UPDATE 1-Peru miners wait for royalty reform small print
reuters.com
Fri Sep 16, 2011 5:00pm EDT
* Miners advancing big projects, small ones less certain
* Industry leaders say law should respect negotiations (Adds fresh quotes from mining minister, industry group)
By Caroline Stauffer and Patricia Velez
AREQUIPA, Peru, Sept 16 (Reuters) - Mining companies say a drive by Peru's leftist president to raise royalties should not derail multibillion-dollar projects as long as the small print reflects the spirit of agreements with the industry.
President Ollanta Humala's government presented a bill to Congress on Wednesday to reform the current tax regime as industry leaders gathered for the Perumin mining convention in the Andean city of Arequipa. [ID:nS1E78D26C]
Humala, who has moderated his once-radical leftist tone, was elected in June on pledges to raise mining taxes to help fight poverty, sparking uncertainty in a sector that accounts for about 60 percent of Peruvian export earnings.
His decision to negotiate the royalty reform proposal with mining companies has helped soothe investor concerns, although some industry figures say the higher tax burden threatens smaller, less productive operations.
Others say the government must ensure the law passed by Congress sticks to the outlines already discussed.
"The rates are exactly what we negotiated, we don't have a problem with them," Pedro Martinez, head of the country's mining company association, said on Friday.
But he expressed concern over a clause in the bill that would let royalty rates be revised in future, saying lawmakers should modify the government proposal to ensure investment continues to flow into the fast-growing economy.
The government proposal envisions royalties of between 1 percent and 12 percent on the profits of those mining companies that did not sign stability agreements in the 1990s.
If Humala's bill is approved, they will also have to pay a "special tax" of 2 percent to 8.40 percent on their profits.
Meanwhile, companies that signed stability accords would have to pay a "special contribution" of between 4 percent and 13.12 percent of their profits.
The proposed system, which would be based on miner's operating profits, would replace the current royalty rate of between 1 percent and 3 percent paid on sales.
Mining firms operating in the South American country have projects with planned investments of up to $42 billion for the next 10 years, according to private estimates, and many companies confirmed their plans this week.
Peru's Buenaventura (BVN.N) and U.S.-based Newmont (NEM.N) said their $4.8 billion Conga mine, the most expensive mine in Peru's history, was on track to come on line in 2014. [ID:nS1E78B16D]
Companies including Xstrata (XTA.L), Anglo American (AAL.L) and Barrick Gold Corp (ABX.TO) detailed their projects at this week's convention in Peru, the world's second-biggest copper and silver producer and the No. 6 gold producer.
Barrick, the world's top producer, said it was "betting on Peru" with a $550 million investment program. Cerro Verde said it expected to submit an environmental impact study for its $3.5 billion expansion project by year's end, playing down the impact of the tax shake-up.
"The new formula for additional mining payments meets the objectives of President Humala's government while also preserving Peru's competitive position as an attractive country for mining investment," Bruce Clements, general manager at the Cerro Verde (CVE.LM)(FCX.N) copper mine told Reuters.
Some miners said smaller companies may have to reconsider their plans if Congress passes the new tax scheme.
"There are marginal projects with very marginal ore grades that, if we weren't going through a time of high metals prices, would never be developed and would clearly be affected by higher taxes," Juan Luis Kruger, Gold Fields GJIJ.J Latin American chief, said at the convention in highland Arequipa.
Gold Fields, the world's No. 4 gold producer, does not have the tax stability accords signed by many large international firms operating in Peru including Xstrata, BHP Billiton (BHP.AX) and Barrick.
Mines Minister Carlos Herrera told reporters the government was open to changes to its proposed legislation.
"In my opinion, the objective (of preserving investment) has been met, but if it's felt that improvements can be made, there shouldn't be a problem," he said. (Editing by Helen Popper and Andrea Evans) (helen.popper@thomsonreuters.com; +54 11 4318 0655; Reuters Messaging: helen.popper.reuters.com@reuters.net)) |
