Cape Lambert Resources from West Australia has announced that its exploration activities in the Pilbara region has been cancelled following the federal government's planned imposition of a 40 percent super profit tax on mining industry.

In a report by AAP, the resource company said that all activities in its iron ore project site will be halted and Cape Lambert is now scouting for locations outside Australia to continue its exploration operations.

The company had originally planned to start drilling projects later this year but the new tax measures prompted the company to abandon the project as it lamented that the super tax has left the company looking for answers.

Cape Lambert chairman Tony Sage said that the company is now at loss and do not understand how the new tax will actually work, stressing that "while there's uncertainty, I think you'll see many exploration and mining companies cease projects until there is certainty."

The federal government is poised to implement the super profit tax on resource companies but will refund royalties paid by miners to state government and introduce exploration rebates, as it stressed that mostly affected by the new regulations are mining companies with above normal super profits.

Prime Minister Kevin Rudd has emphasised that there are benefits to be reaped from the new tax measures, arguing that "it will help fund cuts to the corporate tax rate and provide small businesses with a tax write-off for purchases up to $5,000."

Tim Weir of Black Swan Equities countered though that the proposed super profits tax has introduced so much risks to resource companies such as Cape Lambert.

He told AAP that most projects, if not all, in the mining industry are capital intensive and companies who get involve naturally undertake studies, and "if their assessment of the impact on the economics of the project that this has, they probably would have come to the conclusion that there's too much uncertainty for the risk they have to take in developing the project."