Aluminum Corporation of China (Chinalco) and the government of Queensland, Australia have agreed to abort the Aurukun bauxite development deal signed by the two parties in 2007.

Due to various unfavorable factors, the program cannot resume under the existing framework, Chinalco said in an announcement today.

Chinalco and Queensland government signed an agreement worth A$2.9 billion ($2.2 billion) on the development of Aurukun bauxite mining project on March 23, 2007. The agreement was due to expire on June 30, 2010.

Chinalco didn't give detailed reasons why it chose not to extend the agreement.

In May 2010, Australian former Prime Minister Kevin Rudd proposed a "superprofit tax" of 40 percent against mining companies. Morgan Stanley estimated that the tax would take 85 billion Australian dollars ($74 billion) from the mining industry over the next decade.

 
The proposed superprofit tax met with strong objections from the country's mining giants, including Rio Tinto and BHP Billiton. It also raised market concerns that high taxation will hurt foreign investors' enthusiasm.

Some analysts pointed out that rising costs, oversupply in the aluminum products market as well as the high costs of building a refining factory in Queensland have made Chinalco's project very difficult. And the proposed resource superprofit tax worsened the impact.

However, Chinalco also emphasized in the announcement that it will continue to communicate with the Queensland government about other opportunities to develop the Aurukun bauxite mine.