The Gillard government and Australia’s big three miners have made significant progress in talks about a resources tax compromise and are believed to have reached an agreement that would end one of the biggest government-private sector brawls in history.

It’s understood that BHP Billiton, Rio Tinto and Xstrata have agreed with the government now on the key elements of a new resources tax structure, including the creation of a new trigger point for the imposition of the tax, set at the 10-year Commonwealth bond yield plus 7 per cent.

Shares of all major miners pared their losses on the news, with BHP, Rio and Fortescue Metal Group among those stocks to pick up, helping the overall market to trim its retreat for the day.

With Prime Minister Julia Gillard in far north Queensland today for the funeral of soldier private Ben Chuck killed in Afghanistan, the formal announcement of a deal could be held over.

The proposed new trigger point for the ”super profits” tax to kick in is currently equal to a rate of about 12 per cent, around about the average cost of capital in the mining industry. The original tax cut in above the bond yield only, currently just over about 5 per cent.

The government is also believed to have resolved the miners’ concerns that the tax will be retrospective in its application, by agreeing that the miners can inject their existing assets including the huge Pilbara iron ore mines and the rich east coast coal mines into the revised tax regime at market value. This is a huge concession.

Retrospectivity, the rate at which the tax is imposed and the headline rate — set originally at 40 per cent — were the three key mining sector objections to the proposed new tax. It was unclear at midday, east coast time, what deal had been struck on the headline rate, but the government is believed to have also given ground on this point, with people with knowledge of the talks saying the two sides were “nearly there” on an agreement.