JOHANNESBURG – South Africa should not replicate Australia's controversial resource tax, which is likely to hurt investment and push capital elsewhere, the head of AngloGold Ashanti said on Tuesday.

A South African minister key in economic policy-making said last week that Africa's biggest economy was thinking about overhauling its minerals tax regime to cash in on high commodity prices and could use Australia as a template.

Australia's government last year pushed for a 40% minerals tax on the massive profits being made by mining companies, although this was watered down to 30% after a huge corporate backlash.

Mark Cutifani, the CE of Africa's top gold miner, said Australia's tax move was a "terrible error" and urged South Africa not to follow suit and further dent confidence in the economically vital sector.

A series of scandals last year and disputes over rights upset many companies operating in the world's top platinum producer and a major supplier of gold.

Cutifani said the South African mining sector was underperforming against its global peers by around 30% largely because of concerns about regulatory uncertainty.

"[The minister's comments] will raise some questions in the minds of investors," Cutifani told Reuters.

"There is nothing wrong with the debate ... most of the other ministers are talking about how they can generate jobs, not destroy jobs."

Enoch Godongwana, deputy minister for economic development, in an interview with Reuters last week, took aim at the mining companies that dominated the economy for much of the 20th century, accusing them of making super-profits out of the soaring price of metals such as gold, platinum and chrome.

FRONTIER PLAYER

Cutifani said South Africa still ranked among the top five countries for mining firms to work in.

But he said rapidly rising electricity prices were a concern, with power utility Eskom possibly demanding two additional annual tariff hikes on top of the three 25 percent increases it has already been granted.

"We probably could absorb half of that ... but ultimately ... it will impact our costs," he said.

Cutifani said AngloGold was aiming to keep its global increases to about half of the industry average, and he was cautiously optimistic about upcoming wage talks with unions.

Cutifani declined to comment on whether AngloGold may offer for emerging gold producer Adamus Resources, whose Ghana project nears one of its own, but the miner would consider any targets that fit into its portoflio and made economic sense.

"We've always said that we like the idea of transactions that are adjacent or have direct impact on our existing operations," he said.

AngloGold would only pursue deals which would allow it to stay in the bottom half of the cost curve, he said.

The company is also scouting the likes of Egypt, Ethiopia, Eritrea and Saudi Arabia, hoping to copy the success of its venture in Colombia, where it was once a frontier player.

"We're very excited about the potential but politically things are a little bit more exciting than we would have liked," he said, referring to the current situation in the Middle East.

Cutifani was bullish on gold, adding that bullion could reach $1,600 an ounce by the end of next year.

Cutifani said AngloGold, which has operations across four continents, still expects to produce between 4,55 to 4,75-million ounces of gold in 2011, up from 4,52-million ounces last year.