Top miners operating in Mexico to leave if 7.5% tax approved
Goldcorp (TSX:G, NYSE:GG) and Grupo Mexico, two of the largest miners operating in Mexico, are warning they may need to take billions of dollars in planned investments to other markets if proposed new taxes on resource companies are approved.
Both companies expressed last week that President Enrique Peña Nieto’s plans to reap more income tax from the mining sector’s higher earners, through a proposed 7.5% tax on resource companies, and as much as 8% for gold, silver and platinum, would likely forced them to rethink their future in Mexico.
Delivering its Q3 results Monday, Grupo Mexico, whose 80% owned Southern Copper (NYSE: SCCO) is the country’s No. 1 biggest copper producer, warned investor that if the senate approves the new taxes, the company “would be forced to redirect” close to $5.4 billion of planned investment to other countries including Canada, the U.S., Chile and Peru.
And last week, Canadian Goldcorp also said that if Mexico approves its proposed royalties on mining companies, it will likely have to readdress investments in the country, especially if it can’t get the returns it wants.
Meanwhile, Mexican miners would see their total duties jump up to 57% if the levies are approved, according to the country’s president of the country’s mining chamber Camimex, Sergio Almazán.
In an interview with local paper Milenio (in Spanish), he also said the chamber estimates that total investment in the sector would fall over 50%, from the currently projected $30 billion to less than $12 billion in the next five years.
About 334,000 people work in Mexico’s mining sector, and more than 2 million are indirectly employed by it, which makes it the country’s fourth largest industry in dollar income, only behind cars, oil and electronics.
If approved by the senate, the new mining tax will be implemented as early as January 2014.