Antofagasta Welcomes Chile's Respect For Tax Regime, Changes

9th Jun 2010 00:09

By Alex MacDonald and Carolina Pica Of DOW JONES NEWSWIRES LONDON (Dow Jones)--London-listed Chilean mining company Antofagasta PLC (ANTO.LN) on Wednesday said it welcomed the Chilean government's decision to respect the stability of previous tax agreements with companies even as it considers temporary changes to fund the earthquake-reconstruction bill. "The primary task currently facing the Chilean government is clearly the reconstruction work following the earthquake, and the government has proposed a number of temporary tax measures to partly fund the costs of that work," Jean-Paul Luksic, the chairman of Antofagasta, said at the mining company's annual general meeting here. "We welcome the fact that the government's current proposals respect the tax stability agreements previously entered into with the Chilean state, and also reflect temporary changes to the tax system, to address the current exceptional requirements of the country," he added. "Beyond these exceptional measures, we expect Chile to continue to provide a stable and supportive environment for long-term mining investment." In order to finance its $8.4 billion reconstruction bill, the Chilean government is turning to several sources including temporarily raising the copper royalty. Chile was hit by the fifth-strongest earthquake on record and a tsunami in late February. The earthquake killed more than 500 people and resulted in $30 billion in damages. For 2010 and 2011, the Chilean government is proposing a variable tax rate, from 3.5% to 9%, depending on a copper-mining company's sales margins and on copper prices. The tax rate then reverts to 4% from 2012 to 2017. The royalty change isn't mandatory, but the government hopes that most mining companies will voluntarily adopt the tax increase to help reconstruction efforts. Under the existing copper-royalty legislation, which went into effect in 2005, mining companies pay a tax of 4% on their copper sales. This tax is in effect until 2017. The government hopes to obtain $600 million to $700 million from the royalty increase, but the exact amount will depend on how many companies switch over to the new tax scheme, Finance Minister Felipe Larrain recently said. The bill is still being reviewed by Senate committee and could change before passing through congress. The Consejo Minero trade group--which represents the largest copper, gold- and silver-mining companies in the country, most of which are units of international mining giants--recently said the tax modification will dry up this investment pipeline. Chile is already the biggest copper miner in the world, accounting for a third of global output, and the mining industry represents about 10% of gross domestic product. Analysts said the temporary increase won't curb future capital expenditures. -By Alex MacDonald and Carolina Pica, Dow Jones Newswires; 44 207 842 9328; [email protected] (END) Dow Jones Newswires June 09, 2010 19:09 ET (23:09 GMT)