SYDNEY, AUSTRALIA - Mining companies threatening an exodus of investment from Australia over its proposed "super tax" may struggle to find better prospects in a world of finite resources, analysts say.
Canberra's proposal to update its current royalties system with a 40 percent tax on resources firms' profits has prompted a savage industry backlash, with dire warnings that it will drive investment offshore.
The government wants a greater share of the spoils of an Asian-driven mining boom that is tipped to last decades, but critics argue that the tax will kill the industry, which has been described as Australia's economic golden goose.
Global giants BHP Billiton and Rio Tinto are reviewing all their local operations and mid-tier iron ore miner Fortescue has suspended two projects, while a war of words rages about the levy imposed on profits above six percent.
Rio has declared the tax its top regulatory risk worldwide and left Australian expansion plans on hold in favour of building up its Canadian business.
"There are plenty of investment opportunities globally, and countries with lower, stable tax regimes will be the winners at Australia's expense," Rio boss Tom Albanese told shareholders this week.
Critics say South Africa, Canada and South America stand to gain if the resources giants head elsewhere, but Johannesburg analyst Nick Goodwin said mineral deposits in most developed nations were already under claim.
"You're going to have to go to the Congo or wherever," he told AFP, adding that these types of countries would be more unstable.
"This is what the Australian government knows. They can threaten, but there's nowhere to go to. You can't just replace these mines. You can threaten to pull out of a country because of a tax regime, but where do you find the resources?"
Haytham Hodaly of Vancouver's Salman Partners said mining firms were "just posturing at this point", while Toronto analysts said it would be difficult to walk away from Australia's gold and iron ore deposits -- considered among the best in the world.
The more dominant fear was that the move would have a domino effect and prompt other countries to alter their tax regimes, said Saul Eslake, chief economist with Australia's ANZ Banking Group.
"We've heard Canada say that they're not going to, but we're also aware that, for example, Brazil has expressed interest in what Australia is doing, the Indian government has imposed higher taxes on the proceeds of exports of iron ore and the like," Eslake said.
He said mining firms were unlikely to ditch projects already underway and any shift of capital away from Australia would not happen immediately.
"Of course there are other places in different parts of the world that big mining companies can invest in, but they have risks of their own, including the operating environment, political circumstances and the like," said Eslake.
Resources shares have plummeted since the May 2 announcement of the tax plan, with both BHP and Rio losing about five percent of their value, while the Australian dollar has suffered losses.
One Sydney-based analyst said Australia's reputation had been damaged by the proposal, which he described as a "quantum shift" of policy by centre-left Prime Minister Kevin Rudd.
"I speak to international investors and they've all been scratching their heads going 'What the hell is this guy thinking?'" said the analyst, who declined to be named.