Canberra failed in convincing Fortescue Metals chief executive Andrew Forrest to back the new mining tax by suggesting changes in the capital treatment.

The Rudd government is ready to assist the company with large financing to fund expansion. However, Fortescue reportedly told Treasury officials it sees such modifications as only a short-term solution, and would not fix the broader and long-term problems with the levy.

The Treasury officials' suggestion is part of the government's collective effort to split the almost unanimous industry opposition to the tax announced on May 2.

Canberra has almost abandoned hope of persuading large companies such as Rio Tinto, BHP Billiton and Xstrata, as it will not move on the headline rate of 40 per cent, or the fact that the levy will be implemented to existing projects -- the major concerns to companies.

To reduce the political damage, especially in key marginal seats, it is instead concentrating on cutting specific deals with certain sectors such as the coal-seam gas industry in Queensland.

The government is persistent to separate the high-profile Mr Forrest from the united front by the larger industry players against the tax. This led to discussions about how to deal with Fortescue's odd circumstances. As a relatively new company, Fortescue could not finance expansion except by borrowing to meet its high expenditures.

Under the original proposal, borrowing costs could not be subtracted from the tax, destroying the company's cash flow and its potential to attract project finance for development.

Unlike the more established companies, Fortescue has not written down its project expenses over a long times and would therefore have much higher costs, which could be subtracted from its possible tax obligations.

During negotiations this week, however, Fortescue told Treasury that modifications to the treatment of capital would only slow up the pain for the company, as it would still eventually face a 40 per cent tax rate.

The company would also be reluctant to support anything that indicated it was willing to weaken the opposition from other large miners.