14 July 2010 Last updated at 04:18 ET

Rio Tinto in $200m Australia investment after tax deal

The Pilbara region is rich in iron ore

Mining giant Rio Tinto is investing $200m (£150m) in an expansion of iron ore operations in Western Australia - less than two weeks after a row over a proposed mining tax was settled.

Rio said the money would be used for works at its Cape Lambert port to boost output in the Pilbara region.

It had threatened to trim investment if a 40% mining tax was imposed.

But after Julia Gillard replaced Kevin Rudd as Australian prime minister, a fresh deal was thrashed out.

The announcement came as Rio reported a 2% fall in iron ore production between April and June, compared with a year earlier.

The firm also expressed concern about the impact on its business of a possible double-dip recession in many developed nations and a slowdown in Chinese growth.

Political

The compromise tax agreement has reduced the rate to 30% for coal and iron ore miners from 40%.

Several of the mining giants had threatened to halt or cancel projects because of Mr Rudd's proposal, which they said seriously risked Australia's international competitiveness.

The deal was struck just a week after Ms Gillard had swept to office and the mining tax had become highly political.

When Mr Rudd announced the tax plans earlier this year, he said he expected to raise 9bn Australian dollars (£5.2bn) a year.

The revised plan would raise A$1.5bn less, the government said, but cuts to company tax rates that were to be paid for by the mining tax would still go ahead.