“We think further project curtailments, including that of the $US20-$US40bn Olympic Dam project, are likely if the RSPT remains in its current form,” he said.
“Under the RSPT as proposed, the project has no economic value, in our view.
“The RPST reduces the net present value of the project to an extent that it becomes negative, and return on invested capital below minimum hurdle rate of 15 per cent used by the mining industry.”
BHP has undertaken a feasibility study into the expansion of Olympic Dam which could see the advent of open pit operations in addition to the existing underground mine.
Xstrata earlier this month shelved spending on two Queensland projects expected to cost a combined $6.6 billion and employ 3250 workers, including the $6bn Wandoan coal project in the Surat Basin.
Fortescue Metals last month also put $US15bn of projects in the Pilbara on hold because of the uncertainty surrounding the tax.
Campbell said key changes on the RSPT are needed to enable projects to proceed including lifting the basis of a super profit to a minimum of 10 per cent, and preferably 15 per cent, from the 6 per cent proposed.
This issue of where the tax kicks in has been a key issue for Fortescue boss Andrew Forrest.
Morgan Stanley’s note came as the Rudd government is said to be considering modifying the tax for different minerals in the first sign of compromise in its battle with the industry.
Campbell also called for the headline tax rate to be reduced to 20 per cent from the proposed 40 per cent.
Morgan Stanley’s preferred mining exposure is copper and companies with assets outside Australia.
Campbell said there are three primary areas where the RPST could be challenged under the Australian Constitution after discussions with a “leading constitutional legal firm”.