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A foreign CEO gets it

11 November 2013

Samuel Williams, BN Americas:

Planned mining taxes in Mexico may help win community support for new projects, Jason Reid, CEO of US-based precious metals miner Gold Resource …  said in a call to discuss Q3 results.

While the 7.5% mining tax and additional 0.5% gross revenues charge for precious metals miners will “hurt” both Gold Resource and the mining industry in Mexico, one positive from the reforms is that it may “encourage” communities to support mine development in their areas, with 50% of the taxes to be directed to mining communities or states, Reid said.

People living close to projects or deposits may “want a piece” of the tax revenues and encourage companies to develop mines in their areas, he added.

Reid said the taxes could help the company make “greater headway” at its El Rey project in Mexico’s Oaxaca state which has been affected by community opposition.

Gold Resource said in August that it was continuing talks with local people the aim of winning support for the project.

The mining companies that have threatened to pull out of Mexico have been blowing smoke out their asses (in my humble opinion). Some may pull out in a race to the bottom as far as environmental and labor regulations (and taxes) go, and the quick buck artists that are going to be selling mining operations in lower cost areas (presuming they can find areas with established mining operations and qualified employees) probably won’t be missed.

Although in some sense, Mr. Reid is talking about “selling” his projects with a little more ease, we’re also talking about making it more palatable for Mexican communities to buy into a project that is going to seriously and permanently impact their community long after the metals are extracted.

And, where there have been social “issues”, they have usually revolved around the miner’s isolation from the affected communities, and the mining operation’s unwillingness to invest in restoration or damage abatement. Think of the savings if they didn’t have to invest in “security” (i.e., hit-men and professional thugs) that seem to be a standard with some foreign firms.

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