Latin Finance - July/August 2010 - 40

canadian miners

LatAm Contagion?

The tax hike trend may spread to other countries. “I would not be surprised if other LatAm markets also increased taxes,” says Ecclestone. “It will be interesting to see what happens in Mexico because it has a budget crunch. Miners talk about it at conferences, but there is no sign from the Mexican government that this will happen. Still, don’t be surprised it they do increase taxes,” Ecclestone says. Ecclestone even sees potential for the situation to change in Brazil, which has a general election this year. “Brazil keeps saying its fiscal situation is great, but you never know what these countries will try and do. There will be a change in regime later in the year and it is not necessarily going to be Lula part two.” “It is really no surprise that some governments would seek to increase revenues by taxing mining and other extractive companies, so we may very well see it in other markets,” says James Thomas, vice president of political risk for the Americas at Switzerland-based insurance company Zurich. “The issue of resource nationalism is something we have been talking about,” he adds Some companies have also experienced problems in Colombia, generally perceived as a market-friendly country, where the government is changing the mining code. This may affect mining at certain elevations and in some ecosystems, says Thomas. Vancouver-based Greystar Resources, for instance, was told by the Colombian government in April that it had to resubmit an environmental impact assessment for its Angostura gold-silver project in because the pit and infrastructure under its plan would infringe on areas protected by new mining legislation. However, the company appealed the decision and the government May 31 opted to review the existing assessment. Greystar shares lost nearly half their value on the April decision, but climbed back after the company won the appeal. Greystar says it has already begun the process of securing $650 million in project finance from international sources for its Angostura gold and silver project. However, a second round win by former defense minister Juan Manuel Santos is expected to boost the mining

industry. “With a Santos presidency, one should expect . . . no short-term changes to the investor-friendly business regulatory regime,” says Canadian financial institution RBC. It adds that Santos is in favor of attracting more foreign investment to the resource sector.

Nevertheless, Ecclestone does not believe miners can complain about the new charge. “They have had a pretty good run for a long time,” he says. Moreover, a tax increase in Chile would only hit larger producers. “It will affect companies that produce more than 50,000 tons a year of copper, so it’s not really going to affect us, but it will affect the medium to large miners to some degree,” says Mills. But even mining giant Kinross Gold does not expect a tax increase to hurt much. “Given the size of our operation, it will not deter us from future investment,” Tye Burt, president and CEO of Kinross, tells LatinFinance. “I can’t say that we are ever particularly happy with new and unexpected taxes, but given the natural disaster, it’s almost understandable,” he adds. Nolan Watson, CEO and president of Sandstorm Resources, a Canadian firm providing financing to miners, says companies in Chile do not seem overly worried. “Chile is not heavy handedly imposing taxes,” he says.

Gold financing takes off: McEwan

Miners in countries with unstable tax regimes or a tendency for nationalizing In investment-friendly Chile, the and expropriating assets find it harder to government has proposed hiking taxes on get financing. But when they operate in an copper mining by 3.5%-9.0%, in addition investment-friendly country, the opposite to other sectors, to help finance postis true. earthquake reconstruction. The Chilean McEwen says there is a growing appetite government, which says it plans to spend for gold and silver financing vehicles about $8.4 billion over four years to rebuild, from miners in LatAm and expects this to estimates an increase in mining royalties continue. “Investment dealers are fairly would generate $700 million a year. imaginative. Right now the equity market is “In Chile the argument [to raise taxes] a little quiet, but as gold goes up there will is very feeble,” Ecclestone says. “They have be more equity issued or more convertible a pretty good fiscal situation and could debt issues if the equity markets aren’t borrow some more money because they there,” he says. hardly have any government debt. They There is some activity on the Toronto have enormous pension funds that could Stock Exchange (TSX), which has been invest in better infrastructure and they essential for miners seeking funds to have Codelco,” he explains. expand in LatAm. For example, mining Ecclestone adds that a 20% stake start-up Tahoe Resources, which is buying in Codelco, the government-controlled the Escobal silver project in Guatemala copper mining company, could fetch from subsidiaries of Goldcorp for 505 $8-$10 billion. “That would more than million Canadian dollars, raised 348 million meet whatever requirements they have,” Canadian dollars through a TSX IPO. GMP he says. Securities and Genuity Capital Markets However, the Chilean government has were co-lead underwriters, with BMO, decided not to sell a piece of Codelco to CIBC, Macquarie, RBC, Dundee Securities raise funds, the miner’s new CEO Diego and Paradigm Capital as underwriters. Hernandez tells LatinFinance. Funds raised in the float will be used

