Pascua Lama: What price sovereignty?Published by MAC on 2008-09-29
Last December the Argentinian government re-imposed export taxes on mining, in an attempt to recoup more income for the state. It didn't please the companies.
In the past fortnight threats have been made by Barrick Gold to confine its highly controversial cross-border Pascua Lama project to Chile, as the two Latin American governments argue over their relative shares of the income to be generated. See:
Last week, a representative of Argentina's mining engineers association claimed that the government was deliberately violating earlier tax stability agreements.
Government cannot be trusted to develop Pascua Lama - Argentina
By Harvey Beltrán, Business News Americas
25th September 2008
The Argentine government is not trustworthy enough to develop the Pascua Lama bi-national gold project because of its inability to stick to regulations, as demonstrated by the application of taxes on other projects protected by tax stability contracts, a sector executive told BNamericas.
"They have done it with Bajo de la Alumbrera and they want to do it with Potasio Río Colorado. It's clear that when faced with any future complications in our country, they want to squeeze extraordinary resources out of the mega project," said Mario Capello, press secretary at Argentina's mining engineers association Cadim.
Capello believes the Argentine government has a clear responsibility for hampering the project. "Let's be honest: If Lama Pascua [ends up being] just Pascua, which I do doubt, it wouldn't be the fault of the Chileans or anyone on the company's board of directors," he said.
The project is owned by Canada's Barrick Gold and sits on the border between Chile, which hosts the Pascua portion, and Argentina, which hosts the Lama portion, where the former's region III meets the latter's San Juan province.
Reports this week said the governments of Argentina and Chile will meet in October on the tax issues weighing down the bi-national project.
"Hopefully a resolution will arise from the meeting that unblocks the issue of indivisible cross-border services. That way the project would be left open for approval by the [bi-national committee] before the end of the year," according to a statement by the Argentine embassy in Chile.
The tax differences between the two countries have caused the Pascua Lama project to be delayed for more than a year while Barrick maintains its stance that the company will not begin construction until governmental differences are resolved.
However Capello feels the issue of how taxes should be applied is spelled out clearly in the protocols of the bi-national integration agreement and that there is no reason for doubt.
"That's why I still think that what's happening in Argentina - an issue that must be more than a little irksome to the company's board - is the way the national government is violating tax stability. That has to be the issue holding up these delayed negotiations," he added.
Capello feels the way to untangle complications at the project is for Argentine President Cristina Fernández to announce that she will respect existing legislation and the permits issued at the project since it has relied upon fiscal stability since the initial presentation.
With a capex estimated at some US$2.40bn-2.50bn, Pascua Lama is slated to produce 750,000-775,000oz/y of gold and 35Moz/y of silver during its first five years at a cash cost of US$40-50/oz for gold.
Barrick is the world's largest gold producer.