Editorial: Mexico, the great hope… for higher taxes on mining – by John Cumming (Northern Miner – October 30, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. Editor John Cumming MSc (Geol) is one of the country’s most well respected mining journalists. jcumming@northernminer.com

If there’s been one consistent refrain in Canadian mining circles this millennium, it’s been mining personnel — from top executives to scruffy field geologists — singing the praises of Mexico and its rich mineral potential, easy permitting, mining-friendly culture, skilled population, low costs and enjoyable, snow-challenged lifestyle.

But that’s all changed in the last few months, and it accelerated in the last week of October, as Canada’s globe-trotting miners, especially executives in Vancouver and Toronto, have had to grapple with the dramatically higher federal mining taxes that are on the verge of becoming law in Mexico.

On Oct. 29, Mexico’s Fiscal Reform Act — already passed the previous week by the lower Chamber of Deputies — was approved by the upper Senate in a late-night, 73 to 50 vote.

This fiscal reform package includes a special mining fee of 7.5% on profits (specifically, on earnings before interest, tax, depreciation and amortization), plus another 0.5% gross royalty for gold and silver. The act also wipes out generous accelerated depreciation of assets and immediate deduction of pre-development expenses.

Other features of the act for miners include a 30% corporate income tax, a 10% employee profit-share tax and a 10% dividend tax.

The mining brain trust at BMO Capital Markets — which had been expecting a 3–5% special mining fee — have calculated the impact of Mexico’s new tax reform on the leading miners that are active in Mexico and trade on Canadian or U.S. exchanges, and it’s not pretty.

With that extra kick of the precious metals royalty, the gold and silver miners are naturally hardest hit, with Timmins Gold, Agnico Eagle Mines, Goldcorp, MAG Silver, Fortuna Silver Mines and Pan American Silver all suffering more than a 5% impact to their total net present values using current spot prices, according to BMO’s calculations.

For the rest of this editorial, click here: http://www.northernminer.com/news/editorial-mexico-the-great-hope-for-higher-taxes-on-mining/1002690389/

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