Favorable changes in Dominican Republic mining bill

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Tuesday, December 19, 2017

Lawmakers have significantly altered a mining bill, including an overhaul of the proposed tax and royalty structure.

Changes to the bill, which aims to replace the current mining code, law 146, were introduced following a three-month consultation in which 1,150 comments and proposals were registered, the energy and mines ministry said.

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The amended bill has been sent to the executive branch.

STATE SHARE

One key change relates to the removal of a guarantee that the state will receive up to 60% of mining income. The original draft provisioned that at least 40% of mining income must go to the state, rising to 60% at higher metals prices.

In the revised bill, Article 143 only sets out a 40% minimum of mining benefits to be paid to the state, calculated over the mine life.

This rate will consist of mining fees, royalties and income and other taxes, including contributions to local government.

TAX ON UNEXPECTED PROFITS

However, the revised bill includes an additional tax in the event of a sharp upturn in metals prices, called the unexpected profits tax.

Miners will pay 1% of revenue if the price of the metal in question exceeds 125% of the base reference price for the quarter, and 2% if that average price rises above 135%.

ROYALTY RATE

Royalty rates have been simplified in the revised bill.

The rate for precious metals mining is a flat 6%, compared to 5-8% depending on metal prices originally proposed.

For non-precious metals, the rate is 5.0%, and 4.0% for gems and precious stones mining, 3.0% for non-metallic mining and 1.5% for rock and aggregate quarrying, Article 128 states.

The royalties are calculated on sales value, rather than on pithead production value in the original draft, and are deductible against income tax.

DISCOUNTS

The revised bill adds a 50% discount on royalty rates for miners that refine, cast or transform their mining products locally. A 50% discount also applies to artisanal mining operations.

ANALYSIS

The removal of the maximum 60% contribution to the state will be welcomed by miners and exploration companies in the Dominican Republic.

While miners need to plan for lower prices, they also need to be able to cash-in when prices surge in order to attract investment.

The addition of the tax on unexpected profits ensures the state will also benefit from price surges, while leaving the bulk of the benefit for miners .

The simplification of royalty rates will also be welcomed, as the 50% discount for miners that refine locally could spark investment in this area of added value.

Miners in the Dominican Republic include Barrick Gold and Goldcorp, running Pueblo Viejo gold mine, and Americano Nickel, which operates the Falcondo nickel asset.

Juniors with a presence in the country include GoldQuest Mining and Precipitate Gold.