The raging controversy sparked by the Federal Government's proposed Resource Super Profits Tax (RSPT) is threatening another two WA mining deals, with Western Areas warning yesterday it would reconsider plans to develop a third nickel mine while concerns are mounting about Iron Ore Holdings' proposal to sell a Pilbara iron ore deposit to Rio Tinto.
Another $23 million was wiped off Iron Ore Holdings' (IOH) market value yesterday, taking its losses this week to $77 million, as investors cast doubt on its company-defining ambition to sell its Iron Valley deposit to Rio.
IOH and Rio have been in talks over Iron Valley since late last year, with investors speculating that Rio was considering whether to just buy the deposit, or launch a bid for all of the Kerry Stokes-controlled company.
But investor interest has fallen sharply over the past week on fears the proposed RSPT would prompt Rio to reconsider its Pilbara iron ore growth plans.
Rio has confirmed a report in Tuesday's _The West Australian _that it was re-examining its Pilbara growth strategy.
But IOH managing director Matthew Rimes played down suggestions that either a potential Iron Valley sale or IOH's minegate sales agreement with Rio for the Phil's Creek deposit were under threat.
"Both transactions are progressing on a business-as-usual basis," Mr Rimes said.
IOH has been among the hardest hit of the iron ore juniors, its shares falling 30 per cent since the tax fears hit markets last week, compared to BC Iron (down 17 per cent), Brockman Resources (26 per cent) and FerrAus (22 per cent).
IOH shed nearly 10 per cent of its value yesterday in the wake of the Rio speculation, closing 17.5¢ weaker at $1.625.
At the same time, Western Areas managing director Julian Hanna said the company was reconsidering plans for a mine at Diggers South, on which it had already spent about $25 million.
"Clearly with the threat of this onerous tax hanging over us and the uncertainties that creates in the minds of our investors, we're reconsidering that decision to progress with early development at Diggers South," he said.
"We were due to resume drilling to test extensions to the resource - and that would feed into a reserve and extended mine life - but at the moment the board's just considering whether that's money well spent."
Although Mr Hanna described Diggers South, at Forrestania 400km south-east of Perth, as the group's third planned nickel mine it had not yet to set a time frame to develop it.
Debate over the RSPT has intensified in the past couple of days, with WA miners threatening to shelve projects and Prime Minister Kevin Rudd accusing the industry of "crying wolf" to maintain the status quo.
Analysts, who have been crunching the numbers all week to work out the impact of the proposed tax on company earnings, were yesterday divided on whether the country's mining stocks had been oversold or if worse was to come.
Credit Suisse analysts said the vicious sell-down reflected the first draft of the proposed tax legislation, which they said was still "a worst case scenario".However, Citigroup analysts led by Craig Sainsbury said that while some stocks, including BHP Billiton and Rio, may have been oversold, it was unclear where any immediate buying support would come from.
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