Chile Mining Min Slams Escondida On Copper RoyaltyPublished by MAC on 2006-02-17
Chile Mining Min Slams Escondida On Copper Royalty
by SANTIAGO (Dow Jones)
17th February 2006
Chilean Mining Minister Alfonso Dulanto slammed copper mining giant Escondida's decision to not pay royalties as it would only have cost it 2% of its $2.5 billion 2005 earnings, La Tercera newspaper reported Friday.
"It's not very sensible that a company that makes that level of income using non-renewable resources in Chile isn't willing to pay" the royalty, Dulanto told the newspaper.
The royalty tax is based on annual production and Escondida would have paid about $40 million in copper mining royalties.
Escondida opted to not pay royalties under the current law, as one of its owners, a consortium led by Mitsubishi Corp. (8058.TO), opted for guaranteed tax rate.
Escondida is owned 57.5% by Anglo-Australian mining giant BHP Billiton PLC (BHP), 30% by Anglo-Australian company Rio Tinto PLC (RTP), 10% by a Mitsubishi Corp.-led Japanese consortium and 2.5% by the International Finance Corp.
"It was their option and they'll probably know how to deal with the issue in the future," Dulanto said.
The government recently said it would send a bill to congress that would clarify royalty payments and would force Escondida to pay.
That bill is ready and waiting for President Ricardo Lagos to send it to congress, a Mining Ministry spokesman said Friday.
The royalty is a tax of 5% of operating profits on miners who produce more than 50,000 metric tons of copper a year. Escondida is the only miner that opted for the non-royalty paying tax scheme.
As the largest privately-held copper miner, Escondida is the biggest tax payer in the country.