Excellon CEO talks Mexican tax reform and strategy – by Anthony Vaccaro (Northern Miner – March 21, 2014)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

Excellon Resources’ (TSX: EXN) La Platosa Mine in Durango is one of the world’s highest grade silver mines. The mine also boasts lead and zinc byproducts that help make it one of the lowest cash cost silver mines in Mexico.

The company’s CEO, Brendan Cahill, took some time to sit down with The Northern Miner at the recent Prospectors & Developers Association of Canada (PDAC) convention in Toronto to discuss recent changes to Mexico’s tax code and Excellon’s strategy for thriving in a low cost commodity environment.

The Northern Miner: Your company, like other producers in Mexico such as Sierra Metals (TSX: SMT), took a more expedited route towards production, eschewing the formalities of completing a bankable feasibility study. Is there something about Mexico that allows companies to fast-track to production?

Brendan Cahill: With all the talk of tax reform, when you go through the checklist of things a company is looking for in a country it is going to invest in — the geology, the security, the community relations, education, stability of government — it is still better than almost anywhere else in the world for building a mine.

And you don’t need expats to do it. There is an incredible network of experience with former Fresnillo and Grupo Mexico people…they all have 35 to 40 years experience and then there is a whole layer of other guys stepping in beneath them that will keep things going.

TNM: Let’s talk about the tax. The government recently implemented a 7.5 % royalty on EBITDA, plus another 0.5% royalty on revenues from precious metals, and rather than cut the corporate tax rate to 26% as promised, it is holding it steady at 30%. How problematic is this for miners in the country?

BC: Well, what is perhaps more problematic is the issue of forcing the capitalization of drilling expenditures. We now have to spread them over 10 years rather than expensing them in the first year. So now you go in and drill and maybe have no hope of finding anything but you can’t fully expense it. Capitalizing drilling just doesn’t make sense.

Mexico is complicated right now. There are labour, energy, mining, education and tax reforms. It is a complicated chess game the government is playing and we as an industry aren’t entirely in-the-know in terms of what the political tradeoffs are.

I think it will play out fine in the end. The government is supportive of mining but it needs to be educated further on what effects it can have on industry.

TNM: Is the mining industry doing a good enough job of getting its concerns heard in the highest offices?

BC: The industry is doing a job of it, but we need to make a bigger effort.

For the rest of this interview, click here: http://www.northernminer.com/news/excellon-ceo-talks-mexican-tax-reform-and-strategy/1002974164/rq0wMrp3vyWrlxu0q82vM20/?ref=enews_NM&utm_source=NM&utm_medium=email&utm_campaign=NM-EN03242014

 

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