Nevada residents to decide fate of mining tax
The Nevada gold-mining industry is keeping its ear carefully tuned to what residents think of the state's mining tax.
In November Nevada residents will be asked to vote on whether to remove a mining-tax cap from the Nevada constitution, which stipulates that the mining industry will pay no more than 5 percent tax on the net proceeds of minerals. If voters reject the 5 percent provision, the state legislature could impose whatever tax rate it pleases.
Proponents of the ballot measure say the industry has a sweetheart deal that keeps the industry from paying its fair share. Opponents say removing the cap will open the door to increased taxes, which could discourage investment and kill jobs. The latter group feels that now is an especially bad time to be imposing more costs on the industry, when the gold price is in a slump.
Barrick Gold (NYSE:ABX, TSX:ABX) and Newmont Mining (NYSE:NEM), the two companies that dominate gold-mining in Nevada, have the most to gain or lose from the outcome of the vote, which takes place on Nov. 4.
The resolution was first proposed in 2011 when the gold price was approaching $1,800 ounce. It has since slipped to $1,223/oz, as of Friday. The thinking back then was that increasing the mining tax would help to alleviate a $2-billion shortfall in Nevada's budget as a result of the recession.
According to the Nevada Mining Association, the net proceeds of minerals tax brought in $159.4 million in 2013, with about 96 percent coming from gold and silver. That same year, Nevada produced 5.4 million ounces of gold, at an average price of $1,200 an ounce, the association states – an amount equivalent to about 75 percent of all the gold produced in the United States.