Australian Prime Minister Julia Gillard met with BHP chief executive Marius Kloppers on Wednesday in an effort to save the agreement signed with the mining industry which faces the prospect of a collapse.

The Sydney Morning Herald reported that the mining executive, Kloppers, visited Ms Gillard in Canberra yesterday and held a separate meeting with Trade Minister Craig Emerson.

The issue arose on the state royalties and how this can be offset with the planned mineral resources rent tax.

Although the Australian three states, Western Australian, Queensland, and South Australian Governments have no immediate plans to increase their state mining royalties, the companies would like to clarify this issue with urgency.

Reports gathered showed the MRRT agreement forged on July 2 allowed for all state royalties to be offset against the tax, regardless of the implementing date, which according to the Australian and news.com.au is also the view supported by the Institute of Chartered Accountants.

However, Australian Resources and Energy Minister. Martin Ferguson had said future increases in state royalties could not be offset by cuts to the planned 30 percent mining tax on iron ore and coal. The deal is now limited to to state royalties that were in place or "scheduled" when the original resource super-profits tax was announced in May.

"The government's position on this issue is clear - royalty rates that applied or changes to royalty rates that were scheduled to apply in the future, as at May 2, 2010, will be credited," Ferguson said in an e-mailed statement today and reported on Bloomberg.

Prime Minister Julia Gillard told Parliament yesterday she would not allow commonwealth revenue from the MRRT to suffer by allowing the states and territories to increase mining royalty rates.

"In implementing the mineral resources rent tax, we obviously won't be giving a green light to state and territory governments to increase their royalties in a way which means the federal government effectively foots the bill," Ms Gillard said.