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Message: Don't mess with the 300 Club !
http://www.latinomineria.com/noticias/imprimir_noticia_neo_en.php?id=2155
| The News 23/07/12 | |
Ecuador – Kinross secures legal reforms for Fruta del Norte project Negotiations over development of Fruta del Norte broke down last year over the company’s “demands”, the government said at the time. The demands were related to the tax on surplus projects, which the Mining Law stipulates should be split 70%/30% between the state and private investors. |
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Mining company Kinross will sign a large-scale mining contract for its Fruta del Norte project, Ecuador’s largest gold deposit (seven million ounces of gold), after the country’s government agreed to legal “modifications” on tax and labor issues.
Negotiations over development of Fruta del Norte broke down last year over the company’s “demands”, the government said at the time. The demands were related to the tax on surplus projects, which the Mining Law stipulates should be split 70%/30% between the state and private investors. However, “the possibility that the contract will not be signed is now zero”, said Eduardo Flores, vice-president for Kinross in Ecuador. Above all because in recent months “we have had to work [with the government] on the areas where adjustments can be made,” he said in statements reproduced by the La Hora. Modifications will be made to the Mining Law and labor regulations. On the first point, Jorge Glass, Minister of Strategic Sectors, explained that the adjustments will be made in line with “the moderation of costs which we are going to evaluate.” This is because “we believe that the company may be right on the issue of the cost structure, but we must carry out studies and there will be announcements in two months,” he said. Flores also announced that work has been carried out on expanding the working day for the workers, as current regulations “do not allow people to work for more than six hours.” The changes were announced during the Ecuador Mining Forum, which took place yesterday in Quito. Flores explained that the project would not be profitable under the current tax system. The law stipulates that the state cannot receive less than 50% of a mine’s revenue. These include 5% from royalties, 12% from sales taxes, 23% from a tax on profits, and 70% from the tax on surplus profits, the rate of which will be fixed in the contract. This economic model is not attractive for Kinross because “the average production cost is US$800 per ounce [of gold].” If the average sale price is US$1,600 an ounce, “the profit margin will fluctuate between US$300 and US$400 and if half of this goes to the government, the equation does not work,” he said. |
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