By Shani Raja Jan. 22 (Bloomberg) -- Australian stocks fell, dragging the benchmark index down the most in two months, on concern the government may raise taxes on mining projects and as commodity prices slumped. Rio Tinto Group, the world’s third-biggest mining company sank 3.5 percent after the Sydney Morning Herald reported the government proposal, without saying where it got the information. BHP Billiton Ltd., the biggest, declined 2.3 percent as metals traded in London fell for a second day and oil was poised to decline for a second week. Newcrest Mining Ltd., Australia’s largest gold producer, slipped 2.4 percent. “It does look like we’re going through some sort of a correction,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “The report about the tax review is weighing on resources stocks.” Australia’s S&P/ASX 200 Index fell 1.6 percent to 4,750.60 at the close of trading in Sydney, its steepest drop since Nov. 27. The gauge, which declined 3 percent this week, has rallied 51 percent from a five-year low on March 6 as government stimulus measures helped the country skirt a recession. A gauge of material stocks on the index fell 2.2 percent, the biggest decline among 10 industry groups, as a measure of metals traded in London fell for the second day yesterday, losing 1.2 percent. Rio lost 3.5 percent to A$72.94 and BHP sank 2.3 percent to A$41.70. Newcrest dropped 2.4 percent to A$33.31. Resources Tax Reform The Herald today said a review of Australia’s tax system may recommend taxing mining projects in the same way as energy projects, a change that would have raised an extra A$14 billion ($13 billion) over the past three years, the newspaper cited Treasury estimates as saying. Matthew Coghlan, a spokesman for Treasurer Wayne Swan, declined to comment on the report. The so-called resource rent tax wouldn’t be levied until exploration and development costs were paid and would only take effect when the project made a profit, the Herald said, without saying where it got the information. “The apparent leaking of a proposed national resources tax has created great uncertainty about the future tax regime for resource projects in Australia,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, dipped 3.3 percent to A$44.37. Crude oil fell below $76 a barrel in New York, and is set for a second weekly decline. Separately, Woodside said fourth-quarter revenue dropped 23 percent from a year earlier on lower production. The following are among other stocks that are active in the market today. Stock symbols are in parentheses after company names. Australian Agricultural Co. (AAC AU) fell 6.4 percent to A$1.31 after reporting a bigger than expected full-year loss on flooding, drought and weak livestock prices. Beach Energy Ltd. (BPT AU), an oil and gas explorer, dropped 5.9 percent to 87.5 Australian cents after being downgraded to “hold” from “buy” at Wilson HTM. OZ Minerals Ltd. (OZL AU) advanced 3.5 percent to A$1.195. The operator of the Prominent Hill mine in Australia was raised to “overweight” from “neutral” at HSBC. Santos Ltd. (STO AU) added 0.5 percent to A$13.55. Australia’s third-biggest oil and gas producer was raised to “buy” from “neutral” at UBS AG by equity analyst Gordon Ramsay. Transpacific Industries Group Ltd. (TPI AU) sank 3.3 percent to A$1.325, after the stock was downgraded to “sell” from “neutral” at UBS AG. New Zealand: Nuplex Industries Ltd. (NPX NZ), a New Zealand resin manufacturer, jumped 4.9 percent to NZ$3.20 after raising its earnings outlook for the second time in five weeks. To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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