Latin America Mining – Page 112

Miners warned about Indonesia, Brazil, India and South Africa investments – by Cecilia Jamasmie (Mining.com – December 12, 2013)

December 12, 2013

http://www.mining.com/

A significant increase in conflict, terrorism and regime instability in the Middle East and North Africa, along with deepened global political violence and resource nationalism, are the main risks mining investors will face in 2014, according to a report published Thursday by UK-based risk consultancy Maplecroft.

In its sixth annual Political Risk Atlas (PRA) the analysts tell investors to pay special attention to possible populist moves in Indonesia, Brazil, India and South Africa as national elections in these countries will likely boost resource nationalist rhetoric and policies.

According to Maplecroft close to 10% of the countries studied have shown a significant increase in their risks levels, with foreign investors facing more political violence, resource nationalism and expropriations.

In the last year alone, says the report, the risk of resource nationalism has increased 15% as a consequence of governments attempts to offset the risk of societal unrest through tax increases, tougher regulations or outright expropriation.

Mexican drug cartels now involved in mining industry (CTV News – November 29, 2013)

November 29, 2013

http://www.ctvnews.ca/

MEXICO CITY — Mexican drug cartels looking to diversify their businesses long ago moved into oil theft, pirated goods, extortion and kidnapping, consuming an ever larger swath of the country’s economy. This month, federal officials confirmed the cartels have even entered the country’s lucrative mining industry, exporting iron ore to Chinese mills.

Such large-scale illegal mining operations were long thought to be wild rumour, but federal officials confirmed they had known about the cartels’ involvement in mining since 2010, and that the Nov. 4 military takeover of Lazaro Cardenas, Mexico’s second-largest port, was aimed at cutting off the cartels’ export trade.

That news served as a wake-up call to Mexicans that drug traffickers have penetrated the country’s economy at unheard-of levels, becoming true Mafia-style organizations.

The Knights Templar cartel and its predecessor, the La Familia drug gang, have been stealing or extorting shipments of iron ore, or illegally extracting the mineral themselves and selling it through Pacific coast ports, said Michoacan residents, mining companies and current and former federal officials. The cartel had already imposed demands for “protection payments” on many in the state, including shopkeepers, ranchers and farmers.

Vale to Pay $9.6 Billion to Settle Decade-Long Tax Fight – by Juan Pablo Spinetto – (Bloomberg News – November 28, 2013)

November 28, 2013

http://www.bloomberg.com/

Vale SA (VALE5), the world’s biggest iron-ore producer, agreed to pay 22.3 billion reais ($9.6 billion) to settle a decade-long tax dispute with Brazil over profits of its foreign units, ahead of a deadline tomorrow.

Vale will pay 5.97 billion reais at the end of this month and 16.4 billion reais in 179 monthly installments, plus interest, after its board decided to join a settlement program offered by the government, the Rio de Janeiro-based company said in a filing late yesterday. Shares jumped.

Brazil’s biggest exporters including Vale, brewer Cia. de Bebidas das Americas and steelmaker Gerdau SA (GGBR4) have been fighting a combined 75 billion reais in tax claims on profit of their foreign subsidiaries, according to the country’s tax agency. The net present value of Vale’s liabilities is $6.6 billion, below the $10 billion that was being anticipated by investors, according to JPMorgan Chase & Co. estimates.

“We view this announcement as positive for Vale,” JPMorgan analysts including Rodolfo Angele wrote in a note to clients. “We now can turn the page on the uncertainties surrounding this legal imbroglio to focus on industry and company fundamentals.”

NEWS RELEASE: Vale will participate in income tax settlement

November 28, 2013

11/27/2013

Our Board of Directors has approved its participation in the federal tax settlement (REFIS) for payment of amounts relating to Brazilian corporate income tax and social contribution on the net income of its non-Brazilian subsidiaries and affiliates from 2003 to 2012, as established by Brazilian Law No. 12,865/2013 of October 9, 2013 and Provisional Measure 627 (MP 627) of November 11, 2013.

