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Gold/Mining/Energy : ECHARTERS
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To: Dirtythirty who wrote (3674)11/11/2011 12:14:52 AM
From: E. Charters  Read Replies (1) of 3744
 
The math is crude. It does not have corporate taxes quite right as there was no allowance for depreciation. There are two good things about the Guyanese move, the waiving of duty which makes a large capex difference, and the reduction of taxes by 25% from 40% to 30% in this particular agreement. If you don't get a coporate tax reduction, then you are much worse off..

But also, during payback phase the project has to pay from 8% off the top. I think the revenue boys in government don't really have an understanding of the economics of commodity projects which drill off the grade to 100%. IT is hard to plan a commodity recovery system when they are moving the bar. An unseen part too is that the Guyanese (in their favour) have accelerated depreciation programs available. There

It is the old two steps forward one step back. If we examine other jurisdictions we see that then Guyanese are not that competitive. We examine Canada, and the total tax AND royalty load is 30%. 29% in Quebec. The royalty rate in Mexico is zero, and the tax load is 17.5%. Before you go ballistic on Mexico, note that their tax is a flat tax and whlle the write offs are fantastic, all in the 1st year, you can't deduct royalties or payroll taxes. These are tax credits. This tends to make producers use contractors for development and production as they are 100% tax deductible.

EC<:-}
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