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18 November 2013

As expected, the number of companies pulling out of mining operations in Mexico due to a higher royalty tax so far has been… zero.  Two typical press releases from my in-box today:

New mining taxes in Mexico will not derail Toronto-based McEwen Mining’s (NYSE, TSX: MUX) investment in the country, CEO Rob McEwen told the Cowen Group annual global metals, mining and materials conference in New York.

The charges, which include a 7.5% tax on mining sales minus certain deductions and an additional 0.5% gross revenues tax on precious metals mines, will increase the company’s costs, McEwen told the event, “but won’t slow down our exploration.”

“I am a big fan of exploration,” he added. “Companies that cut back on exploration are giving up their future.”

The company’s capex will also remain the same, he said.

While the exact impact of the taxes on McEwen Mining is not yet known, the cost is likely to be “under US$1mn” next year, McEwen said, with part of the cost “offset by contributions and investments in the local community.”

(BN Americas)

Toronto-based Agnico Eagle Mines (NYSE: AEM) aims to continue expanding its Mexican business beyond 300,000oz/y gold production despite new mining taxes, corporate director of business strategy Dmitry Kushnir said.

There is a “definite objective to grow the contribution” of the company’s Mexican business, Kushnir told the Cowen Group Annual Global Metals, Mining and Materials Conference in New York on Tuesday (Nov 12).

The continued growth plans come despite tax reforms which include the introduction of a 7.5% mining tax, based on sales minus certain deductions, and an additional 0.5% gross revenues tax for gold, silver and platinum mines.

The reforms were passed by the senate in October and are expected to become law from January 1.

(BN Americas)

One Comment leave one →
  1. NORM permalink
    20 November 2013 5:29 am

    The standard oil lease here in Ohio pays the land owner 18% of the net, some old leases pay 12% of the gross, all of this is before tax levied by the Federal, State and local governments. After it is all said and done, the oil concern keeps between 75% and 66% of its income from a given well. The Expat Mexican mining outfits are getting off cheap as far as their tax and royalty payouts.

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