Prime Minister Kevin Rudd said Wednesday he had defended his “super tax” on mining profits in a tough exchange with industry chiefs, as resource shares battled negative sentiment.

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Rudd said he had a “strong, robust exchange” with heavyweights from Rio Tinto, BHP Billiton, Woodside Petroleum and Fortescue Metals Group over his tax on resources companies that have reaped record profits from Chinese demand.

But Opposition leader Tony Abbott was refusing to rule out a blocking of the tax.

“I reiterate that I can see no good arguments for this great big new tax,” Abbott said.

“It is a very, very bad tax. The only way to avoid it is to ensure there is a change of government at the next election.”

Abbott met mining executives in Canberra today, and said he could see ‘no way’ for the Coalition to get behind the tax.

But at least the Greens provided some respite to the barrage of criticism from industry and the conservative side of politics

“The mining corporations have far too much say in the running of this country without being representative, they are a massive lobby on both parties in Canberra,” Greens Leader Bob Brown said, reported the ABC.

Resource stocks hit by proposals

The sector, which helped the country weather the global downturn, has been rattled by the plan to impose a 40 percent levy on “above normal” profits.

The proposal, which would be introduced from 2012, has sent resource stocks plummeting after Rudd announced it on Sunday, with BHP Billiton, Rio Tinto, Woodside and Fortescue severely hit.

Executives including BHP chief Marius Kloppers have spoken out against the move, warning it would drive investors offshore and jeopardise Australian prosperity.

Rudd said that at a meeting in Perth on Tuesday the mining chiefs expressed deep concern, but he denied it amounted to a crisis summit.

Miners ‘forthright’: Rudd

“They were very forthright in putting their views and their concerns about the Super Profits Tax that we’re proposing. I was equally forthright in explaining why we believe this is necessary,” he told commercial radio.

The mining sector is Australia’s most profitable industry, with demand for raw materials from Asia, and mostly China, helping the economy beat the global downturn and accounting for 44.8 percent of exports in 2008-2009.

Rudd said he believed the 40 percent rate was “about right” but refused to call it non-negotiable, warning that talks with the industry to hammer out details would be lengthy and the transition “difficult”.

“We believe we’ve got those settings right but what we’ve said to the mining industry is that we’re more than prepared to sit down and work through the detail with them,” Rudd said.

Rudd has defended the move as a fair redistribution of profits from the country’s natural assets.

BHP: Tax could end Australia’s stable reputation

Noting BHP and Rio’s hefty foreign ownership, he said this week: “It’s time for the Australian people… to get a fairer share of the natural wealth of this country, which ultimately is owned by all Australians”.

Kloppers told BHP staff the proposals would “tear down” Australia’s reputation for stable and competitive taxation and placed its investment future at risk, while saying BHP would “constructively contribute” to discussions on improving the tax.

Rudd, who is due to go to the polls this year, is likely to face an uphill battle to get the reforms through parliament, with the Opposition Leader Tony Abbott saying he was “deeply, profoundly hostile” to the new tax.

Resource stocks dragged into the red early Wednesday, with all but one of the miners on the benchmark S&P/ASX 200 index down by noon. The S&P/ASX 300 Metals and Mining index was at its lowest level for several months after falling nearly eight percent since Friday.

But mining stocks recovered some lost ground by the close of trading, with BHP rising 0.39 percent to 38.74 Australian dollars, Fortescue rising 6.16 percent to 4.31 and Rio Tinto adding 1.82 percent to 68.28.

However calculating from Friday’s figures, BHP has lost 5.19 percent since the announcement and Rio 5.60 percent.

Simon Bennison, head of the Association of Mining and Exploration Companies, said the value of some mining stocks had slumped by up to 40 percent since the tax was announced.

“For companies that are in a fundraising exercise at the moment this is just an absolute nail through the head,” he said.

Iron ore explorer and producer Atlas Iron said the tax would leave smaller-cap miners vulnerable to takeover.

Cape Lambert Resources said Tuesday it had halted all exploration in Australia’s resources-rich Pilbara region due to confusion over the new tax, a development Rudd described as “inevitable” in the reform process.