Participating in the REFIS will result in income tax payments of R$ 5.965 billion at the end of this month and R$16.360 billion in 179 monthly installments, adjusted by the Central Bank of Brazil policy interest rate (SELIC). Vale estimates that the net present value of the tax payments is R$ 14.425 billion.

“The proposed terms have allowed for a considerable reduction in the amounts in dispute, and the decision to participate in the REFIS is consistent with our goal of eliminating uncertainties and directing managerial focus on Vale’s businesses,” CEO Murilo Ferreira commented. “The tax payment will be funded by our operating cash flow, not requiring additional indebtedness, and not causing significant changes in our financial planning, which will continue to support our growth and value creation initiatives, the distribution of dividends to shareholders and the maintenance of a solid balance sheet,” Ferreira said.

Mining reforms key to Chile’s future – by Stephanie Nolen (Globe and Mail – November 26, 2013)

November 27, 2013

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

SANTIAGO DE CHILE — Chile took a decided tilt to the left in elections this month.

Socialist Party leader Michelle Bachelet won the first round of voting with nearly twice the votes of her right-wing rival, Evelyn Matthei, and looks certain to become president in the second round of voting Dec. 15. Ms. Bachelet’s New Majority coalition – including six Communist Party candidates – won a majority in Congress.

The central plank of Ms. Bachelet’s platform is a pledge to increase corporate taxes from 20 to 25 per cent over four years and use the proceeds to fund sweeping reform of education, health and pensions, bolstering the role of the state in every field. She also says she will make businesses pay tax on reinvested earnings.

But none of that should alarm foreign investors, says Karin Poniachik, the former head of the country’s foreign investment council, who served as minister of mining during Ms. Bachelet’s first term as president four years ago.

Vale Tax Appeal Suspended as Justice Requests Revision – by Mario Sergio Lima & Juan Pablo Spinetto (Bloomberg News – November 26, 2013)

November 27, 2013

http://www.bloomberg.com/

Vale SA (VALE5), the world’s biggest iron-ore miner, had its appeal of a 30.5 billion-real ($13.3 billion) government tax claim suspended by Brazil’s Superior Court as the deadline approaches for an out-of-court settlement.

Justice Ari Pargendler, one of five presiding judges, asked to revise the case in a session today in Brasilia. The request followed Justice Napoleao Maia’s proposed approval, Justice Sergio Kukina’s rejection and Justice Benedito Goncalves abstinence. Vale shares fell the most since July.

The case, in which the Rio de Janeiro-based miner is arguing that earnings from foreign operations can’t be taxed in Brazil if they were paid abroad, probably will resume next week, Roberto Duque Estrada, a lawyer for the company, said from the tribunal. That would be after a Nov. 29 deadline for companies to accept a government proposal to scrap fines, interest and legal charges if they agree to pay in one tranche or reduce taxes and interest if they settle in installments.

“The market already priced in this dispute and just wants it to be over,” Leonardo Brito, an analyst at hedge fund Teorica Investimentos, said by telephone from Rio before today’s suspension. “This and the new set of mining rules that Brazil is establishing are pending like swords over the company’s head.”

HudBay Minerals Meets a Legacy of Guatemalan Violence in Canadian Court – by Joseph Kirschke (Engineering and Mining Journal – November 11, 2013)

November 13, 2013

http://www.e-mj.com/

Five years ago, officials at Canada’s Skye Resources Inc. had a simple goal: to become a mid-tier nickel producer representing 1% of the global market by 2015 through developing their open-pit Phoenix project in El Estor, Guatemala, with a local subsidiary.

But as with many things in the troubled Central American nation, the focus was doomed from the start. Within two years, the Vancouver-based miner and Compania Guatemalteca de Niquel (GCN) would stand accused of colluding with private security forces and the local military in the gang rape of 11 indigenous women and two other attacks that left one man dead and another paralyzed, while clearing land for operations.

