Prime Minister Julia Gillard's mining tax deal looks to be unravelling as Australia's mining giants, including Xstrata, say they were misled about a crucial aspect of the negotiations.

BHP Billiton and Rio Tinto have also voiced their grievances with the tax, stating their anger at the way the tax has been drawn up.

When Ms Gillard took over the leadership of the Labor Party she acted quickly to save the Government's political face by doing a deal over the mining tax.

Together the three miners threw Ms Gillard and Labor a political lifeline when they agreed to accept the Government's modified proposal.

For its part, the Government is relying on about $10 billion of budgeted revenue from the tax. With money outside the resource sector hard to come by, it simply cannot afford for the deal to unravel.

Xstrata coal division chief executive Peter Freyberg has told a senate hearing his company only accepted the deal because it was assured existing and future state royalty payments would be refunded in return for paying the new tax.

"There is a new tax that has been levied. It is over and above royalties," Mr Freyberg said.

"For us the word or the statement 'all royalties' is very clear - we wouldn't have signed the agreement had we thought it was ambiguous.

"One of the big subjects discussed during the consultations was the issue of sovereign risk.

"The fact that the spectre of sovereign risk had now within the Australian resource sector been opened up made us argue the point that we needed, given that this was an increase in tax, we needed certainty of the future and hence argued for the point of all royalties being credited."

The Federal Opposition says the Government has made a mess of the tax.

"In her rush to get something tied down so she could go to the election, she has made a complete mess of the compromise deal that she's made with the three large mining companies here in Australia," said Opposition spokesman for resources, Ian Macfarlane.

"What it means is that the states are now free to continue to move royalties up, basically at will, providing it is less than the MRRT in total, so we can see at some stage now taking bigger shares of royalties and leaving the Gillard-Swan budget in complete disarray."

Meanwhile, in booming Western Australia the Labor Opposition says there is no way it would give up income from state royalties.

Surely 'all royalties'  means 'all royalties' ?
not "just royalties at the current levels", but 'all royalties'

Any tricky lying stuff like this HAS to be clearly defined in an agreement.

Gillard is about to have hell and fury unleashed if she thinks she can deceive the Mining companies.

Money talks, and BS walks.