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Resource companies grappling with cash-strapped governments' efforts to squeeze out more of their profits are warning they will reduce investment in countries viewed as having heightened political risk.

The rise in resource nationalism through higher taxes, royalties or government influence over projects could backfire for those countries, said Tom Albanese, chief executive officer of Anglo-Australian mining giant Rio Tinto PLC .

"That may be politically opportune in the short term, but the risk is that it will have the effect of restricting capital flows in the long term. Our business is long term," Mr. Albanese said on Thursday during a meeting with Globe and Mail reporters and editors.

Rio has often been on the front line of battles against governments trying to tap more from resource firms, particularly when commodity cycles are booming. Most recently, Rio and miners such as BHP Billiton Ltd. fought the Australian government to reduce a proposed new resources tax to 30 per cent from the originally proposed 40 per cent.

Mr. Albanese said governments drowning in debt from the latest recession are looking at ways to get more money from miners as companies report record profits during the latest surge in prices of commodities such as copper and coal.

"I think there is an inverse relationship between economic risk and resource nationalism risk," Mr. Albanese said, adding: "The ... higher our returns, the higher our profits, the more governments will look to the resources sector to rebalance the debt they are dealing with."

Last week's government-backed ouster of Brazilian mining giant Vale SA's CEO, Roger Agnelli, is the latest example of a resource-rich nation flexing its muscle in highly profitable times. The move has some investors worried about the impact of what's considered a growing nationalist agenda in Latin America's largest economy.

Panama is also considered a more risky place to invest after it recently repealed part of its mining code allowing investments from foreign governments. It also forced Toronto-based Inmet Mining Corp. to change the power-supply plan at its project in the country to natural gas from coal, at increased costs.

Chile and a handful of African countries have also increased tax revenue from miners in recent years.

Canada, too, is guilty of meddling with its resource sector. Ottawa rejected Australian-based BHP's $39-billion bid for Potash Corp. of Saskatchewan Inc. last fall for not having enough benefits to the country. That decision came amid calls for potash, a key ingredient in fertilizer, to be viewed as a strategic assets as its price is expected to soar amid fears of global food shortages.

Mr. Albanese called the BHP-Potash decision a "one off" due to unique circumstances.

"My own sense is that Canada sees the value of being open to international investment, and the Canadian mining and resource industry has greatly benefited from international fund flows," he said. "I think it's good for any modern mining industry to be fully accessible to those international capital flows."

In 2007, Rio bought Montreal-based Alcan Inc. for $38.1-billion (U.S.), at what turned out to be the top of the market ahead of the commodities crash, leaving the London-based miner suffocating in debt. The company later cut jobs and delayed investments.

Now that commodities markets have rebounded, Rio has started to resurrect some of that spending, committing to invest millions to modernize its aluminum smelters in Quebec and Kitimat, B.C.

A new technology centre in Saguenay-Lac-Saint-Jean - dubbed AP60 - is getting a $758-million (U.S.) injection from Rio, while an aging facility in Kitimat receives $300-million for further construction work ahead of a planned $2.5-billion upgrade. The spending is only a fraction of combined investments of about $6-billion that the company promised before the recession.

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