By Shane Romig
BUENOS AIRES--Pan American Silver Corp. (PAAS, PAA.T) has
shelved work on its Navidad silver mine project in Argentina's
Chubut province due to the local legislature's failure to pass a
regulatory plan for mines and a proposed bill that could sharply
raise taxes on the industry.
"We've suspended new investment in Navidad until we have
legislation in Chubut that will allow us to develop the project,"
Pan American Silver Argentina's business director, Ricardo
Zarandon, said.
Chubut provincial Gov. Martin Buzzi has sponsored legislation
that would slap a new 5% net smelter-return royalty on top of the
current 3% royalty. The bill would also require the provincial
government-owned resource company, Petrominera, receive no less
than 4% of total mineral sales.
In July, Pan American warned it would suspend further investment
in Navidad if the legislation becomes law.
High inflation and "the increased provincial participation will
render the Navidad project uneconomic at any reasonable estimate of
long-term silver prices," Pan American said in a statement at the
time.
No bill has been passed yet, but the uncertainty proved too much
for Pan American to move forward with Navidad.
According to the company's website, Pan American spent $45
million in 2011 and $37.5 million in 2010 on developing
Navidad.
Pan American currently operates the Manantial Espejo silver mine
in Argentina's Santa Cruz province, where the governor is also
seeking to tap the mining industry to plug a wide budget gap.
Earlier this year, Santa Cruz Gov. Daniel Peralta proposed
legislation that would see provincial mining company Fomicruz take
a 10% equity stake in current and future mines without
compensation, and increase royalties to 8% of the value of mineral
output.
While it isn't clear if the bill will be passed, the
cash-strapped province's repeated attempts to secure more tax
revenue out of the mining industry threaten a decade-long
investment boom that has made Santa Cruz home to the bulk of
Argentina's gold mines.
Other Companies with Santa Cruz operations include AngloGold
Ashanti Ltd. (AU, ANG.JO), McEwen Mining Inc. (MUX, MUX.T),
Hochschild Mining PLC (HOC.LN), Mirasol Resources Ltd. (MRZLF,
MRZ.V), and Minera IRL Ltd. (MIRL.LN, IRL.T).
Write to Shane Romig at shane.romig@dowjones.com
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