Access to Credit and Insurance

Weak Chile Rationale

40 LatinFinance

July/August 2010



Latin Finance - July/August 2010

Table of Contents for the Digital Edition of Latin Finance - July/August 2010

Latin Finance - July/August 2010
Contents
Equity/Debt Fund Performance
European Investors
Brazil Domestic Buyside
Mexican Domestic Buyside
Mexico Venture Capital
CEMEX CFO Interview
Panama Investment
Canadian Miners
Peru Investor Report
Peru is Making Strides to Develop Gas and Oil
Microfinance Volume Rises at a Steady Clip
Latin Finance - July/August 2010 - Latin Finance - July/August 2010
Latin Finance - July/August 2010 - Cover2
Latin Finance - July/August 2010 - Contents
Latin Finance - July/August 2010 - 2
Latin Finance - July/August 2010 - 3
Latin Finance - July/August 2010 - 4
Latin Finance - July/August 2010 - 5
Latin Finance - July/August 2010 - 6
Latin Finance - July/August 2010 - 7
Latin Finance - July/August 2010 - 8
Latin Finance - July/August 2010 - 9
Latin Finance - July/August 2010 - Equity/Debt Fund Performance
Latin Finance - July/August 2010 - 11
Latin Finance - July/August 2010 - 12
Latin Finance - July/August 2010 - 13
Latin Finance - July/August 2010 - 14
Latin Finance - July/August 2010 - 15
Latin Finance - July/August 2010 - 16
Latin Finance - July/August 2010 - European Investors
Latin Finance - July/August 2010 - 18
Latin Finance - July/August 2010 - Brazil Domestic Buyside
Latin Finance - July/August 2010 - 20
Latin Finance - July/August 2010 - 21
Latin Finance - July/August 2010 - 22
Latin Finance - July/August 2010 - 23
Latin Finance - July/August 2010 - 24
Latin Finance - July/August 2010 - 25
Latin Finance - July/August 2010 - Mexican Domestic Buyside
Latin Finance - July/August 2010 - 27
Latin Finance - July/August 2010 - 28
Latin Finance - July/August 2010 - Mexico Venture Capital
Latin Finance - July/August 2010 - 30
Latin Finance - July/August 2010 - CEMEX CFO Interview
Latin Finance - July/August 2010 - 32
Latin Finance - July/August 2010 - 33
Latin Finance - July/August 2010 - Panama Investment
Latin Finance - July/August 2010 - 35
Latin Finance - July/August 2010 - 36
Latin Finance - July/August 2010 - 37
Latin Finance - July/August 2010 - 38
Latin Finance - July/August 2010 - Canadian Miners
Latin Finance - July/August 2010 - 40
Latin Finance - July/August 2010 - 41
Latin Finance - July/August 2010 - Peru Investor Report
Latin Finance - July/August 2010 - 43
Latin Finance - July/August 2010 - 44
Latin Finance - July/August 2010 - Peru is Making Strides to Develop Gas and Oil
Latin Finance - July/August 2010 - Microfinance Volume Rises at a Steady Clip
Latin Finance - July/August 2010 - 47
Latin Finance - July/August 2010 - 48
Latin Finance - July/August 2010 - Cover3
Latin Finance - July/August 2010 - Cover4
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