Argentina adjusts there royalty to 3% sales. Good news as an example of a South American country that want to promote mining investment. The more countries in S.A. that do this the more pressure for Ecuador to keep ther royalty in line with their neighbours.

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Argentina San Juan Gov Proposes Change In Mining Royalty Tax


November 29, 2007 2:33pm ET


SANTIAGO (Dow Jones)--The governor of Argentina's San Juan province Thursday said he wants to change the way mining royalty taxes are calculated, basing them on 3% of gross sales instead of 3% of raw output as is the case now.

Speaking on the sidelines of a mining conference, Governor Jose Luis Gioja said his proposal, which would require federal legislation, would be easier on mining companies.

Earlier this month, Gioja proposed a higher tax of 5% of gross sales and the elimination of tax credits for mine development costs, according to Argentine press reports.

However, Gioja said Thursday the proposed change was just a way to simplify the process. He said the gross sales calculation also would allow mining companies to keep their strategic information classified.

"With the calculation based on raw output, companies have to release information that's sensitive to their business, but that's not really important to us," Gioja said.

The governor said he has talked to a few mining companies and "they think the (proposal) is rational."

His scheme would only be applicable to new projects, he said.

However, Gioja didn't rule out raising the royalty tax in the future.

"I think that we'd have to think about modifying it as market conditions improve," he said.

Meanwhile, speculation that the federal government is considering imposing export taxes on mineral shipments has been rattling local mining interests.

Mines in Argentina currently pay a royalty of 3% of gross output with tax credits for development costs. The current tax structure was implemented in 1993 under a national mining law that also guaranteed tax stability for 30 years.

However, earlier this month, the government imposed sharp export tax increases on grains and petroleum products in an effort to increase government revenue and shield the domestic market from surging international prices.

The government is poised to do the same with mine shipments, including gold and copper, according to Argentine press reports.

A spokesman from the Mining Ministry declined to confirm or deny the reports.

Billions of dollars are being spent on the development of a number of major mine projects in San Juan, including Barrick Gold Corp.'s (ABX) $2.4 billion Pascua-Lama gold mine project straddling the Chile-Argentina border. Barrick operates the Veladero gold mine in the province. Other projects include Yamana Gold Inc.'s (AUY) Gualcamayo mine and Intrepid Mines Ltd.'s (IAU.AU) Casposo gold mine project.

In addition, Xstrata PLC's (XTA.LN) El Pachon copper mine project is expected to cost $1.8 billion to $2 billion to develop, and 26 companies are exploring in the province, with 123 million Argentine pesos ($39 million) spent on scouting last year, provincial Mining Minister Felipe Saavedra told Dow Jones Newswires recently.

San Juan province has shown strong support for mining development, while a number of other Argentine provinces in the mineral-rich Andes Mountains having recently blocked mining by banning essential chemicals used in extraction.

-By Carolina Pica, Dow Jones Newswires; 56-2-460-8544; carolina.pica@dowjones.com

(Shane Romig in Buenos Aires contributed to this report.)