The federal government refused to be "intimidated" by powerful mining companies after Swiss giant Xstrata became the latest firm to suspend projects over to a controversial new 40 percent resources tax.
Xstrata suspended 586 million dollars (489 million US) in development spending on two Australian projects, saying a review had found the proposed tax would mean "neither would be viable".
Head Mick Davis said the Resource Super Profits Tax (RSPT) on returns on investment above six percent would slash profitability of its six billion dollar thermal coal project and 600 million dollar copper mine expansion.
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"Our Australian management teams' analysis demonstrates that the RSPT would significantly impact the value and cashflows of both of these projects," he said in a statement.
"The impact of the tax eliminates the net present value of the Wandoan (thermal) coal project almost entirely and substantially reduces the value of the Ernest Henry (copper) underground shaft project," he added.
"Neither will be viable if the RSPT is imposed."
Prime Minister Kevin Rudd dismissed the move as "part and parcel, I believe, of what will be the normal argy-bargy of a very tense debate between parts of the mining industry and the Australian government."
"This government will not be intimidated by the statements of any mining company, foreign or domestic," Rudd added.
"This government does not stand here as the puppet of parts of the mining industry. This government stands here to act in the national interest on behalf of all Australians."
Rudd said he understood that there were a "number of other existing issues impacting on this particular development", including rail access, port infrastructure and power supply.
Xstrata coal chief Peter Freyberg said the RSPT jeopardised the "globally significant" Wandoan thermal coal development "together with the development of the Surat Basin as an internationally competitive export coal region".
The mining giant said it was reviewing Australian projects worth a combined 22 billion dollars, and suspension of investment "ultimately compromises Australia's ability to continue to benefit from future commodity price rises".
The tax has prompted a savage backlash from the mining sector, the country's most valuable export industry, with global giants Rio Tinto and BHP Billiton both reviewing their Australian operations.
Rio chief executive Tom Albanese said the tax reform was "bad policy" and complained about a lack of consultation, saying he felt "like (he) got sucker-punched when the thing came out".
"It's taking away the incentive to invest. Not just for the big companies, but it's just as important for the little guy, the one that wants to make a go at it," Albanese told commercial radio.
Albanese said uncertainty about the tax had hit Australian share prices and placed national retirement savings at risk.
Surging commodity prices are expected to drive Australia's terms of trade for 2010 to their highest level in 60 years, according to the May budget outlook, injecting 30 billion dollars (27 billion US) into the economy.
Canberra wants to reform the tax system to get what they argue is a fairer share of the spoils of the mining boom, which is tipped to last decades supported by demand from China and other countries.
Trade figures released on Thursday showed a surprise return to surplus due to surging commodities exports, including a jump in coal-shipping volumes and a steep rise in the price of iron ore.
