Xstrata is holding back all spending on two mining projects in Australia as a result of the government’s proposed tax on mining profits.

The company had planned to spend A$586m (US$494.9m) developing the A$6bn (US$5bn) Wandoan thermal coal project and A$600m (US$506m) on an expansion of the Ernest Henry copper mine.

Xstrata chief executive Mick Davis, along with other heads of mining giants operating in Australia, said he does not agree with the tax, and that it will change the economic viability of major projects in the region if it goes ahead.

“The RSPT (resource super profits tax) has created significant uncertainty for the future of mining investment into Australia and would impair the value of previously approved projects and exploration to the point that continued investment can no longer be justified,” Davis said.

“Our Australian management teams’ analysis demonstrates that the RSPT would significantly impact the value and cashflows of both of these projects.

“In addition, the government’s decision to change the rules for existing investments has introduced the significant risk that any new investment in Australia may again be subject to tax regime changes without consultation.”

Copper and gold output from the Ernest mine will fall by half to about 25,000t and 35,000t a year respectively under Xstrata’s new plans.

The suspension of these two projects also puts 3,250 new jobs in doubt, Xstrata said.