The KME project aims to lift production capacity from 4 million tonnes per annum to 5.7Mtpa from 2012, extend the mine life to 2031, and increase the longwall face width to 375m.

“We are continuing construction on the Kestrel coking coal extension in Queensland,” Rio chief executive Tom Albanese stated yesterday at the major miner’s annual general meeting.

Albanese also shed light on what other mining companies were up to.

“We are now re-evaluating all our projects in Australia under the worst-case tax scenario,” he said.

“And we aren’t the only ones doing this. Under the Henry proposals, Australia would have the highest mining taxes of any major mining country.

“There are plenty of investment opportunities globally, and countries with lower, stable tax regimes will be the winners at Australia’s expense.”

In his market outlook, Rio chairman Jan du Plessis said the current global downturn was the most severe since World War II, but he expected demand to double over the next 15 years for iron ore, aluminium and copper, while there will be a “substantial increased demand for energy”

“Future energy requirements are such that an entire Hunter Valley coal supply chain needs to be created each year plus a uranium mine the size of Ranger every four years,” he said.

The chairman also launched his own attack on the tax, which is retrospective in that it also hits existing mines and committed projects.

“Applying this tax retrospectively is a dangerous prospect and has the potential to destroy Australia’s hitherto excellent reputation in the global community,” he said.

“I don’t say these words lightly, and I am very keen to work with the government to get to the right policy outcome for the industry and the nation.

“However, retrospective taxation raises sovereign risk and will, as sure as night follows day, increase the cost of investing in this country for the next generation.”

Yesterday even West Australian Premier Colin Barnett was surprised the North West Shelf liquefied natural gas project would fall under the new resources tax proposal.

The Woodside Petroleum-led project was exempted from the petroleum resource rent tax which was introduced in 1987.

The federal government recently indicated it would redefine the super profit definition from 6% to 11 or 12%.

The final design paper for the RSPT is scheduled for a late 2010 release.

The Kestrel longwall mine in Queensland is 80%-owned by Rio and 20%-owned by Mitsui.