Latin Finance - March 2008 - 57

argentine mining billion pesos, a jump of 52% versus 2006, Legal Retaliation and 154% more than in 2005. The miners most affected by the move, Argentine customs say they are merely including AngloGold Ashanti and the acting on the orders of the mining Swiss group Xstrata, are considering legal secretary, who has the right under the action against the government. Xstrata 1994 law to decide which companies are has invested $2.4 billion in the Bajo liable to or exempt from the export tax. Alumbrera gold and copper mine in But miners strongly dispute that the Catamarca province, which started secretary has the power to change the production in 1997. taxes after a company has received Miners could take their case to the acquired rights. country’s Supreme Court, a process that The government remains tight-lipped would probably take years. Arrieta is about the legal basis for the November recommending his clients file suits with move, and the mining secretary declined to the tax courts, which can make a ruling comment. Legal experts say the more quickly. Alternatively, they could government could invoke emergency make a claim before the World Bank’s economic powers, first granted to the presidency in January Argentine Mining Evolution 2002, to constitutionally Investment yields rewards support the new duties. One of the factors that 16 most annoys mining companies 14 is the manner in which the Investment Production Exports government imposed the charge. 12 It was not carried out by official decree but by an internal memo 10 to customs, signed by the mining 8 secretary, Jorge Mayoral, and the minister of internal 6 commerce, Guillermo Moreno, 4 amending a 2002 resolution. The original resolution, signed 2 only by Mayoral, states that all 0 projects that were granted an 2003 2004 2005 2006 acquired right after that time Source: Argentine National Secretariat of Mining would be subject to a 5% to 10% export tax depending on the mineral. It explicitly listed mines International Center for Settlement of already in production that would not be Investments Disputes (ICSID), which has subject to the tax. However, the internal already handled 42 claims against note of 30 November states that the export Argentina. However, like many external tax should now apply to projects started claims against Argentina, ICSID even before the 2002 resolution, without judgments are very hard to collect on. exemption. Some say the administration might “Mining companies that were soften its stance. “Before imposing the exempted under the 2002 resolution export tax in November, the believe that the November note government would have made a careful undermines the mining investment law evaluation about whether it would halt under which they operate,” says Ignacio future investment in mining,” says Arrieta, a lawyer at Argentine law firm Armando Boullhesén, president of Fortunati & Asociados. “The government Canadian-Argentine Chamber of is now effectively saying that the Commerce, whose members include resolution will apply to mining projects many Canadian miners with interests in that were granted approval and special Argentina. “The government wants this tax treatment before the 2002 resolution. investment and is meeting with all the The whole situation seems very parties involved to reach an agreement. contradictory.” It could be that the export tax is lowered by a few percentage points.” The question now is whether the dispute will put the brakes on future foreign investment, not just in mining. Anglo-Australian miner Rio Tinto, is evaluating a $1.5 billion investment in a potash mine in Rio Colorado in Mendoza and Neuquen provinces, which would produce 2-3 million tons of potash a year for a 50-year period. It is among the top five potash deposits in the world and would cover all of Latin America’s needs. The project has not yet received investment approval, but it is expected to go to the board within the next few months. “We are watching the situation about the new export tax closely,” says Gary Goldberg, chief executive of Rio Tinto Minerals, the major miner. “We had negotiated a reduction in the export taxes that would be levied on any future production, but the measure takes away that reduction and violates our existing agreement,” he adds. Rio is in discussions with its lawyers and the government. “A tax of 5 to 10% is sufficient enough to have an impact on our overall investment decision,” says 2007 Goldberg. Smaller projects look more vulnerable. “Submarginal to small projects will be most affected by this kind of measure, leaving development only possible for those with high economic margins and closing the window on the development of medium-scale mining,” says Larissa Pergat, director of strategic development at Energía Mineral, part of Canadian group Calypso Uranium. Calypso has seven prospective uranium properties in Chubut, Mendoza and Neuquen provinces. However, other analysts say that Argentina is one of the new frontiers for mining and that most big projects will go ahead, especially given current commodity prices. Gold has jumped in value by 130% during the past five years, copper by 325%, and silver by 240%. March 2008 LATINFINANCE 57

Latin Finance - March 2008

Table of Contents for the Digital Edition of Latin Finance - March 2008

Latin Finance - March 2008
Contents
Man of the Year
Peru Domestic Markets
General Atlantic Interview
Investment Bank Compensation
Vale Bids for Xstrata
Brazil Special Report
Infrastructure Finance
Oil & Gas
M&A Outlook
Private Equity
Mexico Special Report
Airports
Structured Finance
Argentine Mining
Latin Finance - March 2008 - Latin Finance - March 2008
Latin Finance - March 2008 - Cover2
Latin Finance - March 2008 - Contents
Latin Finance - March 2008 - 2
Latin Finance - March 2008 - 3
Latin Finance - March 2008 - 4
Latin Finance - March 2008 - 5
Latin Finance - March 2008 - 6
Latin Finance - March 2008 - 7
Latin Finance - March 2008 - 8
Latin Finance - March 2008 - 9
Latin Finance - March 2008 - 10
Latin Finance - March 2008 - 11
Latin Finance - March 2008 - 12
Latin Finance - March 2008 - 13
Latin Finance - March 2008 - Man of the Year
Latin Finance - March 2008 - 15
Latin Finance - March 2008 - 16
Latin Finance - March 2008 - 17
Latin Finance - March 2008 - Peru Domestic Markets
Latin Finance - March 2008 - 19
Latin Finance - March 2008 - General Atlantic Interview
Latin Finance - March 2008 - Investment Bank Compensation
Latin Finance - March 2008 - 22
Latin Finance - March 2008 - 23
Latin Finance - March 2008 - Vale Bids for Xstrata
Latin Finance - March 2008 - 25
Latin Finance - March 2008 - Brazil Special Report
Latin Finance - March 2008 - 27
Latin Finance - March 2008 - Infrastructure Finance
Latin Finance - March 2008 - 29
Latin Finance - March 2008 - 30
Latin Finance - March 2008 - 31
Latin Finance - March 2008 - 32
Latin Finance - March 2008 - Oil & Gas
Latin Finance - March 2008 - 34
Latin Finance - March 2008 - 35
Latin Finance - March 2008 - M&A Outlook
Latin Finance - March 2008 - 37
Latin Finance - March 2008 - 38
Latin Finance - March 2008 - 39
Latin Finance - March 2008 - Private Equity
Latin Finance - March 2008 - 41
Latin Finance - March 2008 - 42
Latin Finance - March 2008 - Mexico Special Report
Latin Finance - March 2008 - 44
Latin Finance - March 2008 - 45
Latin Finance - March 2008 - Airports
Latin Finance - March 2008 - 47
Latin Finance - March 2008 - 48
Latin Finance - March 2008 - Structured Finance
Latin Finance - March 2008 - 50
Latin Finance - March 2008 - 51
Latin Finance - March 2008 - 52
Latin Finance - March 2008 - 53
Latin Finance - March 2008 - 54
Latin Finance - March 2008 - 55
Latin Finance - March 2008 - Argentine Mining
Latin Finance - March 2008 - 57
Latin Finance - March 2008 - 58
Latin Finance - March 2008 - 59
Latin Finance - March 2008 - 60
Latin Finance - March 2008 - 61
Latin Finance - March 2008 - 62
Latin Finance - March 2008 - 63
Latin Finance - March 2008 - 64
Latin Finance - March 2008 - Cover3
Latin Finance - March 2008 - Cover4
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