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Nickel producer Minara Resources Ltd. (MRE.AU) on Tuesday raised the possibility of looking overseas for its new projects because of increased risks in Australia from the Government's proposed mining tax.

"There is no doubt that this proposed 'super tax' is a threat to future investment in Australian resources and, like many other resource companies, Minara will be forced to look more closely at overseas investment opportunities," Chairman Peter Coates said at Minara's annual general meeting.

Perth-based Minara, which has around A$300 million in cash, shelved a proposed expansion of its 60% owned Murrin Murrin mine in 2008 because of the global financial crisis.

The existing Western Australian operation came on stream a decade ago at a cost of A$1.2 billion, and Minara considers it "unlikely such an investment would be repeated in a post Resource Super Profits Tax Australia as the returns simply would not justify the risks involved", Coates said.

Minara, 71% owned by Glencore International AG (GNC.YY) of Switzerland, is Australia's second-biggest nickel producer after BHP Billiton Ltd. (BHP.AU).

Coates told reporters after the meeting that the proposed mining tax is "just plain bad policy".

"We have created sovereign risk because we've changed the ground rules of people that have already made investment decisions," he said.

And investors in new projects will be "hesitant because they don't know whether the ground rules will change again", he said.

Minara confirmed that long-standing Managing Director Peter Johnston has agreed to spend another three years at the helm.

Johnston said the proposed tax will "have an impact" on Minara's business.

"I am very concerned about the international competitiveness of the business--our major competitors are in Canada and Brazil, and of course they have much lower taxes than the current proposal," he said.

"And that does put us at a commercial disadvantage," Johnston said.

"I think this tax will have a serious impact on investments in the nickel arena within Australia, as there are attractive alternatives overseas," he added.

He named the Philippines, Indonesia, New Caledonia, Brazil and Canada as countries with plentiful nickel resources and potentially more favourable fiscal regimes.

Johnston said he will travel to Canberra next week to discuss the tax with the Government's consultation panel.

Minara reiterated that Murrin Murrin is expected to produce between 30,000 and 34,000 metric tons of nickel in calendar 2010.

Operations this year will be affected by a scheduled three-week maintenance shutdown starting early October.

But the company hopes to increase production in 2011, Johnston said

Glencore owns the remaining 40% of Murrin Murrin.

Commenting on the market, Johnston said he is encouraged by the recent decline in London Metals Exchange nickel stocks and a recovery in Asian stainless steel demand.

Minara also said its improved financial performance in 2009--it posted a net profit of A$48.5 million for the period--may "provide a platform for a possible return to shareholders in the near future".

By Stephen Bell, contributing to Dow Jones Newswires; 61-8-9244-4243; sgbell@bigpond.com (Alex Wilson in Melbourne contributed to this story)

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