Australia is the number of uncertainties and that includes the carbon tax and the mining tax," Mr Soloviev told The Australian after the company's annual general meeting in Hong Kong last week.

"No one knows what the final result of either scheme will be, but I can say that if the final scheme is what is proposed now, the cost of producing alumina in Australia will increase by around 20 to 25 per cent."

Rusal owns a 20 per cent stake in the Queensland Alumina refinery near Gladstone in central Queensland, with the facility ranking as one of the biggest in the world. Fellow mining giant Rio Tinto owns the remaining 80 per cent.

Rusal purchased its stake in QAL back in 2005, acquiring the interest from Kaiser Aluminium for $US401 million in cash and $US60m in assumed debt. Rusal was also a bidder for the Aurukun alumina deposit in far north Queensland but eventually lost out to the Aluminium Corp of China.

While Mr Soloviev described Australia as "a very interesting place" and "one of the best places in the world you can produce alumina", the question marks over the carbon tax and resources tax meant Rusal was unlikely to make any further investments until the outcomes of both taxes were known.

"I would prefer to wait until the situation on the carbon tax and mining tax is resolved and we can understand what the environment looks like," he said.

Mr Soloviev's comments came after QAL began briefing staff on the likely implications for the plant should the carbon tax be approved in its current format.

As revealed by The Australian on Thursday, Rusal is concerned that Australia's alumina industry could become globally uncompetitive as a result of the tax.

A copy of the QAL message to staff, obtained by The Australian, warned them that the current proposed structure of the tax would see the predominantly coal-powered QAL taxed at six times the rate of lower-emission alumina refineries elsewhere in Australia.

The message, signed by QAL managing director Phil Campbell, said: "QAL's competitiveness has been eroded in recent years with the high exchange rate and increasing input costs -- caustic, energy, labour, maintenance, etc. The addition of a carbon tax, which our competitors don't have to pay, only further erodes our competitive position."