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Strategies & Market Trends : Ride the Tiger with CD -- Ignore unavailable to you. Want to Upgrade?

To: Proud Deplorable who wrote (174447)	9/11/2009 5:15:55 PM
From: E. Charters	Read Replies (1) \| Respond to of 313013

They (EC in Ecuador), owe ten percent carried owned by the military plus a 4 percent smelter return. And they can't get permits to drill? sniff sniff sniff.. what is that smell!? ooooohhhh.. glad we didn't step in it. 10% owned by the mil boys and carried by EC. Uh huh. Now a 4% NSR is worth 20% of the profits in a normal regime of 45% tax, and what is the government royalty? 5%? Anybody mention that? So 9% actually, which could be 45% of profits. Let's look at it. Operating costs ona good good open pit non refractory gold mine. $15.00 per ton. Let's say 3 million ounces of 2 gram ore. So 46 million tons. 3 dollars capex and 12 dollars to operate. They make $855.40/oz after royalties per oz, and on $232.50 costs recover $622.90/oz Then they get 10 per cent gouge, so it is down to $560.61/oz. Then kick in 45% tax. So the company makes $308.55/oz after tax. Their final take home is 38 per cent off the top. That is in a totally ideal mining situation. A vat leach, high grade, oxide mine, which won't cost them a cent to find, or fease, or permit. But you know and I know it will take 5 years and with only three million oz, let's say they won't get bought out and will be lucky as hell to finance. IFF. If they get hit by a windfall tax, then you can forget it. The government and the royalty and percentage holders? They make a total of $147 per ounce on royalties alone, let alone tax. More than 47% of what the company makes after tax. The factor here on a very profitable mine is that the royalty gouge is 3 times the total royalty as a percent of total profits before tax. On royalties alone the government and private royalty holders make 23.6% of the total operating and post capital-recovery profit. Contrast that to the Quebec government who makes on ALL mining taxes, corporate taxes and royalties, with the Federal tax, only 30% of total profits. The Banana republics, once a haven for operators who desired to flee big taxes are now heavy gouge. They are not preferred places to do business especially with byzantine front end & envi regs and delays. No way more profitable than an open pit mine in Quebec. The bottom line is in Ecuador in an ideal situation at very low operating costs, and at these tax and royalty rates you keep 49% of profit. In Quebec you would keep 70%. At one time Peru and now Columbia have attractive tax rates. Chile wasn't bad but I believe they have jacked their mineral royalties to untenable levels recently. EC<:-}