Such incidents are not unique to Guatemala. Indeed, the nation of 13 million heaves equally under drug trafficking violence and the simmering legacy of a brutal 36-year civil war, which claimed more than 250,000 lives and displaced more than 1.5 million. What is novel about this case, however, was its arrival before HudBay Minerals Inc.—which bought Skye in 2008 and abandoned Phoenix in 2011—in three separate lawsuits in a Canadian court this summer.

These will be the first such trials in the world’s top mining nation following three attempts by other foreign plaintiffs to hold Canadian miners accountable to their own court systems since 1997.

Latin America losing allure for global resource companies – by Marta Lillo (Globe and Mail – November 12, 2013)

November 12, 2013

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

SANTIAGO — Natural resource companies are growing increasingly skittish about Latin America, a region that until recently was one of the world’s most powerful magnets for foreign investment.

In Brazil, the country’s recent move to sell interests in its vast Libra oilfield highlighted growing friction over national resources. Brazilian social activists say the government of Dilma Rousseff “gave away” the country’s resources in the auction, where international energy giants Royal Dutch Shell PLC, Total SA and two Chinese oil companies joined with Brazil’s Petrobras as owners of Libra.

Protesters clashed violently with police near Rio de Janeiro last month. “The country’s strategic oil reserves should not be auctioned. Petrobras is perfectly capable of developing Libra,” said Ronaldo Leite, president of the Rio de Janeiro chapter of the Central Workers of Brazil (CTB).

UPDATE 3-Vale Q3 profit doubles on higher iron ore sales, prices – by Jeb Blount and Sabrina Lorenzi (Reuters India – November 7, 2013)

November 7, 2013

http://in.reuters.com/

Nov 6 (Reuters) – Brazil’s Vale SA , the world’s second-largest mining company, reported on Wednesday that its third-quarter net income more than doubled from a year earlier, beating analysts’ expectations as iron ore prices and sales volumes rose.

Net income for the three months ended Sept. 30 soared 114 percent to $3.50 billion from $1.64 billion in the same period a year earlier, the company said. The result was 6 percent higher than the $3.3 billion average profit estimate of seven analysts surveyed by Reuters.

Iron ore prices averaged about a fifth higher in the third quarter of this year than in the same quarter of 2012, according to Thomson Reuters. Net sales, or total sales minus sales taxes, rose 11 percent from a year earlier to $12.7 billion, beating the average analyst estimate of $12.5 billion. The volume of iron ore sales rose 11 percent to 73.4 million tonnes.

“We expected strong volumes, given the robust Brazilian iron ore export figures for July-September, but shipments still exceeded our expectations,” mining analysts Garrett S. Nelson, Mark A. Levin and Nathan P. Martin of BB&T capital markets in Richmond, Virginia said in a report to investors.

Barrick Gold Corp to raise more than US$3-billion in share sale, shelve Pascua-Lama mine – by Peter Koven (National Post – November 1, 2013)

November 1, 2013

The National Post is Canada’s second largest national paper.

Barrick Gold Corp. has launched a monster US$3-billion equity offering in an effort to repair its debt-laden balance sheet. The move was announced late Thursday afternoon, just hours after the Toronto-based miner said it is suspending construction of the troubled Pascua-Lama project.

“Both actions will radically improve Barrick’s balance sheet, which had become the major overhang to its outlook,” Deutsche Bank analyst Jorge Beristain wrote in a note.

Barrick shares were down more than 6% at US$18.15 in early trading Friday. It is the third largest bought deal in Canadian history, according to Financial Post data, and follows months of speculation that Barrick would tackle its debt load. The company is carrying US$15.4-billion of debt, much of it tied to the disastrous $7.3-billion takeover of Equinox Minerals Ltd. in 2011.

As gold prices declined this year, servicing that debt became more of a burden and pushed Barrick into action. The company plans to use at least US$2.6-billion of the proceeds from the offering to repay debt.

Troubled Barrick launches $3 billion stock sale – by Lisa WRight (Toronto Star – November 1, 2013)

November 1, 2013

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

The world’s largest gold mining company has decided to suspend construction of a mine that straddles the border between Chile and Argentina.

Barrick Gold Corp. announced one of Canada’s largest stock sales Thursday right after it shelved indefinitely its prized Pascua-Lama gold and silver project on the border of Chile and Argentina in a double-whammy to its already withering share price.

The TSX halted trading on the world’s largest gold company at 4:15 p.m. after Barrick announced it seeks to raise $3 billion in cash to reduce debt and strengthen a damaged balance sheet that has been under fire lately by increasingly disgruntled shareholders.

Shares of the cash-strapped Toronto miner – which has seen its share price cut in half over the last year — had fallen another 6 per cent earlier in the day as investors learned construction is now suspended on of one of the richest, untapped gold deposits in the world.

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

October 31, 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.

Barrick Gold may raise Pascua-Lama costs once more – by Allison Martell (Reuters Canada – October 29, 2013)

October 30, 2013

http://ca.reuters.com/

TORONTO (Reuters) – Barrick Gold Corp (ABX.TO: Quote) will likely raise the cost estimate for its huge Pascua-Lama mine project in South America for the third time in less than two years when the world’s top gold producer reports results on Thursday.

Much has changed since November, when Toronto-based Barrick pegged the cost of the gold and silver project at $8.5 billion, and markets are anxious to see the company’s new capital cost estimate.

High in the Andes, on the border between Chile and Argentina, Pascua-Lama is Barrick’s biggest and most important growth project. It’s risky, but the potential is great: when and if the mine is completed, it is expected to have exceptionally low operating costs, which could pay dividends for years to come.

Since Barrick released its November estimate, regulators have halted construction on the Chilean side of the project, citing serious environmental violations. Barrick has agreed to build a new water management system to meet their concerns, and said in June it would defer some spending that had been scheduled for 2013 and 2014.

HudBay case raises litigation risk for Canadian resource companies – by Peter Koven (National Post – October 30, 2013)

October 30, 2013

The National Post is Canada’s second largest national paper.

When an Ontario court ruled against HudBay Minerals Inc. in a human rights case in July, it sent shockwaves across the Canadian mining and legal communities. Months later, lawyers remain far from certain what kind of long-term impact the decision will have.

In its decision, the Ontario Superior Court of Justice determined that the suit against Toronto-based HudBay should proceed in Canada, even though the alleged abuses took place in Guatemala. HudBay is not appealing the ruling, which paves the way for a trial some years in the future. The plaintiffs claim that HudBay’s security personnel killed a local activist and gang-raped 11 women.

The implication of the court ruling was obvious: In the future, Canadian resource companies with foreign operations (which is most of them) face a real risk of increased litigation at home based on their conduct abroad. That introduces significant risk for companies like Barrick Gold Corp. and Goldcorp Inc. that have been accused of massive misconduct in far-flung jurisdictions.

Murray Klippenstein, the plaintiff lawyer in the Choc vs. HudBay case who played a key role in bringing it to Canada, said he does expect more lawsuits of this kind.

Grupo Mexico will focus offshore if Mexico mining tax enacted – by Dorothy Kosich (Mineweb.com – October 29, 2013)

October 29, 2013

http://www.mineweb.com/

Greater production from Grupo Mexico’s mining division increased third-quarter base metals sales, but precious metals sales declined.

RENO (MINEWEB) – Grupo Mexico warned Monday that Mexico’s proposed 7.5% tax on mining earnings–in addition to a 0.5% tax on precious metals revenue and the elimination of the immediate deduction on exploration expenses–“will jeopardize investment in current and future projects in the sector, along with the consequent effect on jobs and infrastructure.”

“If approved, we will conclude our current investment program of US$3.5 billion for 2013 and US$1.5 billion for 2014,” said the company.

“Nevertheless, we will be obliged to re-direct our future investment program of US$5.3 billion for the coming years, which is primarily allocated to Mexico, and analyze opportunities in countries where the investment conditions are more favorable, such as the US, Canada, Peru or Chile which offer a stable tax regime with stimuli and low energy costs,” Grupo Mexico